The Deficit Reduction Act that the U.S. House approved Wednesday includes several provisions of interest to insurers.

House members voted 216 to 214 to approve the final version of the budget reconciliation bill, S. 1932, despite concerns about provisions that will lead to cuts in aid for college students and Medicaid benefits for children.

The Senate already has passed the bill, and President Bush says he intends to sign it.

One provision could expand access to long term care partnership programs, and another will extend federal funding for state “high-risk pool” programs that provide health coverage for residents with health problems.

The American Council of Life Insurers, Washington, and other industry groups have welcomed the LTC partnership provision. Partnership programs give purchasers of qualified private LTC insurance policies the ability to seek Medicaid nursing home benefits when private benefits run out without exhausting all of their personal assets.

Today, LTC partnership programs are allowed only in California, Connecticut, Indiana and New York.

“Partnerships provide an innovative choice for individuals who exercise personal responsibility by planning in advance for their long term care needs,” ACLI President Frank Keating says in a statement. “It also represents a great opportunity to reduce Medicaid costs. Partnerships encourage people to turn to private long term care insurance, and not Medicaid, for their potential long term care needs.”

In the 4 states that have LTC partnership programs, only about 150 holders of the 225,000 qualified policies sold have exhausted private policy benefits and turned to Medicaid for help, Keating says.

Other S. 1932 provisions could help LTC insurance sales by putting tighter limits on older Americans’ ability to qualify for Medicaid nursing home benefits for the poor by transferring assets to relatives and charitable trusts.

The bill will cap the amount of home equity that an individual seeking ordinary Medicaid nursing home benefits can keep to a level somewhere between $500,000 to $750,000.

Bill Novelli, chief executive officer of the AARP, Washington, put out a statement criticizing the S. 1932 Medicaid transfer restrictions.

The high-risk pool section of S. 1932, provides $15 million in seed-grant funding through 2006 and $75 million in operational-grant funding of pools through 2010, according to the Council for Affordable Health Insurance, Alexandria, Va.

Today, 33 states use high-risk pools to cover 181,000 individuals, CAHI estimates.

Other S. 1932 provisions:

- Will increase premiums for Pension Benefity Guaranty Corp. pension benefit insurance to $30 per plan member, from $19, and establish a $1,250-per-member premium for single-employer defined benefit plans that are shutting down.

- Will give states the authority to let high-income parents of severely disabled children buy Medicaid coverage for their children.

- Will let states charge parents for children’s Medicaid coverage and offer limited-benefit Medicaid plans for children. The American Academy of Pediatrics, Washington, is blasting the children’s Medicaid program provisions. Passage of S. 1932 “is a devastating blow delivered right to children,” AAP President Dr. Eileen Ouellette says. “I am outraged knowing that a majority of our congressional members believe sacrificing children’s health care is acceptable.”

A copy of the S. 1932 conference report is on the Web at Document Link

Allison Bell contributed information to this report.