COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON LAW AND GOVERNMENT - - - Room 696, City Hall Philadelphia, Pennsylvania Tuesday, April 22, 2003 1:15 p.m. - - - BILL 030178 - An Ordinance providing for the submission to the qualified electors of the City of Philadelphia of an amendment to Section 5-300... RESOLUTION 030189 - Resolution proposing an amendment to Section 5-300... - - - PRESENT: COUNCILMAN DAVID COHEN COUNCILMAN ANGEL ORTIZ COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN MICHAEL NUTTER COUNCILMAN FRANK RIZZO - - - V A R A L L O, INCORPORATED LITIGATION SUPPORT SERVICES 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 I N D E X BILL 030178, RES. 030189 PAGE HENRY NICHOLAS, National Union of Hospital, Health Care Employees, District 1199C .. WALTER TSOU, M.D. .......................... 5 KATHERINE BLACK, AFSCME DC47, CLUW ......... 18 ROBERT REINECKE, M.D. ...................... 24 6 SYLVIA METZLER, R.N. ....................... 30 JOHN DOMZALSKI, Health Commissioner ........ 34 7 KATI SIPP, LEIU 33 ......................... 42 RANDALL EMERY .............................. 50 8 CHARLES SHERROUSE .......................... 52 9 BILL 030220, RES. 030231 SUSAN SCHULMAN ............................. 61 10 HERB DENENBERG ............................. 68 STEVEN HERSHEY ............................. 90 11 LANCE HAVER ................................ 97 JONATHAN STEIN, Community Legal Services ... 99 12 SAM MARSHALL, Insurance Federation ......... 107 DAN GORDON ................................. 167 13 3 04/22/03 - LAW & GOVERNMENT
Will the members of the Committee on Law and Government who are in their offices please come upstairs? We are ready to begin. Good afternoon. Councilman Clarke will have a statement on his consumer advocate bill. Darrell, why don't we get that out of the way? This is the Committee on Law and Government. Councilman Clarke.
Thank you, Mr. Chairman. Mr. Chairman, I just want to make a brief statement on Bill No. 010101, a bill to establish the Office of Consumer Affairs, which we introduced approximately two years ago. I've been in conversation with the Mayor's Office over the last several days, and as a result of those conversations, I will not ask for the bill to be heard today. The Mayor has indicated that within the next several days he will be announcing an Executive Order that will essentially create an Office of Consumer Affairs that will deal with the myriad of issues as it relates to consumer rights. So hopefully within the day or two, I'll be able to 4 04/22/03 - LAW & GOVERNMENT - BILL 030178 give the Committee an indication as to when that particular Executive Order will be forthcoming.
And the Bill No. 5 030115 which is on procurement, that would be tomorrow at 1 o'clock.
Yes, Mr. Chairman. The Commissioner of Procurement has indicated that there are a number of amendments that he would like to have heard as it relates to this particular bill, so we're asking that that bill be heard tomorrow at 1 o'clock.
Thank you, Councilman. There is a court hearing going on in which City Council is actually the plaintiff in 426. So a lot of my colleagues are in that courtroom at this moment. But we will begin to hear testimony on the Committee of Law and Government on the Universal Health Care Bill and Resolution. Will the Clerk read it into the record, please?
Bill No. 030178, an ordinance providing for the submission to the qualified electors of the City of Philadelphia an 5 04/22/03 - LAW & GOVERNMENT - BILL 030178 amendment to Section 5-300 of the Philadelphia Home Rule Charter, by adding a new subsection (f), as approved by resolution of the City Council, requiring the Health Department to prepare a plan for universal health coverage that permits everyone in the City of Philadelphia to obtain decent health care on a regular basis; fixing the date of a special election for such purpose; proscribing the form of the ballot question to be voted on; and authorizing the appropriate officers to publish notice and to make arrangements for the special election. Resolution 030189, a resolution 15 proposing an amendment to Section 5-300 of the City Charter relating to the functions of the Department of Health, by adding a new subsection (f) declaring that health care is an essential safeguard of human life and dignity, and that there is an obligation for the City of Philadelphia to ensure that every resident is able to realize this fundamental right, and requiring the Department to prepare a plan for universal health coverage that permits everyone in the City of Philadelphia to obtain decent health care on a regular basis. 6 04/22/03 - LAW & GOVERNMENT - BILL 030178
Mr. Nicholas, are you here to testify on that bill? Identify yourself for the record, please.
Thank you, Mr. Chairperson. My name is Henry Nicholas and I'm the President of the National Union of Hospital and Health Care Employees and President of District 1199C in Philadelphia, nationally representing 375,000 health care workers and 17,000 health care workers here in Philadelphia. Mr. Chairperson and Members of Council, I come in wholehearted support of this action to put on the ballot before the electorate the question of health care as a basic human right. I do so mindful of the opportunity that Council has by doing this, and that is to redeem itself for failing to put before the voters the questions of what happens to our public schools about this time two years ago. Clearly, health care is a big issue in this state. At any given hour, there are 1.3 million citizens of the Commonwealth without health care, many of them in the City of Philadelphia. We are one of the few major urban areas without a government-run and operated health care facility, and we've been such 7 04/22/03 - LAW & GOVERNMENT - BILL 030178 since this Council gave the late former Mayor Rizzo the right to close PGH. It is important, as we look to introducing and preparing this document for the ballot, that we look further than that because here in Philadelphia we are confronted with a crisis. We are under a monopoly lockdown imposed on us by Blue Cross of Philadelphia and we need City Council to join with us in a suit against Blue Cross requiring them to return to the recipients their dollars now being held in the millions of dollars by Blue Cross, a non-profit, holding on to the subscribers' millions and millions of dollars that they so desperately need to pay for health care. Health care cost is out of reach. But just passing this resolution and just putting this on the ballot will be for naught if we fail to recognize that we are in a monopoly lockdown here in Philadelphia. And City Council need not only to support the action of those of us pushing to bring a class action suit, City Council on behalf of the residents should be one of the moving partners in that action. It is essential because we are at a critical mass. Went from having some of the best single-operated hospitals to a 8 04/22/03 - LAW & GOVERNMENT - BILL 030178 four-structure operated by, for the lack of a better word, four magnate chains, the Jefferson system, the Tenet system, and the Temple system being the largest of the group. But the question of what happens to ordinary citizens -- and I would urge you as I have on so many occasions, spent the night in the various emergency rooms, observing what happens to ordinary citizens coming to the emergency room 10 without adequate health care. There's absolutely de-marketing taking place in those institutions where they'll keep you waiting all night if there is no visible means to pay the bill and then finally call a cab for you and send you to another institution suggesting that the waiting line is not so long up at the other institution; and when you get there, you find that the line is longer than the hospital you just left. We are in an emergency situation. We need this legislation on the ballot in November. But more than that, we need to move as the first step to break up this health care monopoly that we labor under here in Philadelphia, because it won't get better. The cost of paying is whatever the Blues decide that you should pay, and then they have 9 04/22/03 - LAW & GOVERNMENT - BILL 030178 these provisions that no one else can give you a better deal. If that's not a monopoly, I don't know what one looks like. So I urge Council to consider joining the lawsuit to break up this monopoly in conjunction with moving this legislation for the ballot in November.
We are putting it together, a number of us who are concerned about this issue, indeed formulating such a proposal. There is a half dozen unions that are prepared to break ranks and to start the movement against this monopoly.
You're inviting us to become members of that grouping of people?
Yes, I think City Council because you have an obligation to those you represent and you know by talking to them that they are suffering. The average cost of health care by the end of this year will be 31 percent of gross payroll. And that's a lot of dollars for health care. 10 04/22/03 - LAW & GOVERNMENT - BILL 030178
Gross payroll. My members work in the hospital. And we have to negotiate a sum of 31 percent of gross payroll to cover workers who work in the system. And if they have to pay that kind of money -- and the problem is when they lose their job and they have to go on COBRA, they have to pay as high as $600 a month to pay for COBRA. That's the length of the emergency.
That's way beyond what the average citizen can afford and pay rent and put food on the table.
Do you have any numbers as to how many citizens of Philadelphia currently are either not insured or underinsured?
It is a greater part of that 1.3 million that I described earlier. The 11 04/22/03 - LAW & GOVERNMENT - BILL 030178 largest part of that population is in the Philadelphia region.
And has there been a movement -- because I see it at the national level. Is that same movement taking place in the City of Philadelphia for employers to transfer the cost of health care to employees?
There are those who are now rethinking their bad judgment when they moved away from the former proposal that was advanced by the Clinton Administration. Many of our allies on that legislation cut and run. And as a result of that, no health care reform got passed. There are those among the organized labor and our partners who are now rethinking that issue. But one of the policies of it in those of us who wear the label of Democrat, at the last two Democratic Conventions, nothing in the platform was even mentioned about universal health care. The whole Democratic Party cut and ran on that issue. And it is there we have to keep the pressure on, 12 04/22/03 - LAW & GOVERNMENT - BILL 030178 because in 2004 we cannot let that happen again. If those who profess that they speak for ordinary people are afraid to speak, that puts us in a bad light.
As Howard Dean likes to say, you are part of the democratic wing of the Democratic Party. (Laughter.)
I was the only delegate to the convention out picketing when everybody dumped the idea. I didn't go into the convention; I stayed outside and picketed with Dr. Quinton Young because we knew that was a mistake.
Well, we need to get it on the platform this time around and get somebody to run on it. And hopefully, our Governor in Harrisburg can start thinking about doing the same thing here in the Commonwealth of Pennsylvania.
He understands there's a crisis because six days from now when most of the doctors take a leave from their assignment will virtually put the Commonwealth into a crisis. That's just one part of the issue we are facing. When doctors -- who would imagine in the 13 04/22/03 - LAW & GOVERNMENT - BILL 030178 Commonwealth doctors by the thousands would refrain from going to their place of work because the issue is so acute?
Any questions from Councilman Goode, Councilman Rizzo? (Applause.)
Councilman Ortiz, Members of the Law and Government Committee. I'm Dr. Walt Tsou, the former Health Commissioner of Philadelphia and a member of the Philadelphia Area Committee to Defend Health Care and Physicians for a National Health Program. The Philadelphia Area Committee to Defend Health Care represents over 400 concerned citizens interested in quality, affordable health care for all Philadelphians. I'm here today to urge your support of Bill 030178 and Resolution 030189, which would place the wording as already noted on 14 04/22/03 - LAW & GOVERNMENT - BILL 030178 the City Charter in November. The wording of this resolution was adopted from the ballot initiative introduced in Cook County, Illinois. It was based on the words of the late Cardinal Joseph Bernadin who was the head of the Archdiocese of Chicago. This advisory referendum in Illinois was passed by 83 percent of the voters of Cook County. In Philadelphia, this resolution would direct the Department of Public Health to prepare a plan for access to care for all Philadelphians. The importance of access to care cannot be overestimated. In 2000, over 94,000 children and adults alone had no health insurance in Philadelphia. Thousands of families have been bankrupted by illness, and the uninsured are a major factor in the financial solvency of our hospitals and are our City's largest employer. Finally, bioterrorism preparedness depends on access to care for timely diagnosis and treatment for those with contagious diseases. Other cities have spent a tremendous amount of money in order to maintain their public hospital safety net. 7 billion program funded with $176 million of New York City dollars. Chicago has recently built a new $623 million hospital, the John Stroger Hospital. Los Angeles spends over $4 billion in health services of which $609 million are county funds. This resolution offers a chance for Philadelphians to reaffirm our historical commitment to provide a health safety net for our residents. Philadelphia remains the largest City in the United States without a public hospital. However, we made a commitment to support the district health centers and Philadelphia Nursing Home. We've made this commitment since the closing of PGH in 1976. The plan does not necessarily obligate additional funds by the City. We are fully aware of the fiscal constraints faced by the City. " Our goal is to elevate the importance of access to care as an essential function of the Department of Health. Changing the City Charter accomplishes this 16 04/22/03 - LAW & GOVERNMENT - BILL 030178 goal. This plan would be used to identify current city, state, and federal and private dollars that collectively can be used to ensure access for all Philadelphia residents. It also directs the department to examine ways health care providers and hospitals can work cooperatively together to ensure a safety net for those who are uninsured and sick. As our City becomes increasingly diverse, access to care for newly settled Philadelphians becomes a growing challenge and needs to be addressed. Creating such a plan represents no less of a priority than how a City ensures childhood immunizations, reduces lead poisoning, or provides coordinated services for people with AIDS. Our committee has worked for over three years to support this resolution. We have collected close to 10,000 signatures on a petition in support this ballot resolution. These signatures were obtained from all over the City, spanning from South Philadelphia, West Philadelphia, and Chestnut Hill. We urge your committee to approve this bill for a vote by the entire Council. And I have enclosed as an addendum some 17 04/22/03 - LAW & GOVERNMENT - BILL 030178 frequently asked questions for your consideration. Thank you for your time.
You know, it's obvious we have a crisis in this country, in this city, in this state, as Henry Nicholas stated, and as you put it, over 94,000 people in the City of Philadelphia have no health insurance within the City?
Within the City. That was based on the Philadelphia Health Management Corporation's survey that they did in the year 2000. And it is likely since that time, given the recession, that the number is much higher.
