WASHINGTON BUREAU — Insurance carrier and producer groups say they believe the Senate’s new Patient Protection and Affordable Care Act bill would backfire, by making health care and private health coverage even harder to afford than they are today.

Industry group staffers are still speedreading through the 2,074-page PPACA bill, but America’s Health Insurance Plans, Washington, says a combination of weak efforts to control health care costs, a weak health insurance coverage ownership requirement, and strict limits on health insurance pricing would lead to huge problems.

H.R. 3962, the House health bill, would require individuals who intentionally refused to buy acceptable health coverage to pay a 2.5% tax penalty, and, in theory, it could expose taxpayers who failed to buy insurance or pay the penalty tax to the same threat of going to prison that violators of other tax laws face.

The PPACA bill, introduced Wednesday by Senate Majority Leader Harry Reid, D-Nev., would cut the penalty tax for going bare to $750 per uninsured individual, and it explicitly states that individuals who failed to pay the penalty tax would not face criminal prosecution.

“This proposal encourages people to wait until they are sick to purchase coverage, which will significantly drive up costs for those who are currently insured,” AHIP President Karen Ignagni says.

In addition, by limiting health insurers to charging the oldest insureds only 300% of what they charge the youngest insureds, the bill “will raise the cost of coverage for millions of young families in more than 40 states” that offer insurers more flexibility, Ignagni says.

Some health policy experts say health system changes that lead to big increases in premiums for young, healthy people could encourage those people to evade the coverage ownership requirement, making the pool of people who do have health insurance less healthy and leading to further increases in health coverage costs.

“We believe that all Americans, regardless of health status or medical history, should have guaranteed access to affordable coverage,” Ignagni says. “We have proposed guarantee issue coverage with no exclusions for pre-existing conditions in conjunction with a coverage requirement and adequate subsidies for working families. We stand by these commitments, but agree with a wide range of health policy experts that market reforms will not work if there is not an effective coverage requirement.”

Other provisions, such as provisions expanding public health programs that pay providers low rates, could lead health care providers to increase rates for people who pay for care using private cash, or the cash in their own pockets, Ignagni says.

That kind of increased cost-shifting would threaten the current employer-based coverage system, Ignagni says.

But “we believe that these issues can be addressed and improved to achieve these goals, and we will continue to work with policymakers toward that end,” Ignagni says.

The National Association of Insurance and Financial Advisors, Falls Church, Va., emphasizes that it likes many of the provisions in the PPACA bill, including health insurance affordability credits, wellness and prevention provisions, a requirement that insurers sell coverage on a guaranteed issue basis, and provisions protecting consumer access to insurance agents.

“However, there are a number of health reform issues that need further consideration before the bill will meet NAIFA’s reform goals,” NAIFA says.

The bill includes many restrictions on insurers, such as a provision that would make all health insurance rate increases subject to state review, but it does not include any kind of medical malpractice reform, NAIFA says.

National Association of Health Underwriters, Arlington, Va., has published a preliminary analysis of the bill that focuses mainly on summarizing the bill and discussing barriers in the Senate that might keep the bill off the Senate floor.

“It’s not clear that Senator Reid has the 60 votes needed to move forward at the moment, because three moderate senators, Blanche Lincoln, D-Ark., Mary Landrieu, D-La., and Ben Nelson, D-Neb., have not given their commitments,” NAHU reports.

NAHU says it believes the minimum allowable actuarial value for an acceptable health plan “has been reduced to 60%…which should accommodate most consumer-directed account-based plans.”

The small business tax credit in the bill would help only small businesses with low-income employees, NAHU notes.

The CBO has said that the PPACA bill would reduce the federal budget deficit from 2010 to 2019, but, if Congress reverses a permanent 23% Medicare provider reimbursement cut scheduled to take effect in 2011, that would cost about $247 billion, NAHU says.

Like AHIP, NAHU has been emphasizing the need for a strong individual health insurance ownership mandate, and NAHU Chief Executive Janet Trautwein talked about that position in an interview on FOX Business.

The Council of Insurance Agents and Brokers, Washington, objects to a bill provision that appears to define insurance brokers who try to sell subsidized “health insurance exchange” products as having a built-in conflict of interest.

“This bill has a long ways to go before it becomes something that we can support,” says CIAB government relations director Joel Kopperud.

The CIAB also has concerns about a provision that appears to grant the U.S. Department of Health and Human Services to determine compensation rates for brokers who sell through the state-based exchanges.

Another major bill provision, which would create government-run “community health insurance organizations,” would do significant damage to employer provided benefits, Kopperud says.

And “the weak individual mandates make the market reforms difficult to support when they will result in higher premiums for all Americans,” Kopperud says.

The Employers Council on Flexible Compensation, Washington, has been objecting to a PPACA bill provision that would cap flexible spending account contributions at $2,500 per worker per year, without adjusting the cap for inflation.

“It is disappointing that the Senate is determined to fund health care reform by restricting access to flexible spending accounts, a valuable benefit relied upon by more than 35 million Americans to help hold down health care costs,” Joe Jackson, chairman of the ECFC’s Save Flexible Spending Plans campaign, says in a statement. “Severely curtailing the use of FSAs will not only force participants to pay more in health care costs, it flies in the face of President Obama’s pledge to not raise taxes on the middle class.

FSAs also help users play an active role in managing their health care, and an incentive to hold costs down, Jackson says.

The American Benefits Council, Washington, a group that represents large employers, says the PPACA bill would be more flexible than H.R. 3962, and notes that it would preserve the federal preemption of state health insurance mandates provided by the Employee Retirement Income Security Act.

The PPACA bill also includes wellness incentives that the American Benefits Council likes, and it leaves out some provisions, such as retirement health plan restrictions, that would encourage employers to drop their plans, according to James Klein, the council’s president.

“However, there remain a number of areas in which the measure requires urgent improvement,” Klein says in a statement.

Even if Congress promises that the community health insurance organizations would negotiate payment rates with providers the same way private plans do, “there is little evidence or confidence that such a policy would be sustained,” Klein says. “Like Medicare and Medicaid, the public plan would ultimately be forced to pay health providers well below market rates, resulting in significant cost shifts to employers and employees.”

Like the Senate Finance Committee bill, the PPACA bill would impose a 40% excise tax on relatively high-cost “Cadillac plans.”

“Large numbers of public and private employer plans are certain to exceed the new tax thresholds, simply because health care costs are increasing at many times the rate of typical inflation,” Klein says. “If left to stand, this tax will eventually force employer plan sponsors to make significant benefit changes to avoid additional taxation.”

The council is hoping the bill will improve during floor debate, Klein says.

THE PROCESS

Congressional staffers and industry lobbyists say the first key vote on the Senate bill could occur Saturday, when Sen. Harry Reid, D-Nev., is expected to seek a “motion to proceed” that will require at least 60 votes.

The experts doubt debate will begin until after the Thanksgiving holiday, at the earliest. One analyst said debate likely will last three to four weeks.

“It thus appears that no legislation can be voted into law prior to 2010 absent an unexpected development,” one lawyer is advising his clients.