GENETIC NON-DISCRIMINATION: IMPLICATIONS FOR EMPLOYER PROVIDED HEALTH CARE PLANS HEARING BEFORE THE SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS OF THE COMMITTEE ON EDUCATION AND THE WORKFORCE HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS FIRST SESSION HEARING HELD IN WASHINGTON, DC, SEPTEMBER 6, 2001 Serial No. 107-29 Printed for the use of the Committee on Education and the Workforce U.S. GOVERNMENT PRINTING OFFICE 77-675 pdf WASHINGTON : 2002 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: (202) 512-1800 FAX: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 ii COMMITTEE ON EDUCATION AND THE WORKFORCE JOHN A. BOEHNER, Ohio, Chairman THOMAS E. PETRI, Wisconsin GEORGE MILLER, California MARGE ROUKEMA, New Jersey DALE E. KILDEE, Michigan CASS BALLENGER, North Carolina MAJOR R. OWENS, New York PETER HOEKSTRA, Michigan DONALD M. PAYNE, New Jersey HOWARD P. “BUCK” McKEON, California PATSY MINK, Hawaii MICHAEL N. CASTLE, Delaware ROBERT E. ANDREWS, New Jersey SAM JOHNSON, Texas TIM ROEMER, Indiana JAMES C. GREENWOOD, Pennsylvania ROBERT C. “BOBBY” SCOTT, Virginia LINDSEY O. GRAHAM, South Carolina LYNN C. WOOLSEY, California MARK E. SOUDER, Indiana LYNN N. RIVERS, Michigan CHARLIE W. NORWOOD, JR., Georgia RUBEN HINOJOSA, Texas BOB SCHAFFER, Colorado CAROLYN McCARTHY, New York FRED UPTON, Michigan JOHN F. TIERNEY, Massachusetts VAN HILLEARY, Tennessee RON KIND, Wisconsin VERNON J. EHLERS, Michigan LORETTA SANCHEZ, California THOMAS G. TANCREDO, Colorado HAROLD E. FORD, JR., Tennessee ERNIE FLETCHER, Kentucky DENNIS KUCINICH, Ohio JIM DeMINT, South Carolina DAVID WU, Oregon JOHNNY ISAKSON, Georgia RUSH D. HOLT, New Jersey BOB GOODLATTE, Virginia HILDA L. SOLIS, California JUDY BIGGERT, Illinois SUSAN DAVIS, California TODD RUSSELL PLATTS, Pennsylvania BETTY McCOLLUM, Minnesota PATRICK J. TIBERI, Ohio RIC KELLER, Florida TOM OSBORNE, Nebraska JOHN ABNEY CULBERSON, Texas Paula Nowakowski, Chief of Staff John Lawrence,Minority Staff Director SUBCOMMITTEE ON EMPLOYER-EMPLOYEE RELATIONS SAM JOHNSON, Texas, Chairman ERNIE FLETCHER, Kentucky, Vice Chairman ROBERT E. ANDREWS, New Jersey JOHN BOEHNER, Ohio DONALD M. PAYNE, New Jersey MARGE ROUKEMA, New Jersey DALE E. KILDEE, Michigan CASS BALLENGER, North Carolina LYNN N. RIVERS, Michigan PETER HOEKSTRA, Michigan CAROLYN McCARTHY, New York HOWARD P. “BUCK” McKEON, California JOHN F. TIERNEY, Massachusetts THOMAS G. TANCREDO, Colorado HAROLD E. FORD, Jr., Tennessee JIM DeMINT, South Carolina PATRICK J. TIBERI, Ohio iii Table of Contents OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, SUBCOMMITTEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE.............................................................................................2 OPENING STATEMENT OF RANKING MEMBER ROBERT ANDREWS, SUBCOMMITTEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKPLACE.....................................................................3 STATEMENT OF JANET TRAUTWEIN, DIRECTOR OF FEDERAL POLICY ANALYSIS AND STATE GOVERNMENT AFFAIRS, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS, ATLINGTON, VA.................................................4 STATEMENT OF JANE MASSEY LICATA, ATTORNEY, LICATA & TYRRELL P.C., MARLTON, NJ.....................................................................................................7 STATEMENT OF MARY K. WILLIAMS, ATTORNEY, ALSTON & BIRD, ATLANTA, GA..............................................................................................................9 APPENDIX A - WRITTEN OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, SUBCOMMITEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE...................................25 APPENDIX B - WRITTEN TESTIMONY OF JANET TRAUTWEIN, DIRECTOR OF FEDERAL POLICY ANALYSIS AND STATE GOVERNMENT AFFAIRS, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS, ARLINGTON, VA .......................................................................................................................................29 APPENDIX C - WRITTEN STATEMENT OF JANE MASSEY LICATA, ATTORNEY, LICATA & TYRRELL P.C., MARLTON, NJ.....................................67 APPENDIX D - STATEMENT OF MARY K. WILLIAMS, ATTORNEY, ALSTON & BIRD, ATLANTA, GA............................................................................................77 APPENDIX E - SUBMITTED FOR THE RECORD, ADDITIONAL ANSWERS TO QUESTIONS POSED DURING QUESTION AND ANSWER PERIOD, JANE MASSEY LICATA, J.D., Ph.D., SEPTEMBER 6, 2001.............................................87 Table of Indexes............................................................................................................90 