Ready to Repeal

"I don't think there were many surprises in the House vote; it was along partisan lines with a handful of Democratic members voting with Republicans, and we welcome and support it," said Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers.

"But we have high anxiety about what happens now," he said, noting that as yet there is no full game plan for whittling back the impact of the law, and, honestly, there is considerable Republican sentiment that they don't want to 'improve' it," Wood said.

At the same time, he said, there are major concerns about the legislation in the health agent and broker community, especially about the medical loss ratio formula because some agent and broker commissions have been cut by 50% for 2011.

"This is a major concern for us, as the clock has already been ticking since January 1, and we're already feeling significant impact, particularly in the small group markets, of how disruptive the formula will be," Wood said.

What angers the CIAB the most about the MLR is that as a cost control, it is considered a "perverse disincentive" for plans to restrain costs – the bigger the premium, the easier it is to hit the administrative percentage targets.

"We're going office to office on the Hill, and find much sympathy for the spot we're in, on both sides of the aisle," Wood said, "but it's far too speculative to figure out how this is going to evolve through the year." Indeed, the CIAB has said that removing the agent/broker compensation piece from the MLR calculation will be the group's biggest legislative priority of this session of Congress.

Symbolism and Schizophrenia

According to experts in Washington, despite the huge stakes of the repeal effort, it lacks the support to succeed fully. Moreover, players on both sides knew it beforehand, making the vote itself largely symbolic. House Republicans, however, have vowed to use parliamentary measures to block funding for new health care regulations.

"There was the vote and that was the end of it," said Ira Loss, a buy-side healthcare analyst at Washington Analysis, which counsels institutional investors and hedge funds. He added that however repeal fares in the House, the Senate is unlikely to take it up. "It has no legs," he said.

Ethan Rome, executive director of Health Care for Americans Now, a supporter of the health care reform legislation, said that his group takes repeal seriously, calling it "part of a broad Republican assault on the law in Congress, the courts and state legislatures."

Rome called the repeal effort "crass, partisan politics" because according to him, opponents of the health care bill do not really want it overturned. A successful repeal would mean the loss of health care as a political issue, and it would take away benefits and consumer protections that are popular among, their constituents.

A congressional staffer who declined to be identified said the Blue Cross Blue Shield Association, the Blue Plans and many of the national and larger companies (such as Aetna, Cigna, United and WellPoint) "have demonstrated quite a bit of mixed and confused signals or even schizophrenia [sic] on the overall issue of health reform."

The staffer said that based on comments in private meetings and at health care conferences, "they like health reform, especially if they get millions of new customers, and do not have to deal with or compete against a government/public option. But from an actuarial standpoint it is crazy to try to offer guaranteed issue/community rating/no pre-existing condition exclusions if there is no individual mandate (requirement to purchase insurance)."

However, the staffer said, "the same insurers that scream like hell when a state says you have to provide this particular mandated benefit or offer access to a particular type of specialist or treatment, have no problem supporting a mandate that individuals purchase their product or employers offer their product."

The staffer added that, for the insurers, a lot depends on whether one thinks there is a "right" to health care.

America's Health Insurance Plans appears to support that view. Robert Zirkelbach, AHIP press secretary, said, "We continue to believe that changes are needed to the health care reform law in order to minimize coverage disruptions and cost increases for families and employers."

He added that, "While the new law will bring more people into the system, major provisions will raise costs and disrupt the coverage people have today, including: new taxes on small businesses health insurance; age rating restrictions that will cause premiums to skyrocket for younger workers; and massive Medicare Advantage cuts that will result in higher premiums, reduced benefits, and fewer choices for seniors."

He concluded by saying that, "We will continue to work with members of Congress from both parties to address these issues."

And, while the U.S. Chamber of Commerce voiced support for repeal at a recent news conference, one of its officials acknowledged that "the repeal effort just sends an important message and sets the stage for improving the law," namely by addressing skyrocketing health care costs.

The Chamber cites several provisions in the law that it considers particularly onerous to the business community, including the employer mandate; the "$500 billion in new taxes on small business owners, health insurance, medical devices, prescription drugs, and investments"; and "the flurry of regulations and bureaucracies that have been created–there are 159 new programs, boards, and panels."

New House majority leader Eric Cantor, R-Va., said the Congressional Budget Office anticipated that enacting H.R.2 would stop $770 billion in tax hikes and cut $540 billion in government spending. "No wonder former CBO Director Douglas Holtz-Eakin calls repealing the job-killing health care law the 'first step toward fiscal sanity,'" Cantor said.

At the same time, regarding the Republican interpretation of the CBO's analyses of the cost of the bill, Democrats cite comments by Sen. Charles Grassley, R-Iowa. "Like the Bible, a CBO document can mean different things to different people," Grassley said. "It's easy to pull things out in isolation to justify a position. I hope everyone will take the full picture into account before rushing to judgment."

The CBO's numbers are not the only ones in question, however. In a letter to the House Republican leadership about the impact of the MLR on agents and brokers, NAHU said that cuts in commissions through the MLR could impact "more than 100,000 health insurance agents, brokers and employee benefit specialists nationally involved on a daily basis in the sale and service of health insurance."

