Health Care Reform— A Year Of Battles 

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WASHINGTON 

From the perspective of the health insurance industry, the Obama administration’s decision to follow through on a campaign pledge to reform the healthcare delivery system turned into an all-out battle to retain the current employer-based private healthcare system.
Throughout the year, several other factors contributed to intensifying the sense of being embattled.

Bills proposed to reform the health delivery system also threatened collateral damage, for example, through such provisions as one proposing to repeal the McCarran-Ferguson Act for health and medical malpractice insurers and another creating a long term care public entitlement program.

Additionally, the House bill contains language that would give the Federal Trade Commission specific authority to oversee insurance “with respect to unfair methods of competition.”

In another area, both the House and Senate bills would cut spending for Medicare, including Medicare Advantage.

The Senate would institute a payment system based on competitive bids, picking average bids as benchmarks in each market and saving taxpayers $118 billion from 2011 through 2019, according to the Congressional Budget Office. The House bill would cut more, saving $170 billion over 10 years, by paying MA plans the same as fee-for-service providers.  

Another complicating factor is that provisions added to make the changes pay for themselves would impact tax-favored products used by middle-income insurance agent clients, specifically, health savings accounts and flexible spending accounts.

The shape of the industry’s worst nightmare, a “public plan,” didn’t materialize at the end in the Senate bill where it faced total opposition from some senators, including Sen. Joe Lieberman, I-Conn.

However, the marathon debate made for the worst of all possible worlds by failing to resolve itself by year-end, creating the uncertainty sure to carry over into next year as the Senate and House try to reconcile their separate versions of health care reform.

“The threats to our industry continue to grow, not only with amendments to the Senate bill that would repeal the antitrust exemptions afforded health insurers under the McCarran- Ferguson Act, but also with a new provision that came out of nowhere in the Senate bill which authorizes the federal government to determine broker compensation rates for state exchanges,” said Joel Kopperud, a director of government relations for the Council of Insurance Agents and Brokers.

Tom Currey, president of the National Association of Insurance and Financial Advisors, summed it up this way:  "Attempts to cover the uninsured should not come at the expense of the employer-based system that currently covers 160 million Americans or raise premiums beyond affordable levels for those now covered.”

As the year ended, it looked like Senate Majority Leader Harry Reid had managed to get the 60 votes necessary to move the legislation to a vote in the Senate.

That would set the stage for final action perhaps as late as March, all the while impacting the decision-making ability of both businesses and individuals.

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Health insurers argued that the bills being considered won’t serve to cut healthcare costs, a finding corroborated by the American Academy of Actuaries.

“For six months, Washington has focused on health insurance plans’ administrative costs and profits, which account for 4.1% of national health expenditures, now is the time for Congress to focus on the remaining 95.9% of expenditures,” said Karen Ignagni, AHIP president and CEO.

“Pilot programs and timid steps to reform the delivery system are inadequate given the scope of the cost challenge the nation faces,” she said. “Without a roadmap for measurable cost savings across the entire system, health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

The Senate legislation also contains provisions creating a long-term-care entitlement, as well as cuts in the Medicare Advantage program.  The cuts in the Medicare Advantage program are not as steep in the Senate bill as those proposed in legislation passed by the House on Nov. 7.

The Senate bill contains no provision dealing with antitrust issues, as does the House bill. For a while it looked like S. 1681, a Senate bill that would repeal the antitrust exemption afforded health insurers under McCarran-Ferguson, was likely to be introduced during the lengthy debate on the Senate bill.  But an aide to Sen. Patrick Leahy, D-Vt., the proposal’s chief sponsor in the Senate, confirmed on Dec. 18 that there would be no language in Senate health care legislation repealing the antitrust exemption currently enjoyed by health and medical malpractice insurers.

Regarding the individual mandate, Cori Uccello, the senior health fellow for the American Academy of Actuaries, said, “The individual mandate language should be strengthened.”
Uccello said the “viability of health care reform depends on attracting lower-risk individuals, and strengthening the individual mandate through higher financial penalties increases the likelihood that these individuals will purchase coverage.”

In his comments, NAIFA’s Currey also disputed the need for a so-called “public plan” in the legislation and said the Senate bill does not address “the devastating results of allowing individuals to purchase coverage after they are ill or injured--essentially leaving everyone in the system "on claim."

Besides the public plan, the industry was very concerned about the LTC entitlement issue.
"In the short-term CLASS will change the landscape for private long term care insurance sales as Americans become even more confused about their choices and option,” said Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

But, in the long-term, he said, unless it is reversed by future administrations, CLASS will fail as a voluntary program leaving those now in their 20s, 30s and 40s with the financial problem of funding long term care for millions of aging baby boomers.”