WASHINGTON - Treading carefully around the issue of medical privacy, industry representatives on Wednesday criticized a bill that would ban the sharing of consumers' health information among financial services affiliates and third parties.

In a hearing before the House Banking Committee, representatives of the American Bankers Association, the Financial Services Roundtable, the American Council of Life Insurers, and other trade groups testified that, though they support protecting medical information, they believe the bill is unduly burdensome and would have unintended consequences.

The medical financial privacy protection bill was introduced by Banking Committee Chairman Jim Leach, R-Iowa, on June 6. It would bar financial institutions from obtaining or using individually identifiable health information as the basis for making decisions about extending credit, unless they have the individual's affirmative consent to do so. It would also require financial institutions to get consumers to affirmatively consent - or opt in - before sharing their health information with an affiliate or third party.

Financial institutions would not be allowed to release or sell information about a consumer's health-related spending habits or to include a person on a list of those who have particular health spending characteristics, without a similar opt-in agreement.

Among other provisions, the bill would let people request access to any medical information about them that a financial institution holds and would give them the right to challenge and correct errors.

Steve Bartlett, president of the Financial Services Roundtable, told the committee that the bill as written would require insurance companies to get a customer's consent before sharing information with rate advisory organizations and state insurance guaranty funds. "If such information cannot be shared freely with ratings organizations and guaranty funds, the establishment of rates and the resolution of insolvencies may be seriously impaired," he said.

Edward L. Yingling, chief lobbyist for the ABA, described as "totally unworkable in the real world" a provision that would let people inspect medical information held by financial services companies. "Under the bill, a bank would have to go through every check written by the consumer and every credit card slip to see if they contained any medical information," Mr. Yingling said.

He also asked the lawmakers to consider the cost that additional privacy regulations would impose on the industry.

"The implementing regulations are complex, and the cost of compliance will be huge," Mr. Yingling said.

In addition, he said, it is too soon to tinker with the financial modernization law; the privacy protections do not even take effect until July 2001. "The provisions in Gramm-Leach-Bliley need an opportunity to work," he said.

By contrast with the trade group officials, representatives of the Clinton administration and Democratic lawmakers criticized the bill as too lax. Competing legislation proposed by the administration would extend privacy protection beyond medical records to "all sensitive financial information."

"We think that we should not stop at medical information," Treasury Department Under Secretary Gary Gensler said. "We think that there are broader issues, particularly personal spending habits, that ought to be protected and that we believe the American public wants to be protected."

"The primary limitation of the bill is that it applies only to medical and health information," said Rep. John J. LaFalce of New York, the panel's ranking Democrat. "It is a good effort, but we clearly need to do more."


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