1 GENETIC NON-DISCRIMINATION: IMPLICATIONS FOR EMPLOYER PROVIDED HEALTH CARE PLANS ____________________ Thursday, September 6, 2001 Subcommittee on Employer Employee Relations Committee on Education and the Workforce U.S. House of Representatives Washington, D.C. The Subcommittee met, pursuant to call, at 2:01 p.m., in Room 2175, Rayburn House Office Building, Hon. Sam Johnson, Chairman of the Subcommittee, presiding. Present: Representatives Johnson, Boehner, Fletcher, Andrews, Payne, Rivers, McCarthy, and Tierney. Staff Present: Kristin Fitzgerald, Professional Staff Member; David Connolly, Professional Staff Member; David Thomas, Legislative Assistant; Jo-Marie St. Martin, General Counsel; Patrick Lyden, Professional Staff Member; Scott Galupo, Communications Specialist; Deborah Samantar, Committee Clerk/Intern Coordinator; Cheryl Johnson, Minority Counsel; Michele Varnhagen, Minority Labor Counsel/Coordinator; Peter Rutledge, Senior Legislative Associate/Labor; and Brian Compagnone, Minority Staff Assistant/Labor. Chairman Johnson. Good afternoon. A quorum being present, the Subcommittee on Employer-Employee relations will come to order. We are meeting today to hear testimony on genetic non-discrimination and how its implications for employer-provided 2 health care plans affect us. We have been dealing with this issue for a long time and we are now getting serious about it. So it is time for us to have more hearings, and this is the second in a series. I am going to limit the opening statements to the Ranking Minority Member and myself. Therefore, other Members statements may be included in the record. With that, I ask unanimous consent for the hearing record to remain open 14 days to allow Members' statements and other extraneous material mentioned during the hearing to be submitted. Without objection, so ordered. OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, SUBCOMMITTEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE Good afternoon. Let me extend a warm welcome to all of to you, and to the Ranking Member, Mr. Andrews. Today's hearing, as I said, focuses on genetic non- discrimination and what it means for employer-sponsored health care plans. This is our second hearing in a series designed to shed light on the topic of genetic non- discrimination. As I said at the first hearing, the Members of this Committee are strongly opposed to genetic discrimination. And we believe that access to employer-sponsored health care should be available to employees, regardless of health factors, genetic or otherwise. Several existing Federal laws already protect the privacy and use of genetic information and guard against discrimination based on genetic factors. In addition, more than half of the States have enacted laws that further restrict the privacy and use of genetic information by employers and the health insurance industry as a whole. This Subcommittee has jurisdiction over both the employer provided health insurance and employment aspects of the genetic non-discrimination issue. In our first hearing, the Subcommittee looked at current employment law and practice, and State laws and implications for employers and employees of potential legislation to prevent employment discrimination. Today we are going to look at the employer-provided health care portion of genetic non-discrimination. We hope to answer many questions on this issue including, one, does the Health Insurance Portability and Accountability Act, HIPAA, already protect employees from discrimination; two, do the HIPAA privacy regulations already restrict the use of genetic information; three, how additional requirements and penalties would work in conjunction with these regulations; four, what are the unintended consequences of overly broad definitions of genetic information and testing; five, how have States addressed this issue through legislation; six, what enforcement measures and penalties are most applicable to this situation? Following this investigation of genetic non-discrimination, we expect to conduct another hearing to examine the bills that have been introduced in the Congress. Even I look forward to working with my colleagues on the Subcommittee as we move forward, 3 including Mr. Andrews, who has already agreed that we need to work on this issue. So I now yield to the distinguished Ranking Minority Member of the Subcommittee, Mr. Andrews, for whatever opening statement he would like to make. WRITTEN OPENING STATEMENT OF CHAIRMAN SAM JOHNSON, SUBCOMMITEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE – SEE APPENDIX A OPENING STATEMENT OF RANKING MEMBER ROBERT