The New Health Dialogue

As New America's health policy director Len Nichols likes to say, "If you don't have the personality to be a lawyer, you become an economist." Yet Len (our favorite health care economist) had the best personality in a room full of lawyers and Hill staffers at the recent Georgetown Law / O'Neill Institute's Legal Solutions in Health Reform program. It was important and deeply interesting, but there aren't a lot of laughs when you explore the legal barriers to proposed health system reforms that so many people are devoting every waking moment to right now. Given the circumstances, we were glad that Len didn't begin by saying, "Let's kill all the lawyers."

It was an ambitious program and we'll try to post more about it in the next few days. Three papers were featured:

• Health Insurance Exchanges: Legal Issues (by Professor Tim Jost, Washington and Lee)
• Privacy and Health Information Technology (by Deven McGraw, Center for Democracy & Technology)
• Constitutionality of Mandates to Purchase Health Insurance (by Professor Mark Hall, Wake Forest)

It was, in effect, a program about what types of system reforms are legally possible in the United States. Some of the legal barriers presented are daunting (and all this time we'd been worried about the politics of health reform).

Clearly, the scholars at the O'Neill Institute were determined to put a hopeful spin on each of these papers. All of them can be summarized as: "Congress has the power to ... BUT they'd have to change A, B, C and X, Y, and Z." The problem is the legal alphabet soup is difficult to swallow.

For instance, Professor Jost said that from the legal perspective, the easiest way to structure a health insurance exchange is at the federal level. This way, we would only have to be mindful of:

• five Constitutional limitations,
• complying with standards and procedures under the Freedom of Information Act, the HIPAA privacy rule, the tax code, employee benefit and public health laws, and
• making sure Congress clearly preempts state regulation of insurance where necessary.

Professor Jost also injected a lot of skeptical questions about how well insurance exchanges can work, and noted that they have not been tested as currently proposed. GREAT. This is the easy version?

Yep. It turns out that a state-structured exchange would be even more legally complicated, and Jamie Katz, the General Counsel to the Commonwealth Health Insurance Connector Authority in Massachusetts was there to prove it. First, he told us, even with a state exchange you have to consider most of the federal legal issues we just mentioned. Second, you have to consider every state's individual Administrative Procedure Act—each state's procedures for rulemaking, records privacy, adjudication, tort claims and government contracting laws. (And that's not the tricky part). Third, ERISA, which raises the neck hair of many lawyers, judges and policymakers, would prohibit states from regulating certain plans.

Gary Claxton of the Kaiser Family Foundation and Stephanie Kanwit, a long-time lawyer for the insurance industry, agreed that state-structured insurance exchanges would be much more difficult. Kanwit, in fact, predicted that some state insurance exchanges would "die" if subjected to an ERISA preemption challenge.

Katz said the legal issues surrounding the Massachusetts Connector meant he was constantly trying to fit a round exchange peg into a square legal hole. The Connector is essentially running a commercial enterprise as a state authority. It operates as a regulator and as a commercial corporate partner. He noted, for instance, that open meeting, procurement, and other state administrative procedure laws apply to how the authority runs the exchange. Those laws caused real trouble when the Connector tried to collect proprietary information from plans without exposing that information to the public. Katz recommended that any national reform that creates an exchange must start slowly and phase things in. That makes it easier to tweak existing laws so the exchange can work better as a commercial enterprise. Katz also said that it was crucial to have a close working relationship to all the other regulatory entities, such as the Department of Insurance, the Attorney General, and the federal counterparts. It has to be a cooperative effort.

Had enough? Sorry, there's more. We'll be back soon with more on privacy nightmares and the constitutionality of an individual mandate.