President Obama last week signaled an all-out push for major health care reform legislation this year–even if it has to be done through the politically risky reconciliation route.
Given that authority to pass the bill through reconciliation–that is, only with a simple majority in the Senate–runs out in mid-April, this means a showdown could be imminent.
His first move was to unveil an omnibus bill based on the version of the bill passed by the Senate on Christmas Eve that includes a provision giving the federal government the authority to roll back unreasonable rate increases, albeit with state support.
At the same time, the House voted overwhelmingly on February 24 to pass legislation that would repeal the antitrust exemption afforded to health insurers under the McCarran-Ferguson Act.
The White House voiced its support for the effort in advance of the House bill through a statement of administrative policy.
Additionally, Rep. Louise Slaughter, D-N.Y., argued on the House floor during debate on the issue, “We’ve heard too many complaints about the health insurance industry engaging in price fixing, bid rigging, and other anti-consumer and anti-competitive practices.”
She added, “This industry has enjoyed a big giveaway for far too long, and it’s about time that it plays by the same rules as everyone else.”
But, America’s Health Insurance Plans, Washington argued in a statement that the House bill is likely to do more harm than good.
AHIP officials said the rhetoric surrounding the call for repealing the antitrust exemption afforded to health insurers through the McCarran-Ferguson Act “does not match the reality of the situation.”
Moreover, provisions repealing the antitrust exemption afforded to medical malpractice insurers were removed from the bill before it was approved for floor action, and industry lobbyists indicated that stand-alone legislation repealing the antitrust exemption for health insurers is unlikely to even be voted on in the Senate.
The president was scheduled to meet with Republicans in a televised conference on February 25 in an effort–widely viewed as a political theater–to secure support for a bipartisan bill.
The battle lines were drawn before the meeting. First, Republicans requested that the president start all over on health care reform legislation.
One of the attendees, Rep. John Kline, R-Minn., ranking minority member, of the House Education and Labor Committee, said before the meeting, “We ought to start from a blank piece of paper.”
And Republicans in general proposed ways that the reform could be accomplished through the private sector, a non-starter to majority Democrats.
Sen. Michael Bennet, D-Colo., outlined what many industry lobbyists and even Republicans believe the Democrats will do over the next few weeks as part of a last-ditch effort to push through the “big solution.”
In a letter seeking support for a Senate vote on the public option, Bennet proposed passing health reform legislation that included a public option under budget reconciliation rules.
He cited findings from the non-partisan Congressional Budget Office that said a public option could yield cost savings of at least $25 billion. Bennet also pointed to the fact that a public option would provide Americans with a low-cost alternative to private insurance and improve market competitiveness.
In addition, Bennet’s letter noted that there is substantial Senate precedent for using reconciliation to enact important health care policies, including the Children’s Health Insurance Program (CHIP), COBRA, and Medicare Advantage.
“Too many people in Washington believe that just saying you are for health care reform is a substitute for actually getting something done,” said Bennet.
“While some choose to stall progress under the pretext of principle, more and more Americans are losing the health care coverage they need,” he said.
In comments to reporters last week, Sen. Judd Gregg, R-N.H., acknowledged that Republicans anticipate Democrats will seek to pass the Obama administration proposal through budget reconciliation.
But, in advance of the White House bipartisan summit, Rep. Steny Hoyer, D-Md., conceded that comprehensive reform would be best, but that it was not all or nothing.
“We may not be able to do all. I hope we can do all, a comprehensive piece of legislation that will provide affordable, accessible, quality health care to all Americans,” Hoyer said at his weekly media briefing.
“But having said that, if we can’t, then you know me–if you can’t do a whole, doing part is also good. I mean there are a number of things I think we can agree on,” Hoyer added.
Specifically, the bill unveiled by the president includes a provision creating a Health Insurance Rate Authority.
Oklahoma Insurance Commissioner Kim Holland, the secretary-treasurer of the National Association of Insurance Commissioners, immediately criticized such a plan, saying rate regulation is a prerogative of the states.
