Health care reform legislation that the insurance industry could support took a giant step forward last week when the Senate Finance Committee rejected two amendments that would create a so-called “public option” to compete with private insurers.
The industry also won another key victory even before the Senate Finance Committee began marking up the bill Sept. 22, when the basic markup document was modified to say specifically that insurance agents would be allowed to sell insurance to individuals and businesses purchasing health insurance through the exchanges proposed in the legislation.
But the industry still has many concerns with the Senate Finance Committee version of the legislation, which is regarded by analysts and congressional staffers as the one whose principles are most likely to emerge in any legislation reforming the health care delivery system.
The markup was scheduled to be completed by the end of last week, but most observers were doubtful. [See our website at www.lifeandhealthinsurancenews.com for updates.]
And, in the House, where there is stronger support for a public option, work continued on legislation melding health care bills drafted by three separate committees. It was also unclear when work on a final House would be completed and a floor vote scheduled.
As for concerns with the Senate bill, for example, America’s Health Insurance Plans wrote a letter to the committee on Sept. 24 saying that new taxes that would be imposed on insurers through the health care reform legislation would undermine the purpose of the proposed legislation.
The letter talks about a $6.7 billion annual fee proposed in the chairman’s mark that is described “as an annual fee on health insurance providers.” The letter explained that the new tax would have the effect of increasing premiums by roughly 1%, citing Congressional Budget Office estimates.
The letter also voices concern about the decision of bill writers to narrow the age band to 4-1. If age bands are narrowed too much, the letter says, premiums will rise significantly for individuals under the age of 35. Moreover, this age group is the fastest growing segment of the uninsured.
The letter notes that the bill’s original age band of 5-1 already reflects compression, relative to the natural distribution of underlying health care costs across age groups.
“If age bands are narrowed or compressed too much, premiums will rise significantly for these individuals, making coverage unaffordable, and resulting in a smaller and less stable pool, and higher premiums for everyone,” the letter says.
Health insurance agents remain concerned about the rules regarding cooperatives and exchanges contained in the bill, which was drafted under the direction of Sen. Max Baucus, D-Mont., chairman of the Finance Committee.
Janet Trautwein, CEO of the National Association of Health Underwriters, said the trade group still has problems with some of the bill’s provisions even though changes made to the original legislation address many agent concerns.
These concerns include the fact that many of the essential benefits mandated by the legislation “are too rich in certain areas,” Trautwein said.
“We haven’t had any luck winning support for an amendment” that would deal with this issue, she added.
As an example, dental and vision must be included in any base health policy, regardless of the actuarial level, for children up to age 21, she said.
“This will dramatically increase the cost of health insurance coverage,” she said.
Other concerns include provisions dealing with affordability waivers; ability to keep current coverage; market reform rating rules; and retaining a “level playing field inside and outside of the exchanges” that would be created through legislation, Trautwein said.
But the industry did regard the rejection of the two public option amendments as critical.
In a 15-8 vote on Sept. 29, the panel rejected an amendment by Sen. John D. Rockefeller IV, D-W.Va., that would have paid doctors, hospitals and other health care providers based on Medicare fees for the first two years after the health care plan goes into effect in 2013. They would have to participate if they accepted Medicare patients. After 2014, reimbursement rates would be negotiated.
After another debate, the panel also rejected, 13-10, an amendment by Sen. Charles Schumer, D-N.Y., that would have authorized the government to negotiate rates levied by doctors, hospitals and other healthcare providers immediately when the plan went into effect in 2013.
“We are pleased by the rejection of both the Rockefeller and the Schumer amendments containing public plan options,” said Tom Currey, president of the National Association of Insurance and Financial Advisors.
“But we will continue our educational efforts. There are currently three other reform proposals with government-run options, and lawmakers need to understand the negative consequences. A strong private health insurance system is best equipped to provide options for families and businesses,” Currey said.
Robert Zirkelbach, a spokesman for AHIP, also acknowledged the importance of the vote on the two public plan amendments.
“We are pleased that a bipartisan majority of the Senate Finance Committee voted to reject the creation of a government-run public health insurance plan,” he said.
He explained that, “reforms to the private insurance markets combined with concrete steps to slow the growth of health care costs are widely recognized as necessary.”
He also noted that the Senate Finance bill “contains strong market rules and consumer protections to ensure that every American has guaranteed access to affordable, portable health care coverage and to bring all Americans to participate in the system.
“The bipartisan votes in the Finance Committee recognized that the creation of a government-run public plan is a bad idea and a waste of resources that would likely displace tens of millions of happily insured Americans and exacerbate the worst elements of our current system: gross inefficiency, high costs, and bureaucracy.”
Trautwein and other lobbyists at NAHU said the vote on the public plan was key because “the government-run plan is a roadblock to reform.”
NAHU officials explained that a government-run plan “would dismantle employer coverage, bankrupt hospitals, and add to the federal deficit.”
As members of the Senate also noted during the debate on the two amendments, NAHU officials explained that “the same goals can be accomplished by enacting an overhaul of the market rules and new consumer protections so that nobody falls through the cracks of our health care system.
“Health plans have stepped up and proposed guaranteed coverage, elimination of pre-existing condition exclusions, no longer basing premiums on a person’s health status or gender, and a personal coverage requirement to get everyone into the health care system,” NAHU officials said.
“These reforms can work and they can be sustained,” they contended.
Five Democrats opposed the Rockefeller amendment.
They included Sen. Baucus, chairman of the panel, who said he voted against the provision because he feared that a bill including it would not get the 60 votes it would need to pass on the Senate floor.
Another Democrat, Sen. Kent Conrad, D-N.D., said during the debate that that he “can’t possibly support” Sen. Rockefeller’s proposal. He explained that his state has the second-lowest level of Medicare reimbursement in the nation. Every major hospital in North Dakota would “go broke” if they had to accept public option reimbursements at Medicare rates, he said.
Joel Kopperud, a director for government relations with the Council of Insurance Agents and Brokers, reacted to the vote on the Rockefeller amendment by saying, “There’s no way a government insurance program would fairly compete with private industry.”
Kopperud added that, “The real debate on the proposed government program is about a single-payer system and a government program that would certainly become a black hole for federal funds.”
In seeking support for his amendment, Sen. Rockefeller said during the debate that, “We need this option because the insurance companies have failed to meet their obligation to the public.” He accused firms of putting profits over their customers.
He also contended during the debate that, without his proposal, consumers would face substantial premium increases once health care legislation takes effect.
But Republicans charged that a public option would eventually force private insurers out of business. That, Republican members of the committee contended, would force millions to get their insurance from the government.
“Washington is not the answer,” said Sen. Orrin Hatch, R-Utah.
He said a public option “would be a disaster” and cause Americans to “lose an awful lot of control over their health care needs.”
Regarding the authority of agents to sell insurance to those who opt to participate in the health care exchanges the bill would create, the revised draft of the committee print contained an amendment offered by Sen. Tom Carper, D-Del.
Specifically, the language says that “exchanges have access to the same industry professionals as those working outside the exchange.”
NAIFA’s Currey noted that the provision in the Senate Finance bill is consistent with amendments to health care reform legislation adopted by the Senate Health, Education, Labor and Pension Committee and by the House Energy and Commerce Committee.