Press Release March 12, 1998	Contact: Gail Shearer, cheaga@consumer.org Kathleen McShea, mcshka@consumer.org 202/462-6262 Consumers Union Washington, D. C. Office

GAO Report Shows Ballyhooed '96 Health Insurance Law Misfires

Unaffordable Health Insurance Makes "Reforms" Meaningless

WASHINGTON Consumers who lose group health plans when they leave their jobs and turn to the individual market to purchase health care insurance are finding unaffordable premiums in place of the "portable" plans promised by the ballyhooed 1996 Health Insurance Portability and Accountability Act, according to a new report looking at the law's impact issued by the General Accounting Office.

"Although there was enormous cheer-leading when this legislation was signed into law, this report shows the part of the 1996 health insurance reform effort was an empty promise to consumers. Consumers Union is ready to declare the so-called 'group to individual' portability health insurance reform effort an abysmal failure," said Gail Shearer, the Director of the Health Policy Analysis in Washington D.C. for CU the publisher of Consumer Reports magazine. "This news may be bitter medicine for official Washington policy makers to swallow, but this report demonstrates that most consumers cannot afford the access Congress promised them."

The GAO report, Health Insurance Standards: New Federal Law Creates Challenges for Consumers, Insurers, Regulators, shows premiums differ as much as 600 percent for some consumers, creating harsh financial burdens. Consumers who make the transition from group health plans to individual plans are stuck facing premiums $1,200 to $15,000 higher than so-called "standard" rates offered by big insurers. These premiums leave health insurance unaffordable to many families.

"It is clear both Congress and the Clinton Administration were way too optimistic about how the marketplace would react to their 1996 effort at reform, and the time is ripe to get down to business and address how to make health insurance affordable for America's families," said Shearer. "Access to health insurance you cannot afford is meaningless; it is no access at all."

The Senate Labor Committee has called a hearing to examine this GAO report and the impact of HIPPA in further detail for March 19, 1998. Shearer will be among the witnesses testifying at that hearing and will highlight new policy proposals to soften the economic blow consumers face from health care costs. These proposals include transforming the current medical expense tax deduction to a tax credit.

A recent CU study on the problem of underinsurance, authored by Shearer, estimates what families pay for health care. The report, Hidden from View: the Growing Burden of Health Care Costs, concludes that nine million families where everyone in the household has insurance pay more than ten percent of their income on out-of-pocket medical expenses. The GAO's findings further demonstrate that health insurance is less and less affordable.

Copies of the GAO study may be found on the GAO's web site at: www.gao.gov/new.items/he98067.pdf