ANDREWS, SUBCOMMITTEE ON EMPLOYER EMPLOYEE RELATIONS, COMMITTEE ON EDUCATION AND THE WORKPLACE Thank you, Mr. Chairman. It is good to be back with you and Members of our Committee, our staff and our guests today. I think there are two major principles on which there is agreement, and our job is to move from those principles to the specifics of what the law ought to be. The first principle is privacy. Perhaps no item is more private and more sensitive and personal than one's health care records, in particular, one's genetic records. This really is the key that can unlock all sorts of information about one's life, one's health, and therefore it deserves the highest degree of protection the law can afford. The second principle is non-discrimination. I don't think that anyone should be denied a job, a promotion, an educational opportunity or any other thing of value because of his or her genetic predisposition toward any particular condition. The fact that someone may have a gene map that would incline him or her toward alcoholism or drug abuse should never be, in my judgment, a valid basis for denying that person a job or an opportunity. Actual behavior should govern decisions about employment and economic opportunities, not predisposition toward behavior. We are about to be handed an enormously powerful predictive tool. That predictive tool will be the gene map of us and our families and our neighbors. This tool has incredible positive potential. It can lead to the control or elimination of all sorts of diseases and conditions that have led to much human suffering. And for this we should be jubilant. But this powerful predictive tool has some other issues attached to it. It is rather a mixed blessing. The part of the blessing that is mixed is the potential for abuse of one's privacy rights and private information and the potential for abuse of information about one's medical predisposition for decisions that would bar or impede someone's access as far as his or her abilities would take them. These principles do not easily translate themselves into the statute books. The issues that we will explore this afternoon, I believe, have no simple answer nor do they have a partisan tint. Chairman Johnson has approached this issue with fairness and openness. I know that it is his intent 4 to make sure that the law reflects the principles that I have just outlined. And we look forward to hearing from our panel of expert witnesses today, their ideas and views and suggestions as to how we may make those principles the law of the land. With that, I would yield back and ask the chairman to begin the witness statements. Chairman Johnson. Thank you, Mr. Andrews. You know, what Mr. Andrews said that is very important is that this is a very complicated issue, and covers the spectrum of health and law and employer and employee relations. That is why this Committee has an interest in it. We hope we can solve some of those problems. It is now my pleasure to welcome and introduce our panel of witnesses. Let me introduce them all, and then they will give their testimony. Our first witness on the panel is Ms. Janet Trautwein. She is director of Federal Policy Analysis and State Government Affairs for the National Association of Health Underwriters. Our second witness is Ms. Jane Massey Licata. She is the senior partner of the law firm of Licata & Tyrrell. Ms. Licata is also a Professor at the Rutgers School of Law in Camden, New Jersey, and has a strong background in biology and chemistry. Our final witness today is Ms. Mary Williams. She is an attorney at the law firm of Alston & Bird, Atlanta, Georgia. Ms. Williams has focused most of her career on matters concerning employee health and benefit plans. I thank all three of you for being here today, and let me remind witnesses that under our Committee rules, you should limit your oral statements to 5 minutes. However, the entire written statement will appear in the record. There is a light up there in front of you that is red, yellow and green. The green gives you 4 minutes, the yellow gives you 1 minute and when the red one comes on, we would appreciate it if you would wind up your testimony. I thank you so much, all of you, for being here. Let me just tell you that in about an hour, I think we are going to have another vote, which will be the last on the floor today. So we would like to get as much in before that time if we can. And we will either finish afterward or close then. Ms. Trautwein, would you begin with your testimony. STATEMENT OF JANET TRAUTWEIN, DIRECTOR OF FEDERAL POLICY ANALYSIS AND STATE GOVERNMENT AFFAIRS, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS, ATLINGTON, VA