I always believed that politics begin at the local level; and change, in order to become a national issue, has to start at the local level. I believe if we're ever going to have national health insurance in this country, universal health insurance, it has to start with the cities. It has to begin with us. It cannot begin from the top down, as we saw during the Clinton era and we saw Hillary and Bill Clinton try to develop a plan. Unless there's a massive outgrowth of organizing and support from cities across the 18 04/22/03 - LAW & GOVERNMENT - BILL 030178 country, the lobbies of the HMOs, insurance companies, all those individuals are so powerful that they control the media argument, they control the debate, and actually, they're able to shape the form that the debate is going to take place and how and under what ground rules. We saw that happen in the very early part of the Clinton years. So I think that this debate, just like the debate on the Patriot Act and other issues that are being forced upon us by the right wing Administration from Washington, we have to begin those debates here in the City of Philadelphia. And I believe that city government has a purpose, has a duty, a duty really to organize the plan, to develop it, to bring it before the voters of this City and say, "We might not be able to institute this, but this is where this should go. This is where we should be." And this should be the platform of every Mayoral candidate that wants to be Mayor of this City or any other politician that wants to be elected in this City. So I appreciate your testimony, Dr. Tsou, and your leadership on this issue. Thank you very much. 19 04/22/03 - LAW & GOVERNMENT - BILL 030178 (Applause.)
Kathy Black, please. We've been joined by Councilwoman Jannie Blackwell and Frank Rizzo is here and Darrell Clarke and Councilman Goode.
Good afternoon, Councilman Ortiz and Members of the Committee. My name is Kathy Black. I am the Health and Safety Director for AFSCME District Council 47, and I also serve as the President of the Philadelphia Chapter of the Coalition of Labor Union Women. My testimony today is on behalf of both organizations. Together we represent almost 6,000 members and I am here today to voice our support for spirit and substance of the proposed health care for all amendment to the Philadelphia Home Rule Charter. Both AFSCME and CLUW have long supported the idea of universal health care. Organizations have been active in local coalitions for more than 10 years that advocated for health care coverage for the uninsured. While we are both on record as supporting a national single payer health care plan as the best way to achieve this goal, we know that there well may be other viable programs which could 20 04/22/03 - LAW & GOVERNMENT - BILL 030178 be implemented within the City which would also have our support. Although President Bush is now promising universal health care to the Iraqi people, it seems highly unlikely that we can count on him to do so --
He is promising a lot to the Iraqi people right now. I don't think the Iraqi people are buying a lot of the promises.
That's probably true, but these are words that he has never uttered in regard to the US citizens.
Well, it seems unlikely we can count on him to do the same for our citizens now or at any time in the future. And yet in terms of sheer numbers, the need is even greater here than it is in Iraq. Most analysts put the number of uninsured Americans at 41 million and admit that that number does not include those who may be uninsured for significant stretches of time. In Philadelphia alone, as Dr. Tsou said, approximately 94,000 of our own residents are uninsured. Since the Congress and the Administration seem woefully 21 04/22/03 - LAW & GOVERNMENT - BILL 030178 unable to rise to the challenge of providing health care for citizens, we believe we must start locally to care for our own. While we believe that health care should be a right for all citizens and not just a privilege for the wealthy and lucky, we also know that promoting universal health coverage makes good financial sense. Every year, health care cost increases outstrip inflation several times over. A significant proportion of this increase is driven by the cost of uncompensated care. People who do not have access to routine preventive health care and who can't afford to go to the doctor when they are sick wind up in emergency rooms. Delayed care leads to more advanced, costly, and difficult-to-treat illnesses and to premature death. It means millions of dollars of lost work time and productivity. It means financial catastrophe for families and increasing reliance on public assistance. And it means our union members and millions of workers like us who have good health care coverage pay a higher percentage of their income for health care every year. More and more frequently, those costs outstrip any wage increases that have been 22 04/22/03 - LAW & GOVERNMENT - BILL 030178 negotiated. All this adds up to massive losses for our local economy and staggering human costs for our City's own people. We have complete confidence that the able employees of the Philadelphia Department of Public Health can design a comprehensive plan that will provide for the health needs of our City's uninsured. They already run a unique model system of clinics around the City staffed by the competent health care professionals of our union and they provide excellent outpatient medical services and free prescription drugs for Philadelphians. Therefore, we call on City Council representatives to approve this amendment to our Home Rule Charter and submit the provision to the voters for approval. We have no doubt the voters will see the wisdom of this provision and will pass it overwhelmingly. Thank you.
Yeah, but, you know, this is socialism we're talking about here. You're talking about taking competition out. I mean, it's competition that makes this country great and gives us the best health care in the world, after all.
I think the insurance lobby 23 04/22/03 - LAW & GOVERNMENT - BILL 030178 got to you, too, Councilman Ortiz. (Laughter.)
The Canadian system is a great model that we ought to look at more carefully and not just listen to the occasional care scare stories that come out, probably planted by our own insurance lobby. (Applause.)
This guy O'Reilly on TV would say, "Well, all you guys want is to give people something that they don't pay for. The taxpayers and the working people of this country will be carrying forward." What do you say to that?
I would say listening to O'Reilly is a health hazard. It's very bad for people's blood pressure, and I advise against it. (Laughter.)
Well, what do you say to the arguments -- remember the commercials of Harry and Louise? 24 04/22/03 - LAW & GOVERNMENT - BILL 030178
I'd say, look at the Social Security system which runs on an overhead of under 4 percent, I think, and provides benefits to millions 5 and millions of Americans. A health care insurance 6 system could do the same thing. We're not talking about socialized medicine, that is, the doctors and other health care providers would not work for the government, but the people would be insured and they would be paid at a much more efficient system.
But Harry and Louise, they were representing the insurance --
I think they fed fears of mainstream America. But I think mainstream America, when properly informed, would be supporting legislation like this.
Thank you, Kathy. Thank you. (Applause.) 25 04/22/03 - LAW & GOVERNMENT - BILL 030178
Dr. Robert Reinecke. Identify yourself for the record, please.
Mr. Chairman, my name is Robert D. Reinecke, R-E-I-N-E-C-K-E. I'm a physician and Professor of Ophthalmology at Jefferson Medical School. I practice at Wills Eye Hospital. And I have attached my curriculum vitae. I am past President of the Philadelphia County Medical Society, and while in that position, enhanced the Block Captains Program to find ways of helping the citizens of our county find means of entering the health care system. The City health system facilitated this program greatly, and we're grateful to them. And I might add that we are thoroughly in support of the items under consideration today, and I appreciate the opportunity to speak towards this. Several years ago, I was intrigued by the argument of the prosecutors of Noriega, the Panama dictator, who when arrested pointed out that it was a Constitutional right of every accused felon to have access to a lawyer. I pointed out to the then senatorial candidate Harris Wofford that if the Constitution guarantees a lawyer to a felon, 04/22/03 - LAW & GOVERNMENT - BILL 030178 shouldn't a doctor be guaranteed when needed. He thought so and won that election handily on that plank and often credits the win to that issue. More recently, Dr. Fred Davidoff, former editor one of the outstanding medical journals, and myself in an editorial to the Annals of Internal Medicine argued strongly for a 28th Amendment to our Constitution. We should be guaranteed access to health care. And response to that editorial, copies of which I have given you, were very positive and remain so. The concept of access of health care to all the citizens of Philadelphia is a wonderful idea whose time has come. The facts that make it so attractive are the large health care resources we have, the excellent health care brain power, the community which is ready to trigger start of the economic boom without precedent. We need to think of health care as an instrument to be played the way we would any other trump card for the development of Philadelphia. Consider offering health care to an incoming company. We can organize and finance such health care better. We can find the best nurses, 27 04/22/03 - LAW & GOVERNMENT - BILL 030178 physicians, drug suppliers in the country. We can treat cancer, trauma, athletic injuries, heart disease, eye disease, bone injuries far better than anyone. Since we can do health care better here in Philadelphia, we should be able to do it cheaper as well. What about some of the hangers-on who are benefiting from the intense health care industry here? I believe we should tax the malpractice lawyers, do bulk drug purchasing for the hospitals, have city health employment agencies, and it is time that the health care facilities access channels to the many opportunities, such as taxes on health care insurance. You mentioned that, Mr. Chairman, earlier today. If we can make health care the touchstone it should be, we should be able to extend Philadelphia's county lines. Finally, let me cite a social worker's comment when Hillary Clinton was conducting hearings on our needs here in Philadelphia. The Philadelphia social worker said, "Philadelphia and Pennsylvania have enough laws and benefits for health care, but they are such a jumbled morass that the redundancy 28 04/22/03 - LAW & GOVERNMENT - BILL 030178 and poor coordination make them seem hopeless." We have a health care opportunity in Philadelphia which we need to explore and implement. I and the medical community urge you in City Council to move ahead on this attainable issue, and we stand ready to help you in every possible way that we can.
Dr. Reinecke, is it your belief and as past president of the Philadelphia County Medical Society that Philadelphia as a city government, that we could begin a process in which -- because of our purchasing power, our ability to bring resources together, that the City can develop a plan, at least for the citizens of Philadelphia, to give health care insurance to at least the citizens within the County of Philadelphia?
I certainly do, Mr. Chairman. I think we're standing on an unique opportunity. I don't know of any City in America that has more health care resources and the personnel. I think we would be the only City in the country to take the idea of offering health care as part of an attracting bidding unit, so to speak, to new industries coming to our City which we need so 29 04/22/03 - LAW & GOVERNMENT - BILL 030178 desperately. So the answer to your query is, from my point of view, I think the doctors are ready to help you in every possible way. The doctors do face an emergency that you cited earlier. And we need a lot of help get by that. But I think putting this thing together is one of the important things we have an opportunity to do. And we can solve some of these issues that are so burning by so doing.
While you were president of the society -- and I haven't looked into it, but you obviously have given a lot of thought to this process. Did you find that there were any restrictions and/or encumbrances or jurisdictional questions that we could not overcome because we're a county and the State of Pennsylvania -- like you say, Philadelphia and Pennsylvania have enough laws and benefits for health care, but there's such a jumbled morass that the redundancy and poor coordination make them seem hopeless. Is that morass of legislation statewide, and is the Commonwealth an impediment to our establishing our own system of health insurance?
It is, and it makes our responsibility that much greater. Because I don't 30 04/22/03 - LAW & GOVERNMENT - BILL 030178 think we can change a lot of the insurance problems the state has. They have a lot of reasons for that, and I'm not anexpert on that. But I do think we have the opportunity to straighten out all these rules and regulations that are largely state rules, some are City. But we should go ahead, put them together. We have done so with the Block Captains Unit to quite an extent, trying to identify every single advantage we can find to help people get health care. But we can't do it. We don't have the citywide authority you have.
What is the insurance company -- it is the insurance system statewide that would probably prevent the City of Philadelphia from moving forward with a plan such as this.
I don't think it will prevent it. I tried to say, and didn't do so very effectively, I think that we cannot rely on the state system to solve our problems. I think we should go ahead with this as the first step and see what we can do here and come together with problems we can help you identify and solutions that at least deserve a critical examination and a trial.
Thank you. Any 31 04/22/03 - LAW & GOVERNMENT - BILL 030178 questions? (No response.)
Ms. Sylvia Metzler. Please identify yourself for the record.
Good afternoon. I'm Sylvia Metzler. I'm a nurse practitioner. I've been a registered nurse for 45 years and a nurse practitioner for years. Good afternoon, 12 Councilman Ortiz and Members of Law and Government 13 Committee and members of the audience and the media. 14 I work part-time at the APM Community Health Center 15 in North Philadelphia. And I volunteer one evening 16 a week at the Catholic Worker Free Clinic in 17 Kensington. And I'm speaking for the free clinic 18 tonight. 19 This free clinic is a small but important part of the safety net for the many Philadelphians who have no health insurance. All of the 40 nurses, doctors, and other helpers who work there are volunteers and it's supported totally by donations. We have at least 3,000 patients on our records and see about 100 patients a week in five 32 04/22/03 - LAW & GOVERNMENT - BILL 030178 two-hour sessions. Even though our patients are some of the poorest of the poor in the City with multiple physical and mental health problems, only about half of them have any health insurance. About to 7 percent of our patients are employed, none of whom 8 have health insurance. We also see many refugees 9 from all over the world, all with no health care. 10 We are able to care for minor problems 11 there such as respiratory and urinary tract 12 infections, rashes and other skin disorders, gastric 13 and intestinal disorders, minor injuries, et cetera. 14 But most of our patients also have more serious 15 chronic and acute illnesses. They present with 16 hypertension, diabetes, coronary artery disease, 17 schizophrenia, clinical depressions, drug and 18 alcohol addictions, HIV/AIDS, hepatitis, cancer, et 19 cetera. For these patients, we try, sometimes 20 successfully, sometimes not, to get them on medical assistance or refer to the City health centers. Many of our patients fall through the cracks. For example, a middle-aged man I'll Chuck has poor circumstances and stasis ulcer on his leg which we treat, but he cut his leg on a wire at a chicken 33 04/22/03 - LAW & GOVERNMENT - BILL 030178 packing farm where he works in New Jersey. He takes the bus to work a.m., returns to Philadelphia at 4 8:00 p.m. six days a week. His wound became 5 infected, but he has no insurance and he cannot afford to take time off from work to get it properly, as Sunday is his only day off. We can give him limited care, but he could easily lose his leg. Think of the tragedy of this potential outcome for Chuck and also for all of us as many tax dollars will eventually be needed for his very expensive medical care. As more and more employers hire only part-time workers and reduce or eliminate health care benefits, as more and more people are laid off, as more and more people retire early, often nonvoluntarily, the uninsured are rapidly becoming us, not them. I hope this committee and the Philadelphia City Council will allow the citizens of Philadelphia to vote in November that our present health non-system has failed and that we need to create a new system that will provide quality, affordable, and universal health care for everyone. In closing, we want to thank Committee 34 04/22/03 - LAW & GOVERNMENT - BILL 030178 Chair David Cohen and Angel Ortiz very much for their humanity and fiscal responsibility in introducing this bill and resolution. We want to thank the City Councilpersons who have cosponsored this bill for universal health care. Councilman Wilson Goode, Jr., Michael Nutter, Frank DiCicco, and any others that we have not yet heard about. Thank you to all the Members of the Law and Government Committee and all the Members of City Council who will support and vote for this ballot question. In the name of all the uninsured and underinsured people of this City, we're very grateful for you. Thank you.
