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Baucus Unveils Coop Draft

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WASHINGTON BUREAU — Sen. Max Baucus is gearing up to release a health reform bill proposal that calls for making a network of nonprofit health coverage cooperatives an alternative to a government-run health plan.

The office of Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, has prepared a preliminary outline of the bill for a meeting of the committee’s 6-member bipartisan health reform subgroup.

The proposal, as described in a version of the outline obtained by National Underwriter, would impose a tax on the health carriers that offer the most expensive plans. This apparently is an alternative to proposals to impose a direct tax on the people who have the so-called “Cadillac plans.” The tax would raise about $180 billion over the next 10 years, according to the preliminary bill outline

The proposal would also impose a fee on all health insurance companies according to their market share.

The preliminary outline obtained by National Underwriter does not include the “Community Living Assistance Services and Supports Act” or CLASS Act, which would create a long term care insurance entitlement system. A CLASS Act provision is included in the Senate Health, Education, Labor and Pension Committee health reform proposal.

The Senate Finance Committee draft would require health insurance plans serving the individual market to offer coverage on a guaranteed basis starting Jan. 1, 2013. It would prohibit insurance companies from excluding coverage for pre-existing conditions.

Moreover, limited benefit plans and lifetime limits would be prohibited, and health insurance companies would be prohibited from rescinding health coverage.

Health insurance premiums would be allowed to vary based only on tobacco use, age, and family composition, according to the draft. Premiums could also vary to reflect geographic differences. Taking all these factors together, premiums could vary by up to 7.5 to 1.

Individuals with current coverage in the non-group market would be allowed to keep what they now have.

The rules for the small group market would be the same as those for the non-group market, except that they would be phased in over a period of up to 5 years beginning Jan. 1, 2013.

Under the proposal, some states may enact reforms quicker but others may take the entire 5 years.

For purposes of these reforms, a small group would be defined as 1 to 50 employees, or up to 100 depending on state law. In 2017, states must develop a phase-in schedule, not to exceed 5 years, for incorporating larger groups, up to 100 employees.

The draft bill would require drug manufacturers to provide a 50% discount off the negotiated price for brand-name drugs covered on plan formularies when beneficiaries enter the “doughnut,” or the coverage gap now part of the Part D prescription drug benefit under Medicare.

Beneficiaries are eligible provided they do not qualify for low-income subsidies, do not have employer-sponsored coverage or do not pay higher Medicare premiums under Part B or Part D.

It would also require states by 2010 to establish an ombudsman office to act as a consumer advocate for those with private coverage in the individual and small group markets. Policyholders whose health insurers have rejected claims and who have exhausted internal appeals would be able to access the ombudsman office for assistance.

Also in 2010, according to the draft, states would establish an exchange to provide easier, more efficient comparison of health insurance plan benefits and premium costs.

“We’re encouraged by the chairman’s proposal, which seems to generally build on the employer-provided system,” says Joel Kopperud, a government affairs director for the Council of Insurance Agents and Brokers, Washington.

Kopperud says it remains unclear under the draft how the proposed coops would be designed, “but we are hopeful that they would be established in a way that competes fairly with the private market.”

“We remain very concerned that any new taxes or fees on insurance plans will ultimately be passed on to the consumer,” Kopperud says. “We recognize that there a lot of work remains, and we hope that bipartisan consensus can be achieved on a solution that preserves employer-provided coverage.”

Analysts at Washington Analysis, Washington, are warning that while Baucus hopes to start work within his committee on his draft beginning next week, key members of the group of 6, Sen. Charles Grassley, R-Iowa, the highest-ranking Republican on the committee, and Sen. Michael Enzi, R-Wyo., the highest-ranking Republican member of the Senate HELP Committee, “have neither discarded their opposition to liberal efforts nor the requirements on what it would take for them to support a measure. Yet they still maintain they are not walking away from the negotiations…. We doubt either will bless a bill from the Gang of Six, but the odds still favor support from Sen. Olympia Snowe, R-Maine.”