Every lobbyist swarming Capitol Hill these days knows that, when it comes to legislation, the devil is always lurking in the details, not lounging in the concepts. Yet concepts, not details, are drifting down to the public—who will be in for a surprise when they realize that reform is not what they think it is. How these details are hashed out or slipped into a bill at the eleventh hour is crucial to the success or failure of reform. This is the third of a series of occasional posts that will look at where the devil lies in key provisions of the health care bill. The entire series is archived here.

Let’s get right to the point. What started out as an earnest attempt to reform the health care system has morphed into God knows what. It’s fair to say that, at its core, heath reform is really about insurance market reform—but for whom?

Which brings me to one of those pesky details embedded in both the House and Senate bills—a clause that lets insurance companies cross state lines to sell their wares. Way before last year’s election, Ronald Williams, the CEO of Aetna, told the Senate Finance Committee that allowing cross-state purchasing of health insurance was a necessary ingredient for reform. The Senate Finance Committee, along with the House, heard his plea.

The provision, euphemistically named the Health Care Choice Compact, would work like this: Two or more states could join together and allow insurers selling health coverage to be governed by the laws and regulations of the state where the policy was issued, not the rules of the state where they’re sold. So a company wanting to sell in, say, Wyoming or South Carolina—which may have weak regulations—could choose to issue its policies in those states but actually sell them in New York or California—where the rules are tougher. If policyholders have problems with their coverage, too bad: the rules of the weaker state would apply, and they could be out of luck.

Insurers, looking toward lucrative new markets, want to fashion their new policies without having to deal with the restrictions and consumer protections required by some states. In other words, the current definition of market reform will mean they have to insure sick folks; in return, they will offer policies with less coverage and fewer protections. Think of it as back-door underwriting—a process that limits these companies’ liability for high-cost claims.

This is the core of the insurers’ business strategy, wrapped in the guise of consumer choice. Remember, this is the Health Care Choice Compact we’re talking about. If consumers want a policy with few benefits or no protections, that’s their choice. It’s kind of like letting a U.S. toy manufacturer sell yo-yos that conform to Chinese—not American—regulations. Take your choice: a yo-yo with lead, or one without?

Instead of insurance reform making things better for consumers, it might make them worse. Under state compacts, insurers would not have to:

• Provide coverage for state-mandated benefits like maternity care or chemotherapy. Shucking the mandates lets them offer cheaper policies with the potential for people to be underinsured when illness strikes.

• Obtain prior approval from state regulators before marketing their policies. That’s right: no meddlesome oversight of the fine print clauses and conditions they stick in their policies that could hurt consumers.

• Ditch the “discretionary” contractual clauses that give the companies the sole and absolute discretion to determine if a claim is valid. Many states now prohibit these clauses.

• Follow prompt payment rules that require them to pay the docs and the hospitals, within certain limits. If providers don’t get their money, they may hand consumers the bill and make them pay. The prompt payment regulations are designed to prevent that.

All of this raises alarms with insurance regulators, especially in states with strong regulations. Will reform bring wave after wave of schlocky policies, and lots of angry policyholders with little recourse? Consumer groups, perhaps overly distracted by the public plan commotion, haven’t voiced much opposition—at least none that has shown up in the media. For that matter, press stories dissecting what could happen if insurers can pick and choose which rules to live under have been few and far between. No doubt it’s too in-the-weeds for TV, or perhaps its importance has escaped newspapers scrambling to stay on top of Harry Reid and his sixty votes.

Kaiser News Service did a Q and A primer on the subject that was far too wonky for ordinary consumers. It was a classic “he said-she said” story: Republicans argue this; advocates argue that. One point the story made: “Regulation is important, critics of the GOP proposal say.” Duh!

The Los Angeles Times version was a bit more informative, but way too “inside baseball” for average Times readers. One point it made: “In California, for instance, insurers must comply with prompt claims payment laws.” What the heck does that mean for readers in Pasadena?

What we need now is a deep look at the protections themselves in some of the states with strict regulation, and what consumers in those states have to lose if they buy policies from one of the insurance marauders. Those looking for a fresh angle might consider an drawing an analogy with the banks that embarked on a successful crusade to get out from under state banking laws. A court decision allowed banks to charge the rate set in the state where they were chartered to all of their customers nationwide. Major banks ran quickly to set up shop in states that allowed them to charge customers the highest possible rates. The competition this brought destroyed consumer protections that had been hard won in many states and left consumers defenseless against aggressive banking practices. What insurance crisis lurks down the road ?

The individual market is where consumers most need protection. Both the House and Senate recognize that. Both bills say that policies sold across state lines must disclose clearly and conspicuously that a policy may not be subject to the laws and regulations of the state where its buyers live. How many consumers know what that means? Buried somewhere in the fine print might be language that says the rules of Wyoming apply. What insurance buyer knows what those rules are?

A few years ago, the Florida state legislature required such language on association policies, a special type of out-of-state policy, being sold in Florida. One candid agent told me: “Agents tell people who ask about it: ‘don’t worry about that language. It doesn’t mean much.’ It really hasn’t caused consumers to run screaming from the room.” So much for disclosure—even with large type.

Ends today: If you'd like to help CJR and win a chance at one of
10 free print subscriptions, take a brief survey for us here.

Trudy Lieberman is a fellow at the Center for Advancing Health and a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR’s healthcare desk, which is part of our United States Project on the coverage of politics and policy. Follow her on Twitter @Trudy_Lieberman.