If White House health care reform proposals grant power to a federal rate authority to disallow increases approved by the states, Holland said, “I think we would work hard to make a strong case not to do that.”
The White House immediately sought to clarify what it is seeking. In a briefing after the president’s plan was unveiled, White House Press Secretary Robert Gibbs said that the proposal was a “starting point, and that the White House envisions the U.S. Department of Health and Human Services working with state insurance regulators to oversee health insurance prices, rather than creating a new price review agency.”
The president’s new proposal attempts to “bridge the gap” between the current House and Senate bills.
Among other provisions, it includes: a requirement that everyone have health insurance or pay a penalty; elements of both the House and Senate bills in rolling back Medicare Advantage costs; and closure of the so-called doughnut hole under Part D, the prescription drug program under Medicare.
The president’s proposal would also implement health insurance exchanges, as envisioned in the Senate bill, and adapt the medical loss ratio mandates included in the Senate bill.
And, to the dismay of the life insurance industry, the president’s proposal would also include the Community Living Assistance Services and Supports, or CLASS Act.
The summary said that the president’s proposal “makes a series of changes to the Senate bill to improve the CLASS Act program’s ‘financial stability and ensure its long-term solvency.’”
But Jesse Slome, executive director of the American Association for Long-Term Care Insurance, contended that the latest proposal shows that the Obama administration may be counting on the fact that the American public is so tired of the “war on health care” that any movement will be viewed positively.
As a result, Slome said, the provisions in the legislation that would create a worker-paid long term care benefits program “are not likely to be debated and the first step to a new public-financed entitlement program will be born.”
He added that, “The outcome will inevitably make marketing long term care insurance far easier for the industry as a very distinct market segment will find a non-government option highly attractive.”
As to the “Cadillac tax,” the president’s proposal changes the effective date of the Senate policy from 2013 to 2018 to provide additional transition time for high-cost plans to become more efficient.
It also raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500 and indexes these amounts for subsequent years at general inflation plus 1%.
The proposal also imposes a responsibility on employers to shoulder the cost of health insurance for employees.
Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.
“Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” the summary explains.
In dealing with health insurer rate increases, the president’s proposal would seek to ensure that, if a rate increase is deemed unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.
In responding to the proposal, a spokesman for America’s Health Insurance Plans defended the current spate of large increases in health insurance, especially in the individual and smaller markets.
“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” said Robert Zirkelbach, an AHIP spokesman.
“In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs,” he explained.
Zirkelbach added that, “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”
Janet Trautwein, CEO of the National Association of Health Underwriters, said, “The White House plan will exacerbate our nation’s economic crisis by driving up private health insurance costs so significantly that millions of American families and businesses will be priced out of coverage, disrupting the quality coverage on which millions of Americans rely.
“The high cost of health care is the primary problem with our current system, and unfortunately the president’s plan does little to truly rein in these costs,” Trautwein added.
Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers, reacted to the president’s proposal by voicing concern that “about rate regulatory authority in a vacuum.”
He explained that, “It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority intact. We don’t fear federal oversight; we fear Balkanization of the oversight.”
The White House summary also said the president’s proposal would seek to strengthen a provision of the Senate bill that includes a “grandfather” policy allowing people who like their current coverage to keep it.
The president’s proposal would add certain important consumer protections to these “grandfathered” plans.
Specifically, the summary says, “Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate review, backed up by the oversight of the secretary of the Department of Health and Human Services.”
When the insurance exchanges begin in 2014, the president’s proposal adds new protections that prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals.
Beginning in 2018, the president’s proposal requires “grandfathered” plans to cover proven preventive services with no cost sharing.
Regarding Medicare Advantage, the president’s plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area.
“It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” the summary said.
It provides bonuses for quality and enrollee satisfaction and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating.
Under the proposal, plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate).
Finally, the president’s proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggests is warranted, based on actuarial analysis.
“This is the primary source of additional savings compared to the Senate proposal,” the summary said.
–Allison Bell and Phil Gusman contributed to this story.