NAHU projects that the overall impact of the MLR on agent commissions could be as high as 417,000 jobs overall. But a number of people question these numbers.

They cite federal Bureau of Labor Statistics data indicating that, from the start of the recession in December 2007 until December 2010, the nation as a whole lost 7.2 million jobs, but the health care industry gained 800,000.

According to the BLS data, since the recession ended in June 2009, the number of health care jobs has increased by 386,600.

Despite arguments over data, a Reid spokesman acknowledged that the bill could be improved. One specific area of major importance to the insurance industry is repealing a provision scheduled to go into effect in 2012 that would require every business to file a 1099 notice any time a payment of $600 or more is made to any vendor. Reid cited legislation sponsored by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, which would repeal the provision.

Going to Court:
The Real Repeal Battle?

Meanwhile, any legislative wrangling to amend the health care law does so against a backdrop of legal challenges to the provision of the law mandating that everyone have health insurance or pay a penalty. That provision also goes into effect in 2014. Opponents decry the mandate as unconstitutional, and verdicts in several states have given mixed interpretations, setting the stage for what some feel is an inevitable Supreme Court case to be had in the future.

According to a lawyer with the Boston office of Proskauer, the constitutionality of the mandate provision may hinge on a 1942 Supreme Court decision dealing with the government's Depression-era efforts to control the supply of agricultural products in order to boost prices.

He also believes that the Supreme Court will likely hear the case, if at all, only in 2012, or perhaps 2013.

The lawyer, Peter Marathas, who believes Congress overextended its authority by mandating that everyone buy insurance or pay a penalty, said the Supreme Court must determine whether to extend that precedent in order to make the mandate provision constitutional

The key next step is the imminent decision on the constitutionality of the healthcare law in general and the mandate provision in particular by a federal judge sitting in Pensacola, Fla.

Court decisions upholding the law, the Patient Protection and Affordable Care Act, PPACA have been handed down in Virginia and Michigan, while another Virginia judge, Henry Hudson, sitting in federal district court in Richmond, on Dec. 13 declared the mandate unconstitutional.

Another suit challenging the law is expected to be filed by Oklahoma, but the main interest is in the Pensacola case, being heard by Judge Roger Vinson.

The cases must then go to appellate courts, and the Supreme Court will likely only hear the case if there is a conflict in the circuits, according to several lawyers.

Regarding the Pensacola case, in order to save court costs, 19 attorneys general, mostly Republicans, have joined the case, and three more attorneys general, in Wisconsin, Ohio and Wyoming, are expected to join that lawsuit. Kansas, too, is debating whether to join in.

The suits challenge the requirement that all Americans have health insurance as well as the law's expansion of the Medicaid program.

According to Marathas, the "main event" is the constitutional issue, the difference between "activity" and "inactivity."

Those who argue that the mandate is unconstitutional contend that by imposing the mandate to buy insurance, Congress has exceeded its authority under the Constitution.

The basic argument is that the federal government is "one of limited powers and nothing in the Constitution gives the fed government the power or authority to require citizens to purchase a private product, like insurance," Marathas said.

The government response is that the power to pass the legislation constitutionally is found in the Commerce Clause.

Marathas said the precedent goes back to 1942, citing the so-called "wheat case," or Wickard v. Filburn.

He said that in the case, a farmer by the name of Roscoe Filburn grew wheat to feed his chickens. The government had imposed controls on wheat production based on acreage owned by a farmer in an effort to drive up wheat prices, and Filburn, the government said, grew more than permitted in order to feed his main crop, his chickens.

The Agriculture Department ordered Filburn to destroy his crop and pay a fine even though he was growing the wheat to feed his chickens. "The Supreme Court held that even though Filburn wasn't bringing his wheat to market, the government could act under the Commerce Clause to limit his production because by growing too much it would reduce the amount of wheat he would buy on the market, Marathas said.

"So Filburn's activity, even though he was not engaged in commerce, was found to have an effect on commerce," Marathas said.

This decision is now gospel and there are a string of cases following it," Marathas said, "but the argument of the opposition is that okay, that is activity, but now the government is regulating inactivity; if an individual decides not to buy a product, that has an impact on commerce."

Marathas said Hudson didn't buy that argument in his decision and Vinson, in a preliminary ruling, also cast doubt on it.

Marathas said the Obama Administration, and the Act's supporters, say "yes, activity equals inactivity."

"Hudson, however, draws a key distinction between activity and inactivity–one requires action, the other one does not," Marathas said.

"In ruling that the PPACA is unconstitutional, the judge found the federal government's argument to be less than persuasive, Marathas said.

"If accepted, Hudson argued, the Commerce Clause would have no limits, because any decision not to do something is then construed as a decision to do something," Marathas said.

Marathas said the "government's argument is not an unreasonable argument." But he added that the plaintiffs have the better argument under the Constitution.

"The states are the ones that have power to implement these programs, and the federal government does not have the power to implement this program," Marathas said