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Fast Track Move For Health Reform Has Industry Up In Arms

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Last week’s scheduled Congressional action on budget reconciliation was a typical half-full, half-empty result for the life and health insurance industries.

On the plus side, the life industry won a huge victory when the reconciliation package compromise included language facilitating permanent estate tax levies supported and intensely lobbied for by the industry.

But the problem for the health insurance industry was a provision in the bill that would allow for fast-track handling of health care reform.

The industry’s concern is that allowing for passage of healthcare reform in the Senate with only 51 votes–unlike the 60-vote, three-fifth majority required under regular order–would ease the ability of Democrats to include a “public” insurance option that the industry strongly opposes.

Indeed, the provision prompted rare unanimous opposition by life, health and property-casualty insurance groups.

A public option would likely utilize the resources of Medicare and Medicaid to serve as competition to products offered by private health insurers, most of whom pay commissions to insurance agents to obtain business.

The House debated the $3.4 trillion spending plan on April 28 and both the House and Senate were to vote on it on April 29.

In reaction to the move by Democrats, industry officials voiced unanimous opposition.

For example, Robert Zirkelbach, director of strategic communications for America’s Health Insurance Plans, said, “We believe that health care reform should be bipartisan and comprehensive.”

He argued that “reconciliation would make it difficult to achieve bipartisan health care reform that addresses the core issues of cost, access, and quality together.”

“It is our hope that work continues along bipartisan lines for an agreement on health care that will stand the test of time,” said John Greene, vice president of Congressional affairs for the National Association of Health Underwriters.

Robelynn Abadie, president of the Association of Health Insurance Advisers, said, “Open debate and careful vetting of health reform options is critically needed.

“We are disappointed with inclusion of reconciliation instructions in the budget,” she said.

Abadie contends that the budget does not make reconciliation available until October 15, 2009, so lawmakers have about four and a half months to craft a bipartisan health reform plan.

“A health care bill written entirely by Democrats would almost certainly create a new public health insurance program,” she said. “There has been such strong support for reform by various stakeholders and intense bipartisan negotiations, its upsetting to think this reform progress could be adversely affected by budget rules,” argues Abadie.

On the estate tax, Democrats agreed on a 5-year budget plan that calls for a permanent estate tax policy that would freeze levies at the 2009 level of a $3.5 million per person exemption, and a 45% maximum tax rate indexed for inflation.

Industry officials cautioned that legislation implementing the estate tax provisions must still pass Congress.

The package would also support–if enabling legislation is passed–reunification of the estate and gift taxes for the first time since the Bush administration tax cuts were enacted in 2001, and also provides for “portability.”

This means that a couple would not have to create a trust for the estate of the “second-to-die” in a family to deduct the entire $7 million exemption.

Legislation in the Senate, S. 722, introduced by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and in the House, H.R. 2023, introduced by Rep. Jim McDermott, D-Wash., would implement the budget proposal.

David Stertzer, CEO of the Association for Advanced Life Underwriting, said his trade group, a key player in the lengthy battle to provide certainty on the estate tax issue, is “encouraged that lawmakers are now focusing on the planning simplification features associated with reform, rather than just the rate and exemption levels.”

Under current law, the estate tax would be phased out in 2010, but would return in 2011 with a $1 million per person exemption and a 55% maximum tax rate.


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