The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

I am a dyed-in-the-wool legal aid lawyer. Of my 14 years practicing law, I spent only one year in private practice. And although I appreciate to this day many of the skills I gained, I scurried back to legal aid faster than you can say “pay cut.” I love it all--the challenges, the many underdog days, and the deep satisfaction found from helping others in need. I am humbled by my colleagues and their dedication and even more humbled by my clients and their willingness to stand up for what is right.

Over the last six years, my poverty law practice has evolved. As the cases we have taken on got bigger and more complex, so too did the challenges of bringing and financing this litigation. Partnering with law firms enabled us to advance our advocacy agenda without the worry over costs that frequently accompany litigation. Those pro bono partnerships also enabled us to be better lawyers and advocates as we worked alongside seasoned and exceptionally skilled lawyers.

The Shriver Center’s experience with the Chicago, Illinois, office of Reed Smith is a great example of a successful pro bono partnership. Reed Smith attorneys have worked with us on three major housing and civil rights cases. By working together to build each case and share responsibilities, we were able to accomplish a lot of good and advance social justice along the way.

But we also had a lot of fun. I only hope that Reed Smith found as much joy working on these cases as we did: when a group of clients, well into their 80s and 90s, protested at the offices of one of the potential defendants and forced from them an on-the-spot apology; when the federal law changed (to our clients’ benefit) on the eve of a Seventh Circuit brief being due; and when we got to tell a client that their actions not only changed the law but helped thousands of people like them.

That is the joy of law and of helping people in need that you do not soon forget. Our many thanks to the pro bono attorneys at Reed Smith for their partnership, and to all of the law firms and lawyers who rise to this important challenge.

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Many Illinois consumers might be surprised to learn that health insurance rates are regulated (or not) on the state level. This was the case before the federal health reform law was passed earlier this year and, by and large, remains the case. Federal rate regulation was included in some early drafts of the law, but not in the final version. 

Over the next few years, Illinois consumers will benefit from many reforms enacted in the federal law that will bring to an end to some of the unfairness and excessive cost of the until-now unregulated Illinois insurance market. Illinois is the national leader in the number of rescissions—or retroactive cancellations of an insurance policy. Illinois companies can and do charge identically situated women more than men--as much as 57% more. Illinois law allows for individuals and families to be denied health insurance for any reason other than “race, color, religion or national origin.” Case in point: a widow was denied health insurance for herself and her three children because she attended grief counseling to help cope with her young husband’s death. Apparently grief is a pre-existing condition. All of these practices have changed or will change soon under the reform law.

The unchecked state health insurance market in Illinois will not change with respect to rates, however. Insurance companies have been able to increase health insurance premiums with little oversight, transparency, or public accountability because current Illinois law does not restrict health insurance rate increases. In contrast, residents of over half the states and the District of Columbia are protected, because their states have the statutory authority to reject a proposed increase that is excessive, lacks justification, or exceeds certain standards. 

This lack of authority has contributed to unfettered and unjustified premium increases. Health insurance premiums have doubled on average over the last decade, much faster than wages and inflation, putting coverage out of reach for millions of consumers and business owners.  Next year, Chicago workers can expect to pay 12.4 percent more in health insurance premiums and out-of-pocket costs for their health insurance, according to a recent study. And for Chicago employers, the average cost per worker will rise 8.7 percent, including employee contributions to premiums—the highest increase since 2006 and about the same as the national average of 8.8 percent. And if a small employer in Illinois has even just one injured or sick employee, the business can experience rate increases of greater than 50 percent when it’s time to renew. 

Further, a recent report from the Illinois Department of Insurance revealed that Illinois families and individuals have experienced striking base rate increases in their health insurance coverage, often greater than 30 percent since at least January 2005. How can these unchecked rate increases be stopped? Rate approval authority, through the Department of Insurance, has the potential to improve the performance, transparency and accountability of the health insurance market for employers and families. Illinois families trying to obtain financial security and peace of mind in their purchase of health insurance are entitled to have reasonable and fair premiums.