Commissioner, are you going to testify on the referendum bill?
Councilman Ortiz, Members of the Law and Government Committee, I'm John Domzalski, Health Commissioner, and I'm here to testify and present comments on Resolution No. 23 030189. Mr. Chairman, if you will permit me, this is my first appearance in Council since the 35 04/22/03 - LAW & GOVERNMENT - BILL 030178 passing of Councilman Longstreth. And I just wanted to extend my condolences to the Council in the loss of such a longstanding member as Councilman Longstreth.
As Health Commissioner, I fully support access to health care and especially for those in the most vulnerable segments of our City population. This policy is given effect in the government by providing a full range of ambulatory health care in each of our eight health centers located in the neighborhoods throughout the City. Annually, approximately 100,000 Philadelphians make over 340,000 visits to our health centers where they can receive a full range of services, including adult and pediatric care, prenatal and family planning services, immunizations, laboratory pharmacy services. Nearly 64 percent of the residents of these services are persons without insurance of any kind. As Health Commissioner, I am committed to, and as a department we will provide these services regardless of a person's ability to pay. 36 04/22/03 - LAW & GOVERNMENT - BILL 030178 We are insisting that those who are insurance eligible participate in the insurance application process which we make available on site in each of our health centers. We do this so that our primary care services, which for the uninsured are fully supported by local tax dollars, can continue to be available to those who do not qualify for insurance. Make no mistake about it, lack of health care access for the uninsured is and has been a national crisis. For example, a recent report by the Robert Wood Johnson Foundation described that for the two-year period, 2001 to 2002, a full 30 percent of US residents were without insurance for all or part of that period. The implications of being uninsured are more than mere statistics. We know that those who are uninsured fare worse in health status indicators than any other group. Tragically, as the Institute of Medicine has pointed out, there are over 18,000 deaths each year in this country attributable to lack of health insurance coverage. The City of Philadelphia is unique among US cities in providing comprehensive medical care including prescription medications, regardless of 37 04/22/03 - LAW & GOVERNMENT - BILL 030178 insurance status or ability to pay. In addition, there are non-governmental, federally-qualified 4 health care centers that also operate across our 5 City that also serve the very vulnerable segments of 6 our population. The hospital community is also 7 serving this population, and as calculated by the 8 Delaware Valley Health Care Council, is delivering 9 uncompensated hospital-based care at a level of 10 $500 million annually in Southeastern Pennsylvania 11 residents, almost all of whom are residents who live 12 in the City of Philadelphia. 13 What is very clear to everyone who 14 thinks about this issue is that the factors that 15 influence existing or expanded access to health care 16 are overwhelmingly influenced by policies on a number of levels: National policies, both health and economic policy; state policies, health, economic and insurance; business decisions of employers when deciding to expand or contract coverage; insurance industry policies; and the hospital and health care industry. These are only the larger or macro influences. I point this out in such detail so that there's clarity with regard to how few of these influences can be controlled or 38 04/22/03 - LAW & GOVERNMENT - BILL 030178 directed from the local level, especially by a solely local government plan. Thank you for the opportunity to present testimony on this resolution.
Thank you very much. Any questions from Members of the Committee? The Chair expresses his regret at being detained this morning, but there was a matter even more important than this that came up, and that is the Navy in its great wisdom -- as we've learned, the armed forces generally act with great wisdom -- decided to press charges giving a seaman an overnight notice that he's going to be charged with disobeying a lawful order in that he dated his current wife and mother of his three-week child about a year ago, he'd have a hearing this morning on it and would be subject to dismissal from the Navy after six distinguished years of service. So with important issues like that to deal with, the family was, of course, panicked and that was the reason for the delay. And that kind of senseless action pervades, I think, the whole health area where we 39 04/22/03 - LAW & GOVERNMENT - BILL 030178 live with the situation of 42 million, at least, uninsured people, treating them as if they were unimportant and we don't care whether they live or die. I thought those days were gone many, many decades ago, if not a century or more ago. So we appreciate the attendance here on this matter. I think it very important that we raise the issue of universal health care every day and constantly until the United States acts like a civilized nation and takes the steps. (Applause.)
In the meantime, we'd like Philadelphia to come up with a plan as to how do we provide for the proper medical care for Philadelphians, and that's the reason for this action today. We think the people of Philadelphia will want to discuss it or they'll want to show by their votes when this goes on the ballot as a Home Rule, change requiring that the Health Department come up with a plan to take care of all Philadelphians. Philadelphia led the way, when following a bad decision of closing the Philadelphia General Hospital -- we atoned in part for it by establishing 40 04/22/03 - LAW & GOVERNMENT - BILL 030178 health centers which, of course, we've pretty much starved to death so that people have to wait two weeks for prescriptions and sometimes three or four weeks for care for a sick child. But at least it was a beginning and we're working hard to make that work. So I think all of you certainly ought to be commended for your efforts here and in support of this resolution and bill to provide Philadelphians with an opportunity to express their feelings. One thing we can do on national problems, and that is City Council can play the role of the bully pulpit. We've got to -- you know, these things are too important to just permit federally elected officials to deal with them. We've got to instruct them from the local areas how people feel because the government really belongs to the people, and that's this process that's ongoing today. So thank you all for your attention. Is there any other witness?
Yes. Commissioner, I'm interesting in going further than just passing the referendum. Dr. Reinecke says we can start 41 04/22/03 - LAW & GOVERNMENT - BILL 030178 putting a plan together to begin either challenging those state restrictions that are imposed upon us, and if we have over 94,000 uninsured, and probably the number is bigger, I think that constitutes a statewide, Commonwealth-wide health crisis. And I'd be very much interested in seeing something come about from your department in which we start looking as to how we can, as a City, as a county, begin putting together something that goes along these ideas. And challenging. Henry Nicholas said that there's a lawsuit trying to challenge the monopoly aspect of the health insurance industry. We have that problem, not only in health, but it seems the health insurance industry holds us in a stranglehold in other areas. So I would be very much interested to see how we over the next week or so can start a process where we can put together something. I'd like to have this Committee work with your office to put together this plan as we go about.
We'd be pleased to do that. There's absolutely no question that we need to plan. And by "we," I mean everyone needs to plan. 42 04/22/03 - LAW & GOVERNMENT - BILL 030178 I mentioned in my testimony, our health centers, I mentioned the federally qualified 4 health centers. That doesn't mean everything is 5 arrayed the way it ought to be or the way in which 6 we can get the most service out of the resources 7 that are being expended. I imagine -- and I know 8 Dr. Reinecke from his past leadership of the County 9 Medical Society, and to hear him repeat the offer of 10 the cooperation of organized medicine; this is 11 incredibly important. And of course, my colleagues, 12 former Health Commissioner Tsou and everyone else 13 who is in this, in this room and is interested in 14 taking care of folks who just have no other place to 15 turn, this is incredibly good work. It's important 16 work. It's work that we need to get on with. And I'm convinced that some of the things we've already begun we can expand in terms of doing planning.
Thank you. Are there any other witnesses to be heard on the bill and resolution involving universal health care? Will you step forward and identify yourself for the record? Thank you, Commissioner, for your 43 04/22/03 - LAW & GOVERNMENT - BILL 030178 testimony and your support.
Good afternoon, Councilmembers, staff and guests. My name is Kati Sipp and I'm the Political Director of the Service Employees International Union Local 36. SEIU Local 36 represents over 5,000 building service workers in the Greater Philadelphia area. Our membership is a diverse one. We are men and women; African American, Latino, Asian and white; gay and straight; native-born citizens and immigrants. But one thing that binds us all together is the need for quality, affordable medical care when we are sick or injured. Currently, our union is bargaining a master agreement that covers over two-thirds of the members of our union. These members clean and maintain Center City office buildings. We represent workers at over 80 percent of the Class A and B commercial real estate in the City, including Liberty and 2, the Independence Blue Cross Building, Centre Square, 2000 Market Street, and other buildings too numerous to name. The master agreement that we bargain is with the Building Owners Labor Relations Association, commonly 44 04/22/03 - LAW & GOVERNMENT - BILL 030178 referred to BOLRA. This agreement sets the standards for wages, benefits, and working conditions for all janitors and engineers in our local and for those in non-union real estate as well. Tomorrow, we will enter our fourth week of bargaining with the BOLRA Association. At this point, the entirety of our bargaining with management has focused on health insurance contributions. We have not been able to have any substantive conversations about other economic issues, like raises or adding Martin Luther King's birthday as a holiday, or creating for the first time sick days for our members; nor have we been able to talk about non-economic issues like increasing job security or making our members safer on the job due to the overwhelming nature of our health care crisis. To give you a sense of the problem's scale, we have estimated that just to protect family benefits in our contract, each employer will need to increase their contribution by $200 per member per month. I bring this to your attention today 45 04/22/03 - LAW & GOVERNMENT - BILL 030178 because I think our union's experience is not atypical in this or any other city in the United States at this time. Across the country, both unionized and non-union workers are being forced by their employers to accept cutbacks in their standards of health care, to pay more money out of their own pockets, to make difficult choices between fighting for raises and fighting to keep their health benefits secure. We and other working people are right now being asked to cover the uninsured out of our pockets, and not just once, but several times. We pay taxes, which help to support Medicaid, Medicare, and other government-sponsored health care programs. And we pay again when we are asked to increase our out-of-pocket costs to pay the skyrocketing cost charged by our insurance companies who are passing through the cost of providing emergency room and hospital services to uninsured patients. I should say that none of us blame uninsureds for being without health insurance. We believe that all people deserve access to quality health care when they need it, regardless of whether they are employed or unemployed. We believe that 46 04/22/03 - LAW & GOVERNMENT - BILL 030178 everyone should have access to preventive care, not just treatment for illnesses and injuries. But we cannot continue to have a nation where access to health care is predicated upon employment or we will end up in a situation where only the very wealthiest people will have any health care at all. We must do something to stop this growing crisis in the United States. And we are asking you, the City Council, to take the first step by supporting this referendum. I am sure that as you move through this process, you will hear the argument that the health care crisis is a national one, that it requires a national solution as opposed to a local fix.
And it's true that the crisis is national, with over 73 million people who have been uninsured in the last two years, 41 million of whom were without health care coverage for over a year. But we've waited over 10 years for a national fix to this problem. And with the federal government's attention focused on the war and providing a tax cut to the wealthiest in the country, I don't think they're going to be moving too quickly to provide universal health care in this Congressional Session. Our City and other state and local 47 04/22/03 - LAW & GOVERNMENT - BILL 030178 governments must press our federal government to focus on this problem. Putting this referendum on the City's ballot will be a step in the direction of getting Congress' attention. In addition, I should say that SEIU, as the largest international union within the AFL-CIO, representing hundreds of thousands of health care workers across the country, is making access to universal health care the defining issue of 2004 presidential politics in the labor movement. We believe, as well, that there need to be reforms within the health care industry, especially the need for greater corporation responsibility in health care. But above all, we need to take the issue of access to health care off the bargaining table, both for unionized and non-union workers. It is the only way that we, the low and moderate income workers of the country, will ever be in a position to focus on other kinds of improvements in our work sites. We need to be able to talk about workplace safety, about respecting the diversity in our Local, about fighting sexual harassment, and, yes, making economic improvements like raises and new holidays. But we can't do that while we must spend all of our 48 04/22/03 - LAW & GOVERNMENT - BILL 030178 time fighting to protect the health benefits that we enjoy. Thank you for allowing me to testify today. We look forward to working with council to resolve the City's health care crisis this year and in the future.
We certainly agree it's a national problem and it needs a national solution. And I think your organization is in a position to help lead the national fight because you now have the President of the AFL-CIO who is an alumnus of your union. And he, when he was with your union, was one of the great labor leaders. And your Justice for Janitors Campaign in the Philadelphia area has made many people cognizant of the needs of low-income workers. And so we appreciate your leadership, but we've got to get the labor movement as a whole to take the same unselfish attitude and to fight for everybody's rights, as your statement indicated, not just for the rights of the union members. Otherwise this problem will remain with us. 49 04/22/03 - LAW & GOVERNMENT - BILL 030178
The labor movement was responsible in this country 50, 60 years ago for ensuring that access to health care was something that working Americans had. And I think that we have come to the point, at least within SEIU and AFSCME, some of the other large unions that we know that just limiting health care to people that are employed is not enough, that we have to ensure that all Americans, all residents of this country, have access to health care.
