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July 17, 2009

Congressional Activity
The past few days have been among the busiest in Congress, as both chambers advanced the legislative process of health care reform. The House of Representatives released language that will be completed at the Committee level over the next two weeks, and the Senate Health, Education, Labor, and Pensions (HELP) Committee approved its legislative proposal. All eyes are on the Senate Finance Committee as legislative language has yet to be released. A summary of the activities and legislation is provided below.

Senate HELP Committee
After a month-long mark up, the Senate HELP Committee approved its "Affordable Health Choices Act" along a party-line vote of 13 to 10. Despite early criticism, the Senate HELP Committee was the first of the five committees with Congressional jurisdiction on national health reform to actually advance a bill "out of committee."

The bill includes:

• A public plan that is run by the Department of Health and Human Services (HHS) where HHS retains all risk and "negotiates" provider rates that are capped at the average private insurer rates in the region. Under the bill, HHS could contract with non-profit entities for administrative services.
• Members of Congress and staff would be forced to enroll in a public plan.
• The creation of state-based exchanges (with a federal fallback).
• Insurance reforms such as guaranteed issue and adjusted community rating (age 2:1) for the individual and small group markets. An amendment was included to ensure that insurance rating rules apply only to the individual and small group markets and that insured large groups would continue to be rated as they are currently.
• An individual mandate that assesses an annual fee of $750 for individuals that do not obtain coverage.

• An employer "play or pay" requirement that would exempt firms with 25 employees or less.
• Federal subsidies for individuals earning up to 400 percent of federal poverty level.

• A requirement to report loss ratios rather than set minimum loss ratio requirements with consumer rebates.

• Development of minimum benefit standards by HHS and the elimination of a new federal medical advisory council that had previously been assigned this task.

Senate Finance Committee
The Senate Finance Committee has thus far failed to produce legislative language that reaches bipartisan compromise on various provisions of the bill, but action is expected by the end of the week as President Obama and Senate leadership have applied pressure to Chairman Max Baucus (D-MT). In contrast to the House bill, which attempts to raise the majority of revenue through a tax on high-income earners, the Senate Finance Committee is rumored to be looking at several sources of revenue, including: an insurer tax or assessment; a pharmaceutical fee; bonds to pay for Medicaid expansion; and increased corporate reporting measures that may allow the IRS to report more corporate taxes. The benefits contained in previous versions of minimum benefit packages available in an Exchange may also be adjusted down to decrease the overall cost of the bill.

It should be noted that three members of the Senate Finance Committee (Senators Charles Schumer (D-NY), Debbie Stabenow (D-MI), and Robert Menendez (D-NJ)) held a press conference on Wednesday stating their desire to have the insurance industry finance health care reform through some (unspecified) assessment or tax.

House Tri-Committee
Late on Tuesday, the House introduced complete legislative language for its health care reform proposal. The different committees of jurisdiction began the mark up process on Wednesday with a vote still planned by the full chamber for the last week of July. The provision of the bill that has received the most attention is the tax provision that creates a new tax of 1 to 5.4 percent for top income filers, starting at $280k for individuals/$350k for families. These percentages roughly translate to: families making $500k/year would pay $1,500 in new taxes and families making $1 million/year would pay $9000.

In addition, the bill includes several other provisions that have evolved over the past few weeks including:

• An employer "play or pay" provision that exempts small businesses with less than $250k in payroll but requires businesses with $250k-$400k in payroll to pay a sliding scale payroll tax of two to six percent and medium and large employers to pay eight percent.
• A public plan where providers are paid at rates tied to Medicare for the first three years—with a five percent bonus for physicians and other practitioners that participate in both Medicare and the new government plan. Under the bill, Medicare providers are deemed public plan providers unless they opt-out. (The opt-out provision was a change from original proposed language.) $2 billion is provided in start-up funds for the government plan, plus amounts necessary to cover 90 days worth of claims reserves to be repaid over a 10-year period to the U.S. Treasury.
• A National Health Insurance Exchange is created with the option for states to develop regional- or state-based exchanges, and employers who offer coverage through the Exchange are required to contribute at least the required contribution toward such coverage and give their employees the ability to choose any plan within the Exchange. Employees are able to enter the Exchange in certain circumstances, but affordability credits are generally limited to full-time employees not offered employer coverage. Interestingly, states are permitted to require the application of state benefit mandates to Exchange plans, but only if the state reimburses the Commissioner for any additional costs related to these benefit mandates.
• Guaranteed issue, a ban on medical underwriting, and adjusted community rating are included in the bill where variation based on age (2:1), area, and family size is allowed. While the House bill still applies these rules to all insured groups (including large employers), there will be a push to have the House adopt the same amendment as the Senate HELP Committee to remove large employer groups from the pool.

• An individual mandate penalty for individuals who do not obtain coverage is increased from 2 percent to 2.5 percent of adjusted growth income in the revised bill.
• Cuts to Medicare Advantage funding by $156 billion over 10 years by reducing Medicare Advantage benchmarks to 100 percent of estimated local fee-for-service claims costs by 2013. These costs are calculated to exclude the cost of all graduate medical education spending by traditional Medicare.

What's Next?
The House Committees of jurisdiction will continue to mark up the House bill in an attempt to complete the committee process by the last week in July so that a vote by the full chamber can occur before the August recess. The Senate HELP Committee is awaiting action by the Senate Finance Committee. Once the Senate Finance Committee releases language, marks up their bill, and has a final Committee vote, Senate HELP and Senate Finance staff will try to reconcile the differences between the measures. Again, the pressure is to have a final bill ready for a full Senate vote before the Senate adjourns for its summer recess.

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