While federal regulation of health insurance rates was not part of the national health reform law, that law does provide a strong foundation for Illinois to start passing necessary insurance reforms at the state level for the almost seven out of ten Illinoisans (69%) who have private insurance policies. The Affordable Care Act provided Illinois a one million dollar grant to help Illinois set up a system of review and public information about rate increases, requiring the companies at least to publicly reveal their justifications for rate increases. Beyond improving public information, however, national reform did not give Illinois the power to deny or reduce rate increases (like it does for public utilities); only Illinois can do that. 

The Illinois Department of Insurance intends to pursue rate review authority, and consumers can and should help in this effort to put the breaks on unfair health insurance premium increases. Illinois consumers of health insurance, be they individuals and families buying their own coverage, employers buying coverage for their employees, or people covered through their work policies, need to start speaking up about the need for rate review authority in Illinois. They should tell their representatives in the Illinois House and Senate to pass strong rate review legislation now. And they also should speak out to the other interests involved here--their insurance brokers and the insurance companies, too. The message to all is the same: the time for rate review is now.

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The recent economic crisis has placed numerous Americans in vulnerable positions and consumer debt has risen to historic levels. As a result, deep concerns have arisen about the rapidly growing debt settlement services industry, particularly the industry’s pervasive practice of taking advantage of desperate consumers’ fears and financial troubles.

Debt settlement companies claim that they will negotiate with consumers’ creditors to drastically cut down their debts and lift them out of despair. In reality, however, enrolling in a debt settlement service often leaves consumers owing more than before, facing bankruptcy, and with ruined credit scores. These flawed practices are even more damaging to people on the lower rungs of the economic ladder, which are the very people that debt settlement services target. The National Consumer Law Center reports that certain companies work only with “insolvent customers.”

The Government Accountability Office's (GAO’s) recent investigation of the debt settlement industry revealed the appalling situations consumers face. GAO posed as fictitious customers and approached 20 companies across America. Seventeen of the companies said they collect upfront fees, and nearly all of them advised consumers to stop paying their creditors. Furthermore, some companies engaged in fraudulent practices such as claiming high success rates--despite the fact that the Federal Trade Commission (FTC) found that less than 10 percent of consumers successfully complete debt settlement programs.  

Many states across the country are taking action against debt settlement services that trick vulnerable consumers into unfair arrangements. Some states have implemented their own laws in response to the lack of federal initiative. Virginia enacted legislation that provides detailed requirements for debt settlement operations, and Arkansas and Wyoming chose to prohibit for-profit debt settlement companies in their states altogether.

Illinois has recently joined the ranks of other forward-minded states by passing the Debt Settlement Consumer Protection Act (Public Act 96-1420) this summer. The new law requires a written contract that clearly indicates the terms of the debt settlement agreement and that must be signed by both the service provider and the customer. Most importantly, the new law caps the initial fee to $50 and forbids debt settlement companies from unfairly charging customers without having done any work. The settlement fee is capped at 15% of the savings and cannot be charged until the creditor has entered into a legally enforceable agreement with the consumer. Also, debt settlement service providers must warn consumers that debt settlement service is not suited for everyone and that it may have detrimental effects on the consumer’s credit history and credit score. Finally, companies must provide detailed accounting reports, and consumers are entitled to cancel the contract and receive a refund. The Illinois Department of Financial and Professional Regulation has accepted public comments on proposed rules implementing the law and is expected to announce the final rule within the next few months.

In addition to the independent state efforts, 41 state attorneys general teamed up to support the FTC’s new rule governing the debt relief industry. In July 2010, the FTC announced the final Telemarketing Sales Rule.The new rule includes important provisions that ban advance fees, require disclosures, and prohibit misrepresentations. The advance fee ban provision will go into effect on October 27, 2010, and all other provisions went into effect last week on September 27, 2010.

While the new FTC regulation covers calls consumers make to the debt relief service firms in response to their advertising, it unfortunately does not cover in-person or internet-only sales of debt settlement services. Therefore, more federal measures are necessary, including passage of the Debt Settlement Protection Act (H.R. 5387 and S. 3264). It is time for more action in Washington to save countless American consumers from suffering from consumer debt settlement companies.

This article was coauthored by Ji Won Kim.

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