Thank you. My name is Janet Trautwein. I am Director of Federal Policy for the National Association of Health Underwriters. NAHU is an 18,000-member association 5 of insurance professionals involved in the sale and service of health insurance and related products. We appreciate very much this opportunity to present information on the health insurance underwriting process as it impacts employers and the effect well-intended genetic discrimination legislation could have on the cost of health insurance. NAHU believes that health insurance affordability is the most important component of access to health care. To start out, it may be helpful to explain just what underwriting is. Underwriting is a basic evaluation of risk. Applicants for all types of insurance go through a risk evaluation process or underwriting, as do applicants for credit cards, bank loans and mortgages. Since the business of insurance is regulated primarily at the State level, fully insured employer health insurance plans are subject to State rules regarding underwriting and rates. All 50 States have regulations on health insurance underwriting and portability provisions. Most have patient protection laws, and many have already passed laws on genetic discrimination in insurance underwriting employment, or both. In addition to State law and underwriting, Federal legislation HIPAA prohibits discrimination against individual members of a group health plan on the basis of current health status or on the basis of some future predisposition to a particular disease based on genetic information. When an employer of any size obtains health coverage, the employer normally requests bids from several different insurance carriers, usually with the assistance of an insurance broker, to determine which plan is willing to offer the best benefits for the money. The process of obtaining bids for coverage is somewhat different for different size groups. For mid-size groups of 50 to 300 employees, employers that have a current health plan are required to provide 3 years of claims experience. Claims experience is a list of paid premiums versus paid claims. The claims experience will typically also include a list of large claims by amount and diagnosis, not with an individual's name. The bidding carrier will also ask about any known serious illnesses and their prognosis to the best of the employer's knowledge. The underwriter for the insurance carrier evaluates the information provided and issues a proposal with the benefits and rates the carrier is willing to offer the employer. The process for larger groups over 300 employees works in a manner similar to that described for the medium-size groups, except that less information on large claims and serious illnesses is required. Plans may be fully insured still at this size, but much more likely to be partially or fully self-insured. In a self-insured plan, the employer often buys stop-loss coverage to protect against excessive losses. In order for an employer to know how much stop-loss coverage is appropriate for their group, the same information asked of fully-insured cases relating to claims experience, large claims and serious illnesses is required. If stop-loss levels are set too high, the employer may have inadequate protection in event of a year of high claims. So this information is extremely important. Next in size are small employer groups of 2 to 50. HIPAA and State law provide that small employer health insurance coverage must be issued regardless of the health 6 status of employees and dependents, although many States allow rates to vary for the group based on overall health status. In States where underwriting based on health status is allowed, each employer is required to complete an individual questionnaire with detailed health information on the employee and all family members to be covered. Each employee application is considered individually, usually using a point system. And the overall points determine whether the group will be issued at the rates quoted or with a rate-up. We have attached a chart showing the rating laws in each State to our written testimony along with a small sample employer health questionnaire, if you would like to look at the actual questions that are asked. It is important to briefly mention rate stability. It is critical that a plan's initial rates be as accurate as possible. Rates that are set too low initially can result in very large premium increase at renewal. These large fluctuations are very unsettling for employers and employees and can result in some employees dropping coverage when they can't pay