And even in Philadelphia, some of the Administrators who employ Philadelphia labor are trying to reduce the health benefit plans and increasing co-pays. The group of unions representing housing employees at Philadelphia Housing Authority are currently being confronted with that. A number of them have apparently capitulated to all kinds of pressure; pitting worker against worker, saying we'll grandfather in certain rights of current workers provided you let us cut the rights of incoming workers later on. And that's a terrible thing to do by employers and it's particularly terrible and awful when it's done by someone representing 50 04/22/03 - LAW & GOVERNMENT - BILL 030178 government which ought to in every way be a model employer rather than a follower of the worst anti-labor practices that exists. So there's a lot of work for everybody in this area. Are there any comments by members of the Committee? (No response.)
Is there any other witness to be heard? Come forward. Identify yourself for the record, please. Spell your last name for the reporter.
Sure. My name is Randall Emery, E-M-E-R-Y. I appreciate the opportunity to speak here today. I come to wholeheartedly support this initiative, not from the perspective of a labor group, but as someone who has started a business in Philadelphia and, incidentally, who has experienced living in a society that has public health care. It's too bad that Councilman Ortiz is not here 51 04/22/03 - LAW & GOVERNMENT - BILL 030178 because I could speak to his questions about Canada directly.
I would just like to say that in starting a small business -- this is just my own experience. There is no greater risk that you face than becoming sick or disabled. And when you start a business, you quickly find that there really are not many options. Last year, it cost me personally, without any dependents, without a spouse, about 6 1/2 thousand dollars to get insurance that would cover a catastrophic loss in the City. Now, on top of that, you have to actually pay tax, as someone who is self-employed on that coverage, bringing it to about $7,000. Now, when you're starting a business, cash flow is a big issue. It is difficult to have money coming in and to also meet all your expenses, especially if they're fixed. I saw a statistic in US Today about a month ago that said that for the first time large businesses employ more people than small businesses do. I personally believe, knowing that health care costs are the No. 1 reason that small businesses go out of business, that this is 52 04/22/03 - LAW & GOVERNMENT - BILL 030178 the primary reason, and I would like to echo the words of the good doctor from Wills Eye hospital who said that this could be a tremendous competitive advantage for the City of Philadelphia, for the residents of Philadelphia, from a business standpoint. And I would also just like to say from personal experience that public health care does work. I grew up with it. It is no exaggeration to say that I owe my life to public health care. It works. It works wonderfully, and that is why I'm here day. I would just like to thank you all for your work in putting this initiative on the ballot, and I hope that it gets there and that people can give it a chance. Thank you.
Any other people to testify? Please identify yourself for the record and spell your last name for the reporter.
I'm Charles Sherrouse; it's S-H-E-R-R-O-U-S-E. I just wanted to briefly thank ya'll for hearing us and to let you know that we have over 10,000 Philadelphia residents that have 53 04/22/03 - LAW & GOVERNMENT - BILL 030220 signed petitions endorsing just this proposition be on the ballot in the fall, and I want you to take that into consideration. And as somebody without insurance, I think that this is a very important issue and that we can't let it slip by. Thanks.
Thank you very much. Seeing no other witnesses, this will conclude the hearing on this matter of universal health care. At the end of the meeting today, there will be -- as soon as a quorum comes, if you'll be patient we'll interrupt the public hearing for the purpose of holding a special public meeting on this issue. But in the meantime, we'll go on to the next public hearing. Will the Clerk read the next item before this Committee? We'll here a bill and resolution also on a proposed Charter change. We cannot take a vote on the last one heard until a quorum appears, and that's why we're delaying the vote.
Bill 030220, an Ordinance 23 providing for the submission to the qualified electors of the City of Philadelphia of an amendment to the Philadelphia Home Rule Charter creating the 54 04/22/03 - LAW & GOVERNMENT - BILL 030220 Office of the Insurance Public Advocate, as approved by the Resolution of the City Council: Fixing the date of a special election for such purpose; prescribing the form of the ballot questions to be voted on; and authorizing the appropriate officers to publish notice and to make arrangements for the special election. Also, Resolution 030231, a Resolution 10 proposing an amendment to the Philadelphia Home Rule Charter to create the Office of the Insurance Public Advocate, and providing for the submission of the amendment to the electors of Philadelphia.
Thank you very much. The first witness is Susan Schulman.
Thank you, Mr. Chair. I believe the all the Committee members have a copy of a letter that was sent to me from the Insurance Commissioner, Ms. Diane Koken. We had invited the Insurance Commissioner to attend today's public hearing. She writes back that, "Unfortunately, I am unable to 55 04/22/03 - LAW & GOVERNMENT - BILL 030220 attend the hearing. However, I understand the importance of this matter and wish to submit my comments for the benefit of the committee." She goes on to speak a lot about the role of the Insurance Commissioner, the number of people who it employs, the number of consumers in the Commonwealth of Pennsylvania that access the Commissioner's Office either through the Website or phone calls or written correspondence. And it does add up to a significant number of people. She also sites in some instances a number of cases that have been settled on behalf of consumers. Also, a number of -- I guess it appears, the way she's writing this, that a number of businesses that may have been basically shut down as a result of improprieties that were being conducted. And I thank them for that. I admire the fact that they have been doing something in those areas. But I'm still disappointed, obviously, that they are not here today. This is the second hearing we've had, and in both instances they were not able to attend. Further in her letter, she addresses the issue before us. In my letter to her, my request to 56 04/22/03 - LAW & GOVERNMENT - BILL 030220 the Commissioner, what was their position on the creation of an insurance public advocate in Philadelphia. I will read her remark. "Therefore, in addressing the Committee's request for Insurance Department's position on the creation of an insurance public advocate in Philadelphia, we believe that we have the expertise and the resources to perform this important function and that a Public Advocate would be duplicative and not add value. The Insurance Department is here to protect the interest of all consumers and that includes Philadelphians. We believe that we have the expertise and the resources to perform this important function. We actively consider the consumer in everything we do at the Department." With all due respect, I believe that they do have the expertise and the resources, but I do take exception when they suggest that they're doing everything possible to help the consumers in Philadelphia, in particular, in bringing down the rates for our policyholders in the City of Philadelphia.
Councilman, is she 57 04/22/03 - LAW & GOVERNMENT - BILL 030220 the holdover superintendent?
I don't know if she is the holdover or the new -- she is the holdover?
That does not sound like a policy that Governor Rendell would be supportive of.
Well, I think that Mr. Denenberg testified on this at the last hearing we had and will testify again that it's our understanding that this Commissioner will also be held over during the Rendell Administration as well. Again, with all of the expertise and all of the resources and all the budget that they have, insurance rates in the City of Philadelphia have not gone down, irrespective of the chart that she supplies saying that although rates may not have gone down, rates have not gone up in comparison to the consumer price index and the rate of inflation. Those are things we've been hearing for years and years and years. And obviously, if they were doing the job and, I think, protecting us in the way that we expected them to do, that we would not be here today. You really need to take a look at the letter because I won't read it in its entirety. But it 58 04/22/03 - LAW & GOVERNMENT - BILL 030220 just talks about the review process. And again, I don't see any real effort, if you will, that speaks to the issue of high automobile insurance rates in the City of Philadelphia today. I also understand earlier in this hearing, our colleague Councilman Clarke made a statement that he was withdrawing his bill that would create the Office of a Consumer Advocate because we are told that the Mayor in the next couple of days by way of Executive Order will be creating the Office of Consumer Affairs. What that means, I have no knowledge of. I was just told that by my legislative assistant and a reporter while I was down in Room 426. And I believe that my colleague Mr. Clarke also suggested that this bill, this resolution, is moot. I respectfully disagree with him on that matter as well. So I wanted that to be part of the record as well.
Your comments are noted, and I think they're all well taken. I thought I was going to be sharply contradicted when I talked in terms like the holdover superintendent. I think we all hope for 59 04/22/03 - LAW & GOVERNMENT - BILL 030220 better from a new Administration than a holdover who believes that the Insurance Department is fair and equitable in its decisions because, certainly, that's not the way the people of Philadelphia or, as I read them, the people of Pennsylvania feel. But let's see what transpires at this hearing, what action can be taken.
Mr. Chairman, just one more brief comment. A week or so ago when we had our first hearing, there were some comments that were made by either people in the media or other folks who were suggesting that the only reason that we were doing this was because it was an election year. I'd like to remind everyone for the record that Mayor Street has had the report that was supplied to him by Ms. Schulman, the Mayor's Insurance Rate Reduction Task Force, and nothing has been done for two years. And all of a sudden everybody's getting anxious around here and deciding to create a Consumer Affairs Office or another task force that's going to take their job seriously all of sudden. This was not done by me because of any political reason. I don't even have an opponent in the primary. I think this is something that's long 60 04/22/03 - LAW & GOVERNMENT - BILL 030220 overdue. And the fact that the Administration has sat on this report and the task force that the Mayor assigned has not done anything with it, in my opinion, led me to want to do this because I think it's about time we get something done rather than just let this sit on the shelf and collect dust for two years.
Thank you, Councilman, for your comments. And even if everything were politically motivated, I don't want to send the message that there'd be anything wrong with that. Isn't that the purpose of elections, to produce discussion among citizens, to create an opportunity which almost compels citizens to take account of where things are and where they ought to be, and to take action to see that what exists ought to be changed into the state of what ought to be. So that if something is motivated by the election process, that's all to the good of the election process. But I know this thing has been sitting around the desk of the Mayor in Philadelphia for a long time. I know that complaints have existed for many years about insurance rates. And always we get 61 04/22/03 - LAW & GOVERNMENT - BILL 030220 from departments, usually those that are co-opted by the industry they're supposed to regulate that they are in the finest position and best able to protect the interest of consumers. The facts tend to indicate otherwise, but that's the purpose of these hearings and the reason that legislatures exists: In order to bring about change. So this hearing will begin with Ms. Schulman. We're glad to see you back here again on the question of insurance rates.
Thank you Councilman Cohen. And good afternoon, Councilman Ortiz and Mariano, Councilman Goode. My name is Susan Schulman. And as you know, I was appointed by Mayor Ed Rendell to serve as the Executive Director of the Mayor's Automobile Insurance Rate Reduction Task Force in November 1999, and continued in that position until December 2001. Competent analysis of auto insurance rates is a difficult and complex task that requires ongoing actuarial and economic expertise. The task force was created as a temporary investigatory vehicle to identify problems and propose solutions. What we learned very quickly was that this would be 62 04/22/03 - LAW & GOVERNMENT - BILL 030220 a process encumbered by obstruction from the insurance industry and insurance regulators and that access to basic data would require ongoing legal action. I believe that the Committee has copies of the task force report of July 2000 that summarizes our findings after six months of work. Our findings, summarized on of that report, showed that rates in Philadelphia were among the highest among 10 major cities, including New York, Los Angeles, Miami, Chicago, and Detroit. We determined that the personal injury loss experience, however, had significantly declined in Philadelphia but that we were not realizing any comparable reduction in our premiums. We also found that Philadelphians were not benefiting from the tort reforms enacted in 1990 through Act 6. Finally, we concluded that Philadelphians are suffering from over-inflated auto insurance premiums that are choking off the City's population base. We made a variety of recommendations that are listed in Section 5 of the report, . 63 04/22/03 - LAW & GOVERNMENT - BILL 030220 First and foremost, we recommended creation of an independent office to pursue the broad range of initiatives needed to reap any meaningful, long-term success at lowering insurance rates for the drivers of this City. We recommended the creation of the Office of Public Insurance Council for Philadelphia. The goals of this office would include: Ongoing review of rate filings; intervention and rate approval; investigation into unlawful insurance practices; litigation where necessary on behalf of insurance consumers; consumer education; stimulation of the private market competition; and lobbying for consumer interests. The list of tasks that I enumerated can only be done through a dedicated office charged with this task that has the required legal, actuarial, and economic expertise. This office would clearly advocate on behalf of consumer interests; however, it would also become a meaningful resource to the Insurance Department which is charged with the dual role of protecting consumer rights at the same time that it serves the interest of the insurers doing business in the state. We made a number of proposals for action 64 04/22/03 - LAW & GOVERNMENT - BILL 030220 in our report. We did not present these as alternative methods to proceed, but as a comprehensive plan for action. I continue to believe that fractured efforts at insurance reform are doomed to failure and frustration, and that ensuring fair premiums for Philadelphia drivers warrants dedication of funds and expertise before we can expect long-term rate reduction within a healthy insurance market. Thank you, and I'd be happy to answer any questions that you may have.
Thank you. Are there any questions from Members of the Committee? Councilman DiCicco.
Thank you, Mr. Chairman. Good afternoon, Ms. Schulman, and thank you again for coming and taking the time out of your busy schedule to be with us.
You heard my comments earlier and you're aware of my colleague's remarks earlier that he was withdrawing his bill to 65 04/22/03 - LAW & GOVERNMENT - BILL 030220 create an Office Consumer Advocate and that the Mayor is allegedly, will be in the next couple days, by way of Executive Order creating an Office of Consumer Affairs. What do you think about that in terms of how that would impact or what impact it may or may not have on insurance rates? We understand the role of the consumer advocate or the consumer affairs can have a broad range of issues. But your expertise and your preparing these reports and knowing the amount of time it takes just in this one area of automobile insurance rates, how do you feel about that?
