What Direction Healthcare What Direction Healthcare Reform?Reform?

Michael KeeganMichael KeeganFLAHU Healthcare SummitFLAHU Healthcare Summit

Tallahassee, FLTallahassee, FLJanuary 11, 2010January 11, 2010

Current Status of Reform EffortsCurrent Status of Reform Efforts

• Bills have passed in House and SenateBills have passed in House and Senate

• Congress will likely not use formal conference Congress will likely not use formal conference committee to work out differencescommittee to work out differences

• Previous bills of this magnitude generally have Previous bills of this magnitude generally have held formal conference committeesheld formal conference committees

• Negotiations going on behind closed doorsNegotiations going on behind closed doors

• Process being used called “ping-pong” Process being used called “ping-pong”

Current Status of Reform EffortsCurrent Status of Reform Efforts

• Democratic leadership will still need 60 votes Democratic leadership will still need 60 votes in the Senatein the Senate

• Although a vote on the final bill will only Although a vote on the final bill will only require 51 votes, the motion to proceed to a require 51 votes, the motion to proceed to a vote on the final bill will require 60vote on the final bill will require 60

• Goal is passage by State of the Union Address Goal is passage by State of the Union Address (February 2(February 2ndnd), but this will be difficult to ), but this will be difficult to achieveachieve

Overview of House ActionOverview of House Action

•House of Representatives passed HR 3962 220-215 on Nov 7•39 Democrats voted against the bill; mostly centrist-moderate •House will have very little leverage in House-Senate negotiations•Differences between the two bills must be reconciled so that legislation will pass both chambers (Conference Committee or alternative ping-pong approach)

HR 3962HR 3962

• Affordable Healthcare for America ActAffordable Healthcare for America Act

• Replaced HR 3200, which had passed the Replaced HR 3200, which had passed the 3 Committees of jurisdiction for healthcare 3 Committees of jurisdiction for healthcare legislation in the House of Representatives legislation in the House of Representatives in July.in July.

• CBO estimated the cost at $894 billion CBO estimated the cost at $894 billion over 10 years, but conceded that over 10 years, but conceded that “estimates are subject to substantial “estimates are subject to substantial uncertainty.”uncertainty.”

HR 3962HR 3962

• Individuals would be required to obtain Individuals would be required to obtain and maintain health insuranceand maintain health insurance

• Employers would be required to provide Employers would be required to provide coverage or pay a finecoverage or pay a fine

• Market reforms such as modified Market reforms such as modified community rating, guaranteed issue, no community rating, guaranteed issue, no pre-existing condition exclusionspre-existing condition exclusions

• Establishes a government-run public planEstablishes a government-run public plan

HR 3962HR 3962

• An exchange would be established under An exchange would be established under a new independent federal agency (Health a new independent federal agency (Health Choices Administration) headed by an Choices Administration) headed by an appointed commissioner to offer private appointed commissioner to offer private coverage and public plan coveragecoverage and public plan coverage

• Tax subsidies for those below 400% of Tax subsidies for those below 400% of FPLFPL

• Funded by taxes on high-income earners Funded by taxes on high-income earners and funding for Medicare Advantageand funding for Medicare Advantage

HR 3962HR 3962

• Individual MandateIndividual Mandate

• Individuals would be required to obtain and Individuals would be required to obtain and maintain “acceptable” health insurancemaintain “acceptable” health insurance

• Acceptable coverage includes “qualified health Acceptable coverage includes “qualified health benefit plans” (QHBP), an employer-based plan, benefit plans” (QHBP), an employer-based plan, a grandfathered individual plan, Medicare (Part a grandfathered individual plan, Medicare (Part A), Medicaid, or TRICARE/VA coverageA), Medicaid, or TRICARE/VA coverage

• Individuals that do not maintain acceptable Individuals that do not maintain acceptable coverage would be subject to tax penalty equal to coverage would be subject to tax penalty equal to 2.5% of modified adjusted gross income2.5% of modified adjusted gross income

HR 3962HR 3962

• Employer MandateEmployer Mandate• Employers must offer coverage through QHBP or Employers must offer coverage through QHBP or

grandfathered plans as permittedgrandfathered plans as permitted

• Employers would be required to pay 72.5% of the Employers would be required to pay 72.5% of the cost of applicable coverage for individuals and cost of applicable coverage for individuals and 65% for family coverage65% for family coverage

• Part time employees must be covered on a pro-Part time employees must be covered on a pro-rated basisrated basis

• Employers that do not offer applicable coverage Employers that do not offer applicable coverage could be subject to fine equivalent to 8% of could be subject to fine equivalent to 8% of payrollpayroll

HR 3962HR 3962

• Market ReformsMarket Reforms• All health plans, fully insured or self funded, would be All health plans, fully insured or self funded, would be

required to issue coverage regardless of health statusrequired to issue coverage regardless of health status• Elimination of pre-existing exclusionsElimination of pre-existing exclusions• Prohibition on annual or lifetime limitsProhibition on annual or lifetime limits• Dependent coverage to age 26Dependent coverage to age 26• Imposes modified community rating to all qualified Imposes modified community rating to all qualified

plans regardless of size. Allows variances only for plans regardless of size. Allows variances only for family enrollment, geographic area and age (2:1 age family enrollment, geographic area and age (2:1 age band)band)

• Prohibits premium variation based on health status, Prohibits premium variation based on health status, gender, class of business, or claims experiencegender, class of business, or claims experience

HR 3962HR 3962

• CBO estimated the bill would cost $894 CBO estimated the bill would cost $894 billion over 10 years, but that may be billion over 10 years, but that may be optimistic and does not measure true costoptimistic and does not measure true cost

• The Centers for Medicare and Medicaid The Centers for Medicare and Medicaid Services Chief Actuary estimated that the Services Chief Actuary estimated that the House bill would actually increase health House bill would actually increase health care costscare costs• By 2019, health costs would rise to 21.1% of By 2019, health costs would rise to 21.1% of

GDP compared to 20.8% under current lawGDP compared to 20.8% under current law

Overview of Senate ActionOverview of Senate Action

• Senate passed their reform bