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Life Health > Health Insurance > Life Insurance Strategies

3-Sided Battle Over SCHIP Looming

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One of the first orders of business Congress faces as it returns Sept. 4 will be reconciling two vastly different versions of legislation extending the State Children’s Health Insurance Program as well as actions affecting the Medicare Advantage program.

America’s Health Insurance Plans, which represents the health insurance industry, projects that the House bill would cut the Medicare Advantage program by $157 billion over 10 years.

In television advertisements running in key markets starting last week, AHIP President and CEO Karen Ignagni said, “History has shown that cuts to this Medicare program have a direct impact on seniors’ health security.”

The ads say that 10 years ago, Congress reduced Medicare + Choice (now Medicare Advantage) funding by $22.5 billion over 5 years which resulted in over 1.5 million seniors losing their Medicare health plan.

The ad also says that the much larger cuts contained in the House bill could push approximately 3 million seniors out of Medicare Advantage and that millions more could face higher out-of-pocket costs and lose important health care benefits.

John Greene, vice president of congressional affairs for the National Association of Health Underwriters, said NAHU is “disappointed” that the House bill includes provisions that would limit the ability of seniors to access Medicare Advantage plans and may hinder the services of licensed professional health insurance producers.

“Medicare Advantage may not be the right choice for every senior, but there are many Medicare beneficiaries who are very happily insured under these plans,” he said.

“NAHU also is underscoring the critical role that licensed, professional insurance producers play in helping to make health care happen for millions of Medicare beneficiaries each day,” Greene added.

The House bill also imposes added oversight on health insurer marketing of MA plans, as well as enrollment limits on health insurers who don’t attain savings goals as well as new reporting requirements.

The House bill, H.R. 3162, the Children’s Health and Medicare Protection Act, also includes a provision that would provide funding for a new health care effectiveness research agency.

Michael Kerley, senior vice president, federal government relations for the National Association of Insurance and Financial Advisers, whose Association for Health Insurance Advisors division represents health insurance agents, said that due to this provision, “NAIFA is watching the House SCHIP bill “warily,” partly because of the “fee” connected to it.

He said he believes the provision would impose a $2 per head “fee” or tax on each person currently covered by health insurance after the first 3 years, when the Medicare Trust Fund will absorb the entire cost.

The “fee” will go into a trust fund that will pay for research on the most effective treatments under the Medicare program. The “fee” will be paid by health insurers or employers if the employer’s plan is self insured. “This is a good program, but we are very wary of the ‘fee.’ It’s not in the Senate bill, so we hope it will be dropped in conference,” he said.

The Senate bill is S. 1224, the Children’s Health Insurance Program Reauthorization Act of 2007.

Reconciling differing House and Senate versions of the legislation will be made more difficult because the program expires Sept. 30 and there have been no negotiations over the month-long summer break designed to bridge the vast gap between the two bills.

Adding to the cauldron are two other pieces of news that have occurred since the House and Senate acted on their bills as July turned into August.

First, was the disclosure last week by the U.S. Census Bureau showing the number of Americans without insurance coverage grew in 2006. (See top story on page 7.)

According to the Census Bureau report, the percentage of uninsured Americans rose from 15.3% in 2005 to 15.8% in 2006, equating to an increase in actual uninsureds from 44.8 million to 47 million.

Senate Finance Committee Chairman Max Baucus, D-Mont., reacted to the new report by saying that the report “underscores the need for Congress to come back and act quickly to pass a robust renewal of SCHIP.”

He added that SCHIP “helps kids in America’s working families get the doctors’ visits and medicines they need to stay healthy. We need to renew CHIP in a way that gets more uninsured, low-income children covered for health care right away.”

The Bush administration also took action Aug. 17, establishing new rules requiring that states seeking to expand the coverage levels of the SCHIP program would have to show they have already enrolled 95% of children living in households at less than 200% of the federal poverty level.

Officials of a number of states have voiced vehement opposition to the new regulations promulgated by the Centers for Medicare and Medicaid Services, with at least New York and New Jersey governors saying last week they are seeking and suing to overturn the new rules.

The program now gets about $5 billion in funding per year, and the Bush administration has proposed increasing CHIP funding by about $1 billion per year.

But a recent analysis by the concluded that the program would require about $14 billion in new money over 5 years–on top of the current $5 billion in annual funding–merely to keep covering the same number of children, in part because of rising health-care costs.

The administration concern, and a veto threat hangs over both bills, is that increasing the program would “crowd-out” incentives for potentially eligible families to get their own health insurance.

The House bill proposes a $50 billion increase over the next 5 years, designed to cover a total of 5 million children. The cost would be offset by cuts to Medicare Advantage as well as a 45? increase in the cigarette tax.

The Senate bill, which expands SCHIP by $35 billion over 5 years but does not cut Medicare Advantage, raises the tobacco tax to 61? and restricts eligibility more than the House bill.

The House bill would also eliminate over four years the projected 12% additional cost paid by the government to finance the Medicare Advantage program offered by health insurers as an alternative to traditional fee-for-service Medicare.

John Jonas, a managing partner at Patton Boggs and a health insurance lobbyist, rejects the conventional wisdom that Congress will make a deal and the President will veto it, actions that will lay the groundwork for a deal later this year.

He says it is unlikely there will be a deal on SCHIP before the fiscal year ends Sept. 30, “even though the expiration of the deadline provides a convenient deadline for everyone to work towards.”

“The President is comfortable with his position, the Senate is comfortable with its position, the House is comfortable with its position,” Jonas said. The most likely scenario is “that the program will be extended in its present form pending lengthy talks that could extend over several months; it is almost impossible to reach a deal by Sept. 30.”

The key to that, Jonas said, “is that despite the broad differences in approaches and financing, no talks took place over the summer.”

But in the end, a final bill will look more like the Senate bill than the House bill. “A long and tortuous road of talks is ahead on this,” he said.

At the same time, Jonas said, “Given that the House is unlikely to get its way on funding, I think some of the reporting, marketing oversight and enforcement provisions contained in the House bill are going to be included in a final bill.”

He explained, “They can’t let the House go away empty-handed.” The reason the House bill is so different, he said, “is that the House (Democrats) don’t like insurance industry.”

Jonas also said that non-financial issues dealing with health insurance are important, saying such issues as community ratings and no pre-existing conditions or very limited restrictions on pre-existing conditions “have broad public support.

“I am surprised the Democrats have not been more aggressive over the years in seeking modifications in non-monetary provisions regarding health insurance policies,” he added. “There is a lot of public disgruntlement over these contract provisions.”


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