Well, without knowing the details of what's being proposed for this office, in general it seems that a consumer advocate is a good idea, certainly for the City of Philadelphia. However, insurance issues are unlike almost any other consumer issue. Insurance issues are more complex, require more expertise, require more ongoing concerted effort than I think it does to handle other types of consumer complaints. I did some work at the United States Consumer Protection Office, and I know that consumer complaints are plentiful and can often be ongoing, 66 04/22/03 - LAW & GOVERNMENT - BILL 030220 but none, I don't think, are as complex as insurance complaints. And if there is a dedicated office within the Consumer Advocacy Office for insurance, then I think that would be great. But that office clearly needs funds for insurance research, it needs funds for attorneys who understand insurance issues, it needs funds for actuarial staff. If this is an Office where there's one advocate and secretary, I don't think that the insurance consumers' needs are going to go very far.
So we should actually follow the lead of the Commonwealth of Pennsylvania, I guess, and other states where they created an Insurance Commission to deal strictly with the issue of insurance. I mean, it's kind of one in the same --
A guy by the name of Herb Denenberg. 67 04/22/03 - LAW & GOVERNMENT - BILL 030220 (Laughter.)
I think what you're referring to is there are other states that have an Office of Public Insurance Council, such as Texas, where we modeled our office from. That office of Insurance Council has such a staff and such expertise. All they do are insurance issues, and they advise the Insurance Commissioner in Texas as to certain rate filings where that Office reviews rate filings and finds actuarial discrepancies. They have access to the Commissioner. They can point those discrepancies out to the Commissioner rather than leaving it to some consumer who's annoyed about their auto rates.
The next witness will be the one Insurance Commissioner that made Philadelphians relax and felt a little bit more 68 04/22/03 - LAW & GOVERNMENT - BILL 030220 secure, Herb Denenberg.
Let me say first of all that you've already had your most powerful witness in the form of the witness who did not show up. As I understand, you invited her on April 9 and she wasn't here. You her invited her again, and she wrote that PR letter. There's nothing in it that's worth even repeating, and I'm embarrassed that you would even read it to Committee. And thank God, you didn't read the whole letter. It's just a PR piece. I think the fact that she doesn't show up tells you all you have to know about the need for an Insurance Consumer Advocate. The Commissioner is not protecting the public. If she had any decency at all, she would have at least sent someone else. You notice, she didn't say "I can send someone else." She just said, "I can't make it." She offered no 23 excuse and she acts like this is some little village. This is the largest City in Pennsylvania. It has the most severe insurance problems in the 69 04/22/03 - LAW & GOVERNMENT - BILL 030220 state and probably the country, and the Insurance Commissioner can't find time to be here. So in my view, that makes the case for an Insurance Consumer Advocate.
Before you go on, let me just refresh everybody's mind that the Members of the Committee that are now present, to the far right is Councilman Nutter standing in the second row, Councilman Rizzo, Councilman Ortiz, Councilman DiCicco, myself Councilman Cohen, and Tim Kearney, the Legislative Director of the Committee, and Councilman W. Wilson Goode, Jr. Councilman DiCicco is, for the purpose of this hearing today, I'm informed, he was appointed by the President of City Council. Go ahead, Mr. Denenberg. I think she's been reappointed and I'm wondering why she's being considered by the Governor for retention.
I can't say who the Governor is considering. All I said was I heard rumors that they're going keep her. And I think it's a disgrace that she's been kept this long. When I was appointed Insurance Commissioner, by this time I had already started having hearings in 70 04/22/03 - LAW & GOVERNMENT - BILL 030220 Philadelphia on the way the Blue Cross was ripping off the public. I mean, someone should have been on the job immediately. And she certainly should not be retained. As I pointed out in my statement, she's been a failure under three different governors. Someone ought to get the message. He ought to appoint a good commissioner.
We have three or four candidates in this room, so I don't think that's a problem if you really want to appoint someone that's good. If he's going to run it by the insurance industry, that's another issue. Now, I prepared -- you put me under undue hardship because I was here April 9th, and I'm compulsive enough to prepare a fresh new, brand-new statement for you, so this is something you haven't heard before. I didn't want to come in and repeat what I said before. But I think this is such an important issue, I wanted to do the work and really 71 04/22/03 - LAW & GOVERNMENT - BILL 030220 lay it out for you because I think there's an air-tight case and I think the public is sick and tired of excuses. They want some action. And also just one minor introductory note. I don't think creating this Office of Consumer Affairs is going to solve the problem. First of all, they're going to be swamped by all kinds of complaints. I used to have student interns handle most complaints. The typical complaint you get in a Consumer Affairs Office, you can have almost anyone handle. But as Susan pointed out, insurance has a lot of complexities. And certainly, if you want to go to bat against the insurance industry and the Insurance Commissioner, you need more than just one little office. So until you see an office with adequate resources, that's not going to do the job at all that we're talking about. Now for my statement: Proving the need for a Philadelphia Office of an Insurance Consumer Advocate is somewhat akin to proving the need for air, water, and food. Rip-offs, fraudulent schemes and other abuses of the marketplace are rampant. The late great Senator Phillip Hart of Michigan, a great champion of consumer protection used to say 72 04/22/03 - LAW & GOVERNMENT - BILL 030220 that 30 to 40 percent of the consumer dollar buys no 3 value because of abuses of the marketplace. I've been monitoring consumer complaints for about 30 years, and I can assure you the public is now and has always been underserved by government and private consumer protection agencies, and that the public is not getting the kind of help a consumer protection agency should provide. Every one of the suburban counties has its own consumer protection agency, but not Philadelphia. And I should add that they're not going to be adequate to handle these insurance problems at all. They don't do any of the lobbying that you're talking about or any of the litigation or any of the serious negotiation with the Commissioner. The public is crying out for help, and that cry should be answered. I support bills to establish an Office of Consumer Affairs and an Office of an Insurance Consumer Advocate. If you establish the former, you can include the latter as a unit within the Office of Consumer Affairs. But if you want the insurance problem solved in the fashion suggested by your prior hearings and the Mayor's Automobile Insurance 73 04/22/03 - LAW & GOVERNMENT - BILL 030220 Rate Reduction Task Force, you will have to give it carefully defined responsibilities and adequate personnel budget. Now, as I try to make the case for one or both of these offices, I'll illustrate in terms of insurance, but the same case could be made for any other area of consumer abuse, from home repair and home improvement to landlord and tenant, from credit problems to Internet scams. Now, here's the way I start to prove the case in the area of insurance. If members of this Committee believe that the insurance industry is treating Philadelphia policyholders fairly and is not overcharging them for auto insurance and other coverage, then you don't need an Insurance Consumer Advocate. If you believe that your constituents don't need a voice in Harrisburg, if you believe that Philadelphia policyholders will get fair treatment before the Commissioner when she listens to hundreds of company representatives, but no 23 policyholder advocates, then you don't need a consumer advocate.
If you believe that all is well in the 74 04/22/03 - LAW & GOVERNMENT - BILL 030220 insurance market for auto insurance, for homeowners insurance, for health insurance and all the rest and if you're not concerned about Philadelphia being overcharged for auto insurance, if you're not concerned about red lining, if you're not concerned about insurance companies that don't pay their claims, if you're not concerned with other insurance company abuses, then you don't need an insurance consumer advocate. If you believe the Insurance Commissioner can be trusted to protect the policyholders of Philadelphia, you don't need an insurance consumer advocate. But this is the same Insurance Commissioner who would not meet with the Mayor's Auto Insurance Rate Reduction Task Force. She would not meet with then Police Commissioner Timoney and City Solicitor Joe Dworetsky representing the Task Force. In my opinion, that's like kicking the City of Philadelphia in the teeth, and she's done it again today by not showing up at this hearing. That alone proves the need for an advocate, when the office that is supposed to protect the public is so arrogantly disregarding the public. I served as Insurance Commissioner and I 75 04/22/03 - LAW & GOVERNMENT - BILL 030220 met with anyone and everyone and would give testimony on insurance matters when requested. Incidentally, this Commissioner would not even come before City Council, as I pointed out before, when asked for the April 9th hearing, and she's a no-show again today. If you believe the insurance companies will protect the public, you don't need an Insurance Consumer Advocate. But the insurance companies would not even give the Task Force the time of day. They refused to provide information that should be in the public domain. That shows you how much many of the companies are concerned with Philadelphia policyholders. I know you are concerned about all that, and that's why you are proceeding in this and other committees to establish the Office of Insurance Consumer Advocate. I'd recommend favorable action on that bill immediately. It's easiest to illustrate this whole scene in terms of the insurance marketplace. The Mayor's Automobile Insurance Rate Reduction Task Force found Philadelphians are being overcharged for auto insurance on a grand scale, about $443 per 76 04/22/03 - LAW & GOVERNMENT - BILL 030220 policy on average and a percent overcharge on limited tort policies. The Task Force also found that getting information and data out of the Insurance Commissioner and insurance companies is more difficult than pulling alligator teeth. For example, the Insurance Commissioner claims that data on the rating differential between full and limited tort was confidential and would, therefore, not be provided it to the Task Force. Philadelphians are forced to buy auto insurance and pay inflated premiums, yet they can't even get the information needed to asses the fairness of those rates. So in effect, we not only have taxation without representation, but taxation without information. The City has had to go to court to try to stop auto insurance rate increases. But a lawsuit here and there is not going to solve this problem. This little review suggests what has been obvious to any observer who asks. Who speaks for the consumer? The answer is no one. The Commissioner is either asleep at the switch or is busy doing the industry's bidding. I've described recent Commissioners as lap dogs, rubber stamps, and puppets of the industry. You may want a kinder 77 04/22/03 - LAW & GOVERNMENT - BILL 030220 term.
But recent Commissioners have not been protecting policyholders in general and Philadelphians in particular. They not only have had no solutions, but also won't even provide the public with information that should be public. During a whole cascade of insurance crises, I haven't heard a peep out of Harrisburg or the Office of Commissioner. We've had a malpractice crisis, a health insurance crisis with the Blues monopoly creating problems for its members and the doctors while sitting on billions in surplus, an automobile insurance crisis in Philadelphia, a solvency crisis with Reliance going belly-up and malpractice insurers doing the same, skyrocketing premiums on property insurance since 9/11, and failure to make refunds after Congress gave the industry special protection, and other problems and issues that should be addressed by the Commissioner. Even a perfect commissioner, if she should be named -- and we can't expect the Commissioner to protect the public even in that 78 04/22/03 - LAW & GOVERNMENT - BILL 030220 circumstance. She has to serve as judge, jury, and prosecutor in making decisions involving the insurance industry over which she has almost complete control. In this process, she is guided by the lobbyists and representatives of hundreds of companies, their associations, rating agencies and all their agents and brokers. Consumers and their representatives are almost nowhere to be found in that decision process. The field is left to the industry which by and large guides the regulatory process, writes the insurance laws, and among other things, participates in the selection of the Commissioner. Take the last two Commissioners. Both came out of the ranks of the industry, and one has already returned to its ranks. This has been a great revolving door of insurance regulation. The top regulators come from the ranks of industry and return to them when their tenure is over. Even if she would like to protect policyholders and public, there is almost a total imbalance of advocacy on rates and other matters. Even the best intention Commissioners should get the benefit of policyholder advocates as well as insurance industry advocates. 79 04/22/03 - LAW & GOVERNMENT - BILL 030220 Now, I can prove the need for an Insurance Consumer Advocate in another way. This Committee and others in City Council can try to sort out the facts. You will hear different stories from the Mayor's Task Force, from consumer organizations, and from the insurance industry. You will be subjected to a blizzard of claims of numbers, of statistics, of rates, and of interpretations of the complexities of the insurance marketplace. You will find insurance is complicated merchandise with complicated policies, underwriting procedures, rating practices, and regulatory controls. The industry likes to keep things complicated, and that helps insulate them from media scrutiny, from legislative controls, and from policyholder and public pressures. My own experience as Commissioner was unique in history. The insurance industry objected to making policies more readable that were found to be less readable than Einstein's theory of relativity. They objected to giving the public shopper's guides so they could find the lowest cost companies. They objected to disclosure of information that would make transactions more 80 04/22/03 - LAW & GOVERNMENT - BILL 030220 understandable. They make it difficult for others who want information so they can figure out what is going on in the insurance marketplace. I get complaints from consumers all the time who have trouble getting something as simple as a copy of a specimen policy they're going to buy or a premium quotation they might want. The industry almost automatically objects even to obvious and long overdue reforms such as an Office of Insurance Consumer Advocate.
