Tuesday, June 29, 2010

A word from an industry insider makes the case against ERISA

Wendell Potter is a former “insurance” industry bigwig; he worked at Cigna Corporation, most recently as head of corporate communications and as the company's chief corporate spokesman. Before that he was with Humana, a major health “insurer.”

Mr. Potter had the unenviable job of serving as Cigna’s corporate spokesman following its decision to let Nataline Sarkisyan die and its too-little-too-late decision to cover its tracks. That’s no job for someone with a conscience, and Mr. Potter soon thereafter resigned his position. This is worth watching and listening to in full:

Mr. Potter now maintains a blog, and his most recent post is also worth a look. He describes how Health Care Reform did precious little to rein in the “insurance” industry, since they can still lie, cheat and steal with no legal consequence. The whole thing is compelling; here’s a taste:

While the motivation of Congress was to protect employer-sponsored pension plans when it passed the Employee Retirement Income Security Act (ERISA) in 1974, the federal courts over the years have interpreted the law to apply to all employee benefits, including health care benefits. Because it is a federal law, it preempts state laws, meaning that the 130 million Americans enrolled in employer-sponsored ERISA-protected plans cannot sue their insurance companies (or their employers) in state court if they have been denied coverage for a treatment or procedure. The can try to sue in federal court, but even if they succeed, they can only recover the value of the denied treatment or procedure. Federal courts, unlike state courts, cannot require defendants to compensate plaintiffs for pain and suffering or lost wages. The monetary awards to plaintiffs who win their lawsuits are typically so small that few lawyers are willing to represent patients in federal courts.


Insurers and big employers argue that ERISA allows them to offer benefits to their employees more efficiently because it exempts them from what they pejoratively call a patchwork of state regulations. That’s true, but many consumer advocates, health policy experts, jurists and regulators believe that the ERISA preemption of state laws does more harm than good. As the National Association of Insurance Commissioners noted in a comprehensive report on the often harmful consequences of ERISA’s preemption of state laws: “ERISA provides few rights to consumers and, more significantly, it is used as a weapon to block the states’ implementation of health care consumer rights.”

So while Obama’s Patients’ Bill of Rights represents an important step forward, much more reform is needed if the United States is ever to have a health care system that benefits its citizens more than profit-driven health insurance companies.

Kudos to Mr. Potter for his good work.

1 comment:

  1. The federal "restitution" concept is inherently wrong on the pension side of ERISA as well. The compensation principle should be an expense in pension and health plans just as in any business. There are always going to be human errors which should be corrected in our society through the transfer of property rather than some other more primitive "eye for eye" method.