their share of premiums. How does pending genetic discrimination legislation impact this process? Legislation to expand the HIPAA prohibition on the use of genetic information in underwriting, such as H.R. 602, has broadened the definition of genetic information in a way that could include items that go beyond what is normally considered to be a genetic test. Using too broad a definition could disrupt normal underwriting procedures resulting in unaffordable health insurance premiums for employers and consumers. In conclusion, health insurance underwriting is a complicated process. It is a combination of art and science and it is highly dependent on not only the risk of the applicants, but also other market conditions that may be beyond the applicant's control. The most important component is complete information to allow for a thorough evaluation of risk. It is critical that as lawmakers consider genetic discrimination legislation, they carefully craft the definition so as not to impede the normal underwriting process. I appreciate this opportunity to come today and welcome any questions you may have. WRITTEN TESTIMONY OF JANET TRAUTWEIN, DIRECTOR OF FEDERAL POLICY NALYSIS AND STATE GOVERNMENT AFFAIRS, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS, ARLINGTON, VA – SEE APPENDIX B Chairman Johnson. Thank you so much. We will reserve our questions until we listen to all three of you. But thank you again for your testimony. Ms. Licata you may begin yours now. 7 STATEMENT OF JANE MASSEY LICATA, ATTORNEY, LICATA & TYRRELL P.C., MARLTON, NJ Good afternoon. My name is Jane Massey Licata, and I am a biotechnology patent and FDA lawyer and professor of patent law at Rutgers School of Law, Camden, NJ. In my practice, I represent universities, biotechnology companies and major pharmaceutical companies. I have filed and prosecuted thousands of patent applications concerning diagnostics and therapeutics, which rely upon genetic information and human genes. As I have watched the technology and the law develop, I have come to appreciate the power of this technology and also the responsibilities and risks created by it. With the completion of the first map of the human genome, we now have a basis for determining our unique genetic makeup and probable medical future to permit personal diagnostics and therapeutics to be created for us. This is no longer the stuff of science fiction. Every day, new genetic markers are identified and correlated with human biology and disease. The future of medicine lies in Genomics. Worldwide university and pharmaceutical company researchers alike are mining databases of genetic information and rapidly identifying new drug targets, diagnostic markers and creating a basis for novel therapies. Tests designed to determine the presence or versions of genes that cause diseases or conditions carry with them the most intimate details of a biological past and future as well as a devastating potential for discrimination. Analysis of our genetic material also provides information about our parents, siblings and children which impacts not only on us, but also on family privacy. The potential for misunderstanding or misuse of this information is so great that it is essential that we establish a national policy for the protection of an individual's privacy interest in their genetic information. H.R. 602 is an important and timely legislative initiative to prohibit health insurance and employment discrimination against individuals and their family members on the basis of predictive genetic information or genetic services. Overall, this bill is a well-drafted, well-considered proposal. There are a number of points that may bear further consideration, however. The term "predictive," in the definition of genetic information, may have been intended to address the concern that many genetic markers are not conclusively diagnostic, but rather may indicate a predisposition to a disease or condition, or may presently be believed to have a correlation with a disease or condition. In such cases, it would be especially troublesome if the information were relied upon to make employment or insurance decisions. There is also an exception concerning sharing of information between health care providers for treatment. Health care providers, however, are accustomed to dealing with sensitive, confidential information, such as HIV status and accordingly, a blanket exception is not required. The individual's prior written consent to make the information available between health care providers should not be an undue burden and helps to identify the information that is sensitive and confidential.