Industry spokesmen keep chanting, "Let's work together," but ask them for information, for documentation, or reforms, and see how much of that working together really happens. What all this points to is that City Council is not going to be able to resolve the meaning of hundreds of thousands of pages of rate filings that the Task Force obtained and confidently draw conclusions as to the exact amount of the Philadelphia overcharge. You will have difficulty monitoring solutions that might be implemented, and this is all just one piece of a much larger series of insurance problems that Philadelphians face. Auto insurance is just the tip of one iceberg. Just think of the ordeal of trying to handle auto 81 04/22/03 - LAW & GOVERNMENT - BILL 030220 insurance rates alone. What if you wanted to work all the other insurance problems that Philadelphia faces. What you need is an office that has the know-how, the resources, and the time and the authority to clearly define and document the problems, come forth with solutions, and get them implemented by publicity, education, negotiation, legal representation, or whatever it takes. That means an Office of Insurance Consumer Advocate. That is the logical solution of the problem from your point of view. Otherwise, you will be getting endless complaints from your constituents and will be bounding from hearing to hearing in an never-ending attempt to identify problems in different segments of the insurance marketplace, but always finding yourself lacking in the expertise, resources, and authority to really come up with the facts and solution and get necessary action. City Council has to ask itself, in view of all the special problems of Philadelphians, with auto insurance, homeowners insurance, and health insurance, and all the rest, one simple question: Isn't it about time the voice of the premium-paying and taxpaying public is heard and necessary action 82 04/22/03 - LAW & GOVERNMENT - BILL 030220 is taken to protect their interests? They want more than hearings, studies, and press releases. They want some protection in the insurance marketplace which now poses more difficulties for this City than any other in the state and perhaps any other in the nation. The answer is an insurance advocate. Now, I'll skip this section about other consumer problems, it's the same thing, only it's not as complex. And I'll offer one more piece of evidence that you need the Consumer Advocate. In my testimony last week, I noted that one way to prove the need for an Insurance Consumer Advocate is to take a look at the arguments used to oppose it by the Insurance Federation of Pennsylvania. I said all of their arguments were weak and some were positively ridiculous. Since then, I've had a few conversations with the Federation's lobbyist, Sam Marshall who was a witness last week and is here again today. " Thank you, Abe Lincoln. You can see them all in my statement from last week which is attached to this statement. But to give you the flavor of these arguments, I will briefly repeat a few of them, and I apologize for Mr. Marshall if the quality of his arguments are embarrassing to him. " I'm sure the insurance companies think so, but do your constituents? Even if the Commissioner is the best regulator, that doesn't mean Philadelphians don't need an advocate. The office we're talking about is not another regulator, but an advocate. A function clearly distinct from that of regulation. " So what. Paying a small fee for the Office of Insurance Consumer Advocate certainly beats overpaying hundreds of dollars for each policy every year, not to mention a train of 84 04/22/03 - LAW & GOVERNMENT - BILL 030220 other insurance abuses. I will not embarrass Mr. Marshall further, but only hope he comes up with some new arguments today. And I understand Mr. Marshall has some new arguments, but they're as weak as his other attempts to sink this much-needed office.
He says an Insurance Consumer Advocate would not have standing to sue on behalf of Philadelphia policyholders. First, that may be the view of an insurance lawyer, but not the courts. Second, I think competent lawyers will find a way to litigate the issues and properly assert standing in one way or another. Finally, even if true, that does not change the need for the other activities proposed for the Office of Insurance Commissioner. Needless to say, the incumbent Insurance Commissioner, in the letter which Councilman DiCicco read, merely parrots the arguments of the industry and says she is policyholders' consumer advocate. I would also like to comment on a few other reforms. We need an Insurance Commissioner that will stop hibernating in Harrisburg and start investigating and acting on the insurance problems of the state. It doesn't look like that's going to 85 04/22/03 - LAW & GOVERNMENT - BILL 030220 happen, as thus far Governor Rendell has kept a do-nothing commissioner that has been a failure under three different governors. We also need a State Office of the Consumer Advocate. That's probably not going to happen either, as the insurance industry has too much power in Harrisburg and will not let it happen. For the same reason, we won't get a decent Insurance Commissioner, we won't get decent insurance laws or decent insurance regulation. That's all the more reason for you to act here in Philadelphia and give your constituents at least a fighting chance in the insurance marketplace. I'd suggest one more reform. After my testimony last week, I talked for several hours with Mr. Marshall of the Insurance Federation. We agreed on a couple things. I told him that I was going to include a recommendation in my testimony last time here that would open up a third option available under the no-fault law, but I didn't have it the last time, but I'll do it this time. He agreed on this third option, and that was one happy note of agreement with the insurance industry. The third option, in addition to a full 86 04/22/03 - LAW & GOVERNMENT - BILL 030220 tort and limited tort option, would be one with no 3 pain and suffering recovery. It would be an option similar to limited tort, but in addition there would be no pain and suffering recovery, even in the case of the most serious injuries. Of course, victims would still be able to collect out-of-pocket costs, medical costs, and the like, lost wages. The option, instead of merely providing a percent 10 across-the-board discount, might provide a discount 11 of 30 to 50 percent or even more. The trial lawyers 12 would object, of course, just as they are highly 13 critical of the limited tort option. But I think 14 consumers should have that choice. They could take 15 the savings and spend it on something else or buy their own disability, health, and life insurance and provide a more efficient, speedier, more certain and less aggravating form of protection. Mr. Marshall and I agreed on one other matter. It would be productive to bring different interest groups together to come up with ideas for improving the insurance market. This body could have representatives from the insurance industry, trial lawyers, health care providers, business and consumer groups. This could be done under the 87 04/22/03 - LAW & GOVERNMENT - BILL 030220 PhiladelphiaCity Council or some other group. Finally, I'd like to make my final argument. I'm sure you get many insurance and other consumer complaints. I'm sure that when you do, you would want to be able to refer these complaints to a consumer protection agency you can count on. So that's one more reason to establish an Office of Insurance Consumer Advocate. Thank you very much.
Thank you, Mr. Denenberg. I'm going to recommend to the author of the legislation Frank DiCicco and the Chairman that we put forward a resolution asking Governor Rendell to replace the current Commissioner of Insurance. And I think that's sort of a sentiment of City Council. And if she served through three governors, I don't believe she should have the opportunity to keep serving the insurance companies through a fourth Governor and a four-year term.
I think she should be returned to the insurance industry from whence she came.
I think that's the sentiment that I get from at least my one instinct, and I would recommend that we let our feelings be 88 04/22/03 - LAW & GOVERNMENT - BILL 030220 known. And actually, I recommended Susan Schulman. I think she did a great job as the Executive Director, and I know her. So I would not have any problems seeing her be appointed to be Commissioner. Mr. Denenberg, I'm glad to see you back in action; not that you have been out of action. But I'm glad to see you back traipsing around in the areas where we need some strong advocacy. Because it seems like the insurance industry has a stranglehold, not just on the State of Pennsylvania, but across the United States. It's throughout. It's car insurance, the medical, the whole kit and kaboodle of daily living that seems to be regulated by -- we don't regulate. The Commissioners don't regulate the industry. It seems the industry tells the Commissioners what it is that they need and those Commissioners seem to do exactly that. They are no longer a representative of the public's interest. Councilman DiCicco.
Thank you, Mr. Chairman. Mr. Denenberg, I'd like to thank you for coming out again today. It's the second time in 89 04/22/03 - LAW & GOVERNMENT - BILL 030220 about as many weeks. You're a busy man, and I understand that. I wanted to personally thank you for the opportunity to hear from you today as well as on April 9th. You've always been there for the consumers of this City. And from all of us here, thank you again. I appreciate it.
I'm ready to come back anytime. I'm just getting warmed up.
Again, I think I said it last visit, and I'll say it visit. You're a great Pennsylvanian. You've made people's lives a lot better. And I hope that resolution doesn't turn out to get you out of retirement as the Insurance Commissioner.
Don't worry about that. When I left the office the first time, Ralph Nader said, "You will never again be appointed to a public office. Once you do the job the way it's supposed to be done, you are automatically disqualified forever." Which is all right with me because I can make more money on the outside. (Laughter.)
Ralph Nader was right, wasn't he? 90 04/22/03 - LAW & GOVERNMENT - BILL 030220 Thank you. Steve P. Hershey, former Community Legal Services Public Advocate. Former colleague of mine, how are you doing, sir?
My name is Steven Hershey. Council President Verna, Chairman Cohen, Councilman DiCicco and Committee Members, thank you for this opportunity to testify before you today concerning the proposed Office of the Insurance Public Advocate. I served as the public advocate on matters related to Philadelphia Gas Works and the Philadelphia Water Department for more than 15 years while I worked at Community Legal Services. In calculating the impact of our advocacy, we saw that many of our recommendations were accepted by the Gas Commission or by the Water Commissioner in rate cases, saving consumers literally hundreds of millions of dollars during that period. Before the creation of a Public Advocate for water and gas, utility customers in Philadelphia faced many of the same kinds of problems now facing 91 04/22/03 - LAW & GOVERNMENT - BILL 030220 those who need insurance but who cannot afford the rates. With no one to represent them, utility customers were paying rates that were not only higher than they needed to be, and in many case unaffordable, but rates that were also unfair in that some of the poorest customers were forced to subsidize customers with substantial resources. Our work was successful in eliminating some of the those inequities. While at Community Legal Services, I also had occasion to represent clients in automobile rate cases before the Pennsylvania Insurance Department. In several cases in which I was supported by an expert whom we had retained, we were able to eliminate the entire rate increase proposed for Philadelphia drivers. And I'll come back to that experience at the end of my testimony, if I may. My testimony today is based primarily on those experiences. I fully support the purpose of this bill because I believe that if passed and implemented appropriately, it will benefit Philadelphia and its citizens. A few additional comments are appropriate, however. 92 04/22/03 - LAW & GOVERNMENT - BILL 030220 The credibility and effectiveness of any office of public advocate depends on several factors. And one of the most important of them is its independence from political or financial pressures that might influence the advocacy decisions of the office. City Council should amend the proposed legislation to protect the independence of the office in two ways: First, the advocate should be appointed for a specific term of office and that term should not coincide with the mayoral term of office. Council should further provide that the advocate could be removed from office only for good cause. Second, Council should create for the office a dedicated and predictable source of funding that could be supplemented by City funding, but is otherwise independent of the City Operating Budget. This provision will be particularly important during periods like the current one in which the City faces a serious fiscal challenge. In dedicating a source of funding, it is essential to recognize that an effective advocacy effort on insurance issues will not be cheap. Keep in mind that in order to 93 04/22/03 - LAW & GOVERNMENT - BILL 030220 accomplish its mission, this office will have to challenge one of the best organized and best funded industries in the country. In the long-term, it is likely that an Office of Insurance Public Advocate will have a beneficial effect on the Philadelphia economy. Generally, for all but the wealthiest in our population, insurance premiums paid by policyholders reduce the ability of those individuals to spend money on discretionary items. The money paid for insurance premiums is normally exported from the Philadelphia economy. To the extent that rates can be reduced or held steady, some funds will be spent for goods and services in Philadelphia and will not be exported from the local economy.
I'm not an economist, but I've worked with economists enough to understand that they normally calculate that as residents have additional discretionary resources, they spend some predictable amount of those additional resources within the local economy. In the case of a rate decrease or avoided rate increase, that spending means additional expenditures in the Philadelphia economy and a predictable increase in jobs and tax revenues as 94 04/22/03 - LAW & GOVERNMENT - BILL 030220 measured by what economists call a multiplier effect. I recommend that an Office of Insurance Public Advocate have responsibility which is broader than merely fighting rate increases. While rates and affordability are the most acute aspects of the problem for most people in Philadelphia, availability of insurance and customer service issues are also very important. The ability of an Advocate to address availability of insurance and customer service issues would accomplish two important goals: First, the Advocate would provide an important service to individual citizens of Philadelphia who need help. Second, the more contact that any Public Advocate has with real people experiencing real problems, the more likely it is that the Advocate will stay out of the ivory tower, understand real issues for real people, and craft strategies and solutions that benefit those people. That knowledge of problems experienced by real people can have direct impact on strategy for rate cases, even when the problems do not arise directly from rate issues. Now, I'd like to address one paragraph 95 04/22/03 - LAW & GOVERNMENT - BILL 030220 that Councilman DiCicco read from the Insurance Commissioner's letter, and that is the paragraph where the Insurance Commissioner indicates that an insurance advocate is not needed because they have the expertise and the resources to do that in Harrisburg. I respectfully disagree for a number of reasons: One, an advocacy effort from within the very department that has to rule on the regulation of matters raised by insurance company does not provide the same independence that is absolutely essential to the integrity and effectiveness of the kind of office that we're talking about. I remember in 1986, there was no public advocate for gas in Philadelphia. At that time PGW proposed to the Gas Commission a substantial rate increase. At the time I worked at Community Legal Services, and I appeared before the Gas Commission on behalf of numerous clients; CEPA, Action Alliance of Senior Citizens, Tenant Action Group, and others. We asked for something very simple. PGW was mounting an advocacy effort for a rate increase, and they were using customer revenues to promote their own cause. We asked for a little bit of that money 96 04/22/03 - LAW & GOVERNMENT - BILL 030220 back to present the other side of the story. Now, one Councilman John Street, who was then a member of the Gas Commission, took the lead in agreeing with us and making sure that it happened. As I said earlier, the effectiveness of the efforts of the Public Advocate on gas and also on water can't be disputed. The efforts of that office have saved customers hundreds of millions of dollars, have made PGW and the Water Department leaner, in many ways more effective. And I don't think either of those utilities would dispute that fact. There's no way that an organization can both regulate and advocate on behalf of the consumers who are served by the companies proposing rate increases or other changes in the way they deal with customers. That has been precisely the experience at the Public Utility Commission where it was deemed necessary and appropriate to have an independent Office of Consumer Advocate on utility issues. I submit that the same thing is appropriate here. Thank you very much.
Thank you. And, Mr. Hershey, for your information, I do have 97 04/22/03 - LAW & GOVERNMENT - BILL 030220 proposed amendments to the resolution that will address the issue of the term that the Advocate would serve and the cause for removal as well. Thank you.
Good afternoon. My name is Lance Haver. I'm the President of the Board of CEPA, the Consumers Education and Protective Association. I testified earlier and a lot of people have already said what I thought was important. I don't want to waste the Committee's time. I do want to make one point again about the Insurance Commissioner being wrong. As it stands now, the Insurance Commissioner holds public meetings, not public hearings. The information at a public meeting can be asked for. You can ask for whatever information you want. But because it's a meeting and not a hearing, the information does not have to be provided. That's why, as you heard earlier from Mr. 98 04/22/03 - LAW & GOVERNMENT - BILL 030220 Denenberg, a lot of the information that was requested simply isn't received. Second, the Insurance Commissioner sits in two roles right now, which is impossible. It would be as if a judge was the lawyer for one side and also the judge in the case. That's how the Insurance Commissioner sees herself right now. And, of course, that lends for absolutely no belief in any decision that any Insurance Commissioner can make, whether you recommend a new Insurance Commissioner be appointed or not, the problem is the role that the Insurance Commissioner is being asked to play and not the person. It is an impossible role, and there needs to be a public advocate. And the third point is, the way that we have competition in regulated marketplaces is through fair, equal hearings; it is not through opening the doors and letting one side have everything. We have to regulate insurance because it is required to drive. The only way to have real regulation, to have real adversarial hearings, is to have an equal playing field, and that's what this bill does and that's why I support it and that's why I'm thankful for the time to be here. 99 04/22/03 - LAW & GOVERNMENT - BILL 030220
Yes, thank you, Councilman. I'm Jonathan Stein, General Counsel at Community Legal Services. I think when you look at the bill before you and Councilman Clarke's bill that has been withdrawn or that proposed office, the three principles to keep in mind in evaluating what works, what's effective are: 1, independence; 2 professionalism and expertise of an advocate; and 3, funding and staffing. And independence is obviously important because an Advocate will step on some toes, and toes of some pretty powerful interests. And unless there is independence protected, you're not going to have effective advocacy. Second, professionalism, this is an area of great expertise. Really, a very technical area, these areas of insurance and other consumer areas, and you have to build in professionalism in your staff. And funding and staffing is crucial 100 04/22/03 - LAW & GOVERNMENT - BILL 030220 because unless you have the wherewithal to both be able to litigate, propose policy changes, advise on legislation, deal with very difficult, ethical, and policy issues, you're really going to have a symbolic office and not a real office. So we're here to support your bill, Councilman DiCicco. We would support amendments to the bill because I think in the area of independence, the first principle we mentioned, I think it's important to have a Public Advocate who can only be dismissed for good cause and we would also urge dismissed for good cause by, not only the Mayor, but also Council. We think there should be a Councilmatic vote that approves a dismissal, as there would be a Councilmatic vote to vote that Advocate in, as well as the term of office idea that my former colleague Steve Hershey proposed a few minutes ago. We've heard from Mr. Marshall. I know he's here waiting to give his testimony again that one of the reasons why an Advocate, in his view, is not needed is that, well, the City of Philadelphia can be there to represent the interests of policyholders. And in fact, the City is in or 101 04/22/03 - LAW & GOVERNMENT - BILL 030220 trying to beat a couple of auto insurance rate cases right now. What his testimony fails to say today, as it failed to say the other day, is that the insurance companies that his Federation includes is actively trying to stop the City of Philadelphia from being in these rate cases. How are they doing it? They're filing objections on what's called standing or the right of a party to actually be heard at the hearing or in court later to speak for policyholders. So that with one breath as he's saying, "Well, the City of Philadelphia is in these proceedings, that you don't need an advocate," in the other forum are the companies he's speaking for are actively filing papers and they filed the papers already in the Insurance Department, ongoing cases before a hearing examiner saying, "We don't think the City of Philadelphia has a right to say one word on behalf of policyholders because the City is not technically a policyholder and they have no 21 standing. So we suggest that it's fairly hypocritical for the industry to stand up before you or sit down at this table before you say an advocate is not needed on those grounds. 102 04/22/03 - LAW & GOVERNMENT - BILL 030220 We also take serious objection to the current acting Commissioner -- I guess she's not acting. She's the holder of a Commission, Commissioner Koken, saying that they have enough resources and expertise in the Department already. What she doesn't tell you is that the budget for the Insurance Department in Pennsylvania is one of the lowest in the entire country. It's less than a half of, apparently, what Missouri is, with far many more policyholders and insurance assets in Pennsylvania. It's a greatly underfunded department that cannot even do its own job, much less do an advocacy job for customers. And the Blue Cross situation is a good example. She held a hearing last September.
She was forced to hold a hearing on the billions of dollars of excess reserves that the Blues are sitting on while over one million Philadelphians have no health insurance. And what has happened since that hearing in September? Not one word from her, not one report issued as to the results of that hearing. So all this stuff about she's there to protect us is really a lot of malarky. And we don't 103 04/22/03 - LAW & GOVERNMENT - BILL 030220 need her as a Commissioner. We need a really fine Governor in place right now, Ed Rendell, to appoint a public interest oriented Insurance Commissioner to support a Public Advocate. Although this City Council can't make that happen, we urge this Council and this Committee for the next Council meeting to consider a resolution that could be adopted by City Council and directed to the leadership in the General Assembly and to the Governor urging the immediate appointment of a public interest oriented commissioner and a public advocate.
Excuse me, Mr. Stein. Would there have to be legislative action, or could the Governor do it without legislative action? I raise it because if it's possible not having to deal with the Governor and the Assembly but just deal with the Governor, I think that would be much easier to accomplish.
For the Insurance Commissioner, the cabinet appointment does need the consent of the State Senate.
Right. Although, he need 104 04/22/03 - LAW & GOVERNMENT - BILL 030220 not continue the current commission one day. He could have an acting person tomorrow if he wishes. For the Public Advocate, you raised an interesting question, Councilman Cohen. It is probably preferable to have legislative action, but I would venture to guess that probably there is power within the executive branch of the Governor's office to establish a Public Advocate to perform advocacy functions through his own Council office or by Executive Order. I think it probably would be preferable for the long-term to have that done as a statutory body, but there may well be leeway for him to do that at present. And I think that would be a step forward. But on the other hand, Councilman, there has been legislation in the General Assembly for many years now for a Public Advocate for insurance. In fact, it passed the State House more than once, but, unfortunately, has been killed in the State Senate. And perhaps Mr. Marshall behind me was one of the forces that urged the State Senate not to adopt a State Advocate, and his friends followed his bidding. But I think if this issue becomes 105 04/22/03 - LAW & GOVERNMENT - BILL 030220 public, as it has become public, I think the time is right today where no one of either party can say no 4 in Harrisburg to a State Public Advocate. So that's why we urge this City Council to help that issue become public in a resolution aimed at Harrisburg, saying, a State Insurance Advocate is long overdue, as is a good Insurance Commissioner.
I'll urge Councilman DiCicco to prepare such a resolution. And if not, maybe Councilman Goode and I will cosponsor one. It sounds to me like a very good idea. I don't think we ought to let the new Governor off the hook. On that he was elected, on a platform that promised change in the way in which matters are dealt with in Pennsylvania, and I think the people are entitled to get that change. That ought to be a change in which actions are taken for the benefit of the people.
Mr. Chair, for your information, we actually have something prepared that we will be introducing on Friday with the help of Mr. Stein. We'll circulate that to everyone prior to Friday for your review.
Include me as a chief cosponsor. 106 04/22/03 - LAW & GOVERNMENT - BILL 030220
Thank all of you gentlemen for the time that you've put into these hearings. We really appreciate it. Thank you very much.
Mr. Marshall. And now we'll hear the industry explain to us why everything else we heard today on this matter is really unimportant and not relevant to the issues. Right?
Well, don't steal my testimony from me yet, Councilman. That may not be exactly what I'm going to say. You don't want to prejudge.
All right. Prove me wrong. Come strong and say, "The way to keep everything nice and clean is to create an opposing force as powerful as we are and then the Insurance Commission will hear an even keeled set of messages."
Tell you what. How about you hear me out and then you can ask me all the questions. 107 04/22/03 - LAW & GOVERNMENT - BILL 030220
We'll do that. Please identify yourself and spell for the elucidation and edification of the reporter your last name.
Good afternoon. Thanks for the chance to be here again. I'm still Sam Marshall. I'm still President of the Insurance Federation of Pennsylvania. And I'm still joined by John Doubman from our office.
The Federation is a non-profit trade association. We represent insurers of all shapes and sizes doing business in Pennsylvania including the insurers who insure the lives, the health, the homes, the cars, and businesses of the City and its residents. Two weeks ago, I closed my remarks talking about our commitment to this City as insurers, employers, and investors. Today, I'd like to start with that point because it shows we have 108 04/22/03 - LAW & GOVERNMENT - BILL 030220 more in common than either the press or political forces or frankly the previous witnesses want to acknowledge. I suspect we want the same things you want, a competitive marketplace for insurance, fairly-priced and honestly marketed coverage, and knowledgeable consumers who understand the insurance they buy and understand the impact their own actions have on the insurance they buy. We may differ, at least at the outset, about how to achieve these goals. But I've always believed that reasonable minds end up in agreement, at least when they share a common goal, and I hope that's the case here. As to the proposal that the City establish and fund an Insurance Public Advocate through the Mayor's Office; we recommend against doing this, but we do so with mixed feelings. First, I recognize that the insurance industry opposing a City Insurance Advocate is going to be seen by some as the best reason to have one. Second, there's much in the proposal that's good, at least on paper. It calls for more consumer education in Philadelphia-specific shopping guidelines. It calls for increased competition in 109 04/22/03 - LAW & GOVERNMENT - BILL 030220 the Philadelphia market. And it calls for the City to get more involved at the state level in promoting measures that will lower premiums and, presumably, in opposing measures that will raise premiums. Those are things we have recommended to City Officials in the past, with less-than-mixed results. In the early stages of the Auto Task Force, we made several recommendations about ways to lower rates and we asked that the Task Force get involved in some administrative and legislative matters in Harrisburg that we knew would and are increasing auto rates in Philadelphia. But nothing came of that. In fact, our ideas and requests didn't even get a footnote in the first Task Force's report. And there was scarcely any mention of the progress that has been made on Philadelphia auto rates and the availability of coverage. Rates here have been flat or gone down over the past eight years for most insurers. And insurance far more available. Pointing out that progress may have taken some of the theatrics out of the issue for the first Task Force, but it deserved mention because it deserved to be built upon. That highlights my concern with creating 110 04/22/03 - LAW & GOVERNMENT - BILL 030220 a separate office within the Mayor's office to look at insurance issues. In itself, it simply doesn't add anything. The fact is, there's nothing stopping the Mayor or the City Council from doing these things now, just as there was nothing stopping the Auto Task Force from doing these things. You don't need separate offices, new titles, and unlimited budgets to draft and distribute shopping guides or lobby in Harrisburg. You just need to decide to do these things and make them a part of existing community outreach programs or lobbying efforts. The Mayor's Task Force is doing some of the other things called for in the proposed Insurance Advocate Bill. It's examining auto rate filings and it's suing insurers over those filings. I'll go off of my remarks for a second. The previous witness said we're challenging those filings, those lawsuits on a matter of standing. With due respect among lawyers, frankly, I think that that was a filing problem that the City had. All they had to do, as they did in one action, was identify one policyholder.
That's standard standing rules that have been in place in Pennsylvania and throughout the country for literally hundreds of 111 04/22/03 - LAW & GOVERNMENT - BILL 030220 years. All the City had to do is identify one City resident as an agreed party and then they can assert standing. For whatever reason, they didn't do it. In two of the actions they did it. And a third and I believe that's a legal dispute. Now, we can differ on whether a litigation-only strategy is going to lead to lower rates, a better marketplace and more savvy consumers in Philadelphia. And I hope the Mayor's Office and the new version of the Auto Task Force consider actions beyond litigation, actions that include working with, not just suing, insurers. But the City's suits at least show that you don't need a separate office and, therefore, an added layer of bureaucracy and cost to take action at the City level on insurance matters. What's missing from the City's efforts to date and what's missing from this proposal is any focus on what Philadelphians are doing to make rates here so high what they could be doing to bring those rates down. Let's take auto rates as a case study. There are 67 counties and about 2400 municipalities in this Commonwealth, and Philadelphia is the only 112 04/22/03 - LAW & GOVERNMENT - BILL 030220 one with auto rates so high that they're seen as a reason not to live here, much less offer insurance here. Philadelphia is the only one with auto rates so high that it's considering a separate office just to deal with insurance. Now, insurers do business about the same throughout the Commonwealth. We don't have one set of rules for setting rates or underwriting risks or paying claims in 66 other counties and another set of rules when we cross over City Line and come here to Philadelphia. And we have a good track record of passing on savings to consumers, which is why rates have gone down and competition has gone up for many Philadelphians and throughout the state. But we still have dramatically higher rates here than everywhere else in Pennsylvania, including other urban areas. Given that, it makes sense that the City examine itself, not just insurers. It doesn't make sense that insurers are pretty good everywhere else but bad here anymore than it makes sense to conclude that we want to avoid the largest and certainly the most publicized marketplace in the Commonwealth. But everybody seems to want to look the 113 04/22/03 - LAW & GOVERNMENT - BILL 030220 other way when it comes to addressing this. Certainly, the first version of the Auto Task Force did. Philadelphia medical claim patterns were mentioned as the main reason auto rates are high here, but no solutions to that problem were offered. Instead, the only solution was to sue insurers. Maybe the proposed Insurance Advocate wouldn't ignore that problem. Maybe that's what's meant by the proposal's call for greater consumer education. But that level of self-critical examination isn't really the thrust of the proposal, and none of the proposed Insurance Advocate's powers go in this direction. The investigatory and litigation powers are pretty much limited to going after insurers. And in any event, you don't need a separate office to do this, just a willingness. Please understand that our opposition to the proposed Philadelphia insurance advocate isn't because we want to avoid public scrutiny or accountability, although I know some will try to portray it that way. We accept that insurers are generally held to a higher standard of scrutiny and accountability than most other businesses, that the 114 04/22/03 - LAW & GOVERNMENT - BILL 030220 regulatory, legislative, and judicial oversight of our industry is greater than that of business generally. In fact, the powers that you want just for Philadelphia already exist at the state level and are being used for all Pennsylvanians, including those in the City. We accept that.
All we ask is that this oversight be done in a consistent, effective, and efficient way. In Pennsylvania and throughout the rest of the country, that consistency and oversight has been determined to be a responsibility of the states. The laws that apply to insurers are enacted by the State General Assembly and the Governor. The regulator that supervises the industry is the Governor, acting through the State Insurance Department. And the courts that rule on judicial disputes are the state courts. The exceptions to this are found at the federal level, not the local level. They are largely limited to instances dealing with multi-state operations and multi-state insurance issues. The fact is, the City has always had input at the state level. It has the largest delegation in the General Assembly with some pretty 115 04/22/03 - LAW & GOVERNMENT - BILL 030220 powerful members in both chambers and on both sides of the aisle. It has its own lobbyists -- I won't call them a swarm. But their numbers seem about equal or, actually, in excess of ours. And, of course, it now has the former Mayor as the Governor. A separate office, new titles and an unlimited budget won't add to that input. Again, it comes down to willingness. Not just the willingness to attack insurers, but to attack the underlying problems that lead to high rates and to work with insurers and others on those problems. Maybe we're part of the problem, but you already have an extensive state administrative and judicial system to go after us, and you're already using it. But any objective observer would conclude there are other parts of the problem, too. And those parts aren't even mentioned in the proposal, certainly not in terms of investigatory powers or the ability to sue. If you set up an office whose only real power is to sue the messenger, you'll continue to ignore the message, and that will mean continued high rates and a relatively weak marketplace for Philadelphia consumers. 116 04/22/03 - LAW & GOVERNMENT - BILL 030220 Our concern with the primacy of state regulation is a legal one as well as one of public policy. I don't believe the City can pass an ordinance that gives it standing in state courts and administrative proceedings. I don't believe the City can pass an ordinance that gives it investigatory powers over matters, including the setting of rates, that are already subject to state investigation and autonomy. Lawyers can and do argue these issues for billable hours on end, but the laws establishing state control of the insurance industry and the laws establishing standing to sue insurers are pretty firm. So is the public policy behind those laws. I guess every municipality could set up an Insurance Advocate, and we could be subject to investigations and litigation from each of those municipalities. But that would make comprehensive, statewide regulation of insurers, their rates, their marketing practices, and their solvency veritably impossible. It would also make doing business in this state cost-prohibitive. I appreciate the consumer value in the regulatory scrutiny of 117 04/22/03 - LAW & GOVERNMENT - BILL 030220 insurers, but consumers need that scrutiny to be cost-effective, not cost-prohibitive. Otherwise, you risk setting up a regulatory labyrinth that adds costs and weakens the marketplace. I brought up the concern about every other locality getting involved in insurance regulation with some City officials and it was with the understandable response that only Philadelphia has the problem of out-of-whack rates. But that highlights the flaw in creating an office that will inevitably focus mainly on insurers' rates. Yes, Philadelphia's rates are out of whack, but maybe, as easy and tempting as it is to blame insurers, it highlights that the real need is to focus on the underlying problems.
Part of the reason for the proposal may be a disconnect between the City and the State, at least in terms of the City understanding just what the State does in terms of regulating the rates and practices of insurers here and understanding what the State does or can do in terms of consumer education. I'm not sure why that's happened or why it doesn't seem to be a problem in other parts of the Commonwealth. 118 04/22/03 - LAW & GOVERNMENT - BILL 030220 I do think -- obviously, I'm disappointed that the Insurance Commissioner isn't here. " Trust me, given the abuse that our industry tends to take in this forum, I sure as heck would have liked to have had Insurance Commissioner up here today. So much for our power and ability to have people do our bidding, because if it were up to me, the Commissioner would have been here and would have been working with the City long before. But going to what state regulators do, I do think it's a matter of understanding. Because I think if the City realize the attention its insurance concerns get at the state level, it would focus more on working with the State than on setting up a competing office. But at the least, you ought to learn more about how insurers are regulated at the state level before creating what will amount to a Philadelphia regulator. If nothing else, it may help you figure out better ways to ensure that Philadelphia's concerns are heard at the state 119 04/22/03 - LAW & GOVERNMENT - BILL 030220 level. I also understand the main reason for this proposal is your continued frustration with high auto rates in this City. If I thought a separate office within the Mayor's Office was the answer, I'd be here supporting the proposal, too, because we want lower rates here, too. But I've been around enough to tell you that a separate office won't lower rates or attract more insurers into the City. It will lead to more litigation, and it will lead to another layer of regulation, this time a Philadelphia-only layer. It will be expensive for the City. Unlimited budgets tend to mushroom, especially when they allow for as many lawyers that somebody wants, but it won't lower the expense of insurance in the City. In the end, the only way to lower auto insurance costs in Philadelphia won't be to set up a new layer of bureaucratic wrangling and litigation unique to the City. Frankly, that isn't a welcome mat; it's an exit sign. I think the way to lower rates is three-fold. First, get involved in state matters. Not just in examining rate filings, which you 120 04/22/03 - LAW & GOVERNMENT - BILL 030220 already are doing, but in examining what the State is or could be doing about reducing the costs that drive rates. Second, get involved in City matters and try to address the things that make Philadelphia an exception to the rule. That means going after what we have continuously pointed out over the years, the inordinately high number of medical claims here. Third, give us a chance to work together. As I said at the outset, we're here and we want to be here, not just in this immediate forum, but in this marketplace. But adding to the regulatory wrinkles and suing us doesn't help. Maybe listening to each other and working together will. Heck, over the past two weeks, I've had several talks with Herb Denenberg. He characterized, I thought, in part honestly -- maybe we both learned a few things. I might have learned a little bit more than Herb did because I sort of came to like him, stuck around for his testimony. Sorry the same courtesy wasn't afforded. But we actually both do have an idea about getting a low-cost policy into the market. But that only happens when you work together. 121 04/22/03 - LAW & GOVERNMENT - BILL 030220 For all the efforts that have taken place so far, working together is about the only thing that hasn't been tried. Maybe it's time to do it. I would like to comment on a couple things that have been said beforehand.
That's one luxury, you go last, most of the people leave, but at least you have the chance to comment to the few remaining, and I appreciate it, on some of the points that were made. Herb Denenberg spoke loudly and colorfully. A large part of his testimony was to criticize the current Insurance Commissioner. Frankly, it seemed that Herb criticized every Commissioner since Herb. , to Tom Ridge, to Mark Schweiker and now Governor Rendell. I'd suggest that Herb may want to replace the current Commissioner and all of you may, too. If you want to replace the Commissioner, knock 122 04/22/03 - LAW & GOVERNMENT - BILL 030220 yourselves out. But what you're proposing here is to replicate that function. I don't think that leads to a better Commissioner. There's nothing in this office -- I mean, frankly, the functions that are in the Commissioner's Office, I suspect everybody will agree are good functions. You may not like the person doing it. In the end, the function is only as good as the person doing it. And I'd suggest that what you're trying to do here is replicate. What some of you seem to really want to do is replace. We could argue the merits. The other thing you said, somehow the current Commissioner is seen as a flop because she is serving under three different governors. Maybe that's actually -- if we get away a little bit from the politics of it all, maybe that's a testimony to the honesty and to the ability of her as a regulator. Frankly, it's easy to criticize her, but somehow three very different governors in three very different times from three very different parts of the state have all found her to be an honest, competent, and fair regulator. Those are three governors -- frankly, not governors who are necessarily particularly close with the insurance 123 04/22/03 - LAW & GOVERNMENT - BILL 030220 industry. I'd also note Herb seemed to suggest that all former commissioners go back to the industry from whence they came. If I can offer -- I'm old enough now to have a little bit of history, certainly since Herb Denenberg's time. No former Commissioner, to my knowledge, is currently employed in the insurance industry. One Commissioner was for a period of time. That's one out of about eight or nine. Previous commissioners, their jobs ranged from being a federal judge to a local judge out in Pittsburgh to being partners in law firms who spent an awful lot of time suing insurance companies or don't even deal in that area. Frankly, all the talk about revolving door, I think you could line up all the former commissioners and ask them whether their experience as commissioner was rewarding, and they'd all say in terms of public service, yes; financially no. I think Herb Denenberg is the only one who said he's making too much money now to possibly go back. There was a lot of talk about how the Insurance Commissioner is both the judge and the jury up in Harrisburg. It's ironic when I hear that complaint because I'd offer the same complaint. I 124 04/22/03 - LAW & GOVERNMENT - BILL 030220 am an example of the revolving door. As a young boy, I was an assistant counsel at the Insurance Department before political changes and health reasons brought me down here. When I was at the Department and we spent all of our time suing the insurance industry. I was a litigator for the department. Didn't do anything but sue insurance companies, and that remains the record there. I sort of joke about it, but when I was at the Department I was 100 and 0. Since I've come to the industry I'm 0 and 100 in regulatory proceedings. I don't know that I was that smart then or that dumb now, but, frankly, yes, the Commissioner is both the judge and the jury. That's a stacked deck that, frankly, works against our industry one heck of a lot more than it works in favor of us. There was some talk about the Insurance Department being underfunded. We've always supported adequate funding for the Insurance Department.
All those insolvencies, somebody mentioned the insolvencies, we pay for it. In truth, we pay for ineffective and incomplete regulation just as much as we pay for misdirected regulation. 125 04/22/03 - LAW & GOVERNMENT - BILL 030220 And I believe I addressed Mr. Stein's concern about isn't it hypocritical for us to on the one hand say the City can get involved; and on the other hand object on standing grounds. As I mentioned, I think that was a clerical mistake on the part of the City to not identify a policyholder. But any lawyer would have to point that out in any judicial proceedings or risk his own disbarment. Thanks for the chance to be here. Happy to answer questions.
Thank you, Mr. Chairman. Good afternoon, Mr. Marshall. I certainly see how you have endeared yourself to Members of this Council and other people in this audience because that's actually possible the most arrogant testimony I've heard since I've been here. I think the only people that are bigger crooks than the banking industry which take deposits out of neighborhoods and then won't lend to them are people who actually charge people higher insurance rates 126 04/22/03 - LAW & GOVERNMENT - BILL 030220 because of the same time geographic discrimination. You've come before this Council and tried to limit the purpose of what we're trying to do here by assuming that it is just to lobby, to sue, or to change your underwriting criteria. You've made recommendations to this Council about how we should structure local government. You have suggested that we have a lack of understanding about the State's authority and role and function in terms of the insurance industry. Yet, my question will be very direct to you about -- you've mentioned the fact that we should be dealing with the unique nature of the Philadelphia market. Who do you think has the best understanding of that Philadelphia market and how is that information shared?
Councilman, let me answer the first thing first. Frankly, you may not agree with the remarks in my testimony, but we have been here at the Council's bidding and we have made ourselves available to Councilmembers throughout the process and to the Mayor's Office. And we can disagree at the outset, but --
You may enjoy being arrogant publically. 127 04/22/03 - LAW & GOVERNMENT - BILL 030220
My question is actually about how unique is the Philadelphia market and how is that information shared in terms of Philadelphia's uniqueness? Who does that type of market education? Who's educating consumers about the market? Who has the best understanding of the market? Who's responsible for the uniqueness of the Philadelphia market and how we change it?
I think City government, obviously, has a role in that. That's one of the reasons why I said that there are things that can be done on that that the City can now do in terms of shopping guidelines, in terms of looking at some of the City problems. In fact, we made those recommendations to the City Auto Task Force. I think the City can also play and does play a role at the state level. That's why the City has lobbyists. That's why the City has involvement there.
Once again, you're limiting us to lobbying and suing. We're talking, I believe, also about consumer education about the 128 04/22/03 - LAW & GOVERNMENT - BILL 030220 Philadelphia market. Who is responsible for that?
Obviously, I wasn't clear in my testimony because I said the City -- we hope the City gets involved in educating the consumers and in studying consumer behavior patterns.
So that would not automatically create another layer of bureaucracy within government? Another necessary layer of bureaucracy with the government.
I don't know that you have to formally institutionalize it in an office, Councilman. And I don't know that it goes into having the City involved in every state rate filing. That's the layer that I'm talking about. Do I think that the City, as any locality should, should be involved in studying the cost of living in its area and addressing that? Yes, I do. Do I think that having -- I think it's possible to do it through the current state system.
What sort of educational outreach does your organization do in terms of consumer education in terms of the market here?
We speak and we always 129 04/22/03 - LAW & GOVERNMENT - BILL 030220 make ourselves available for any public education program, things of is that nature. We do a fair amount --
What are you doing to educate consumers in order to change the market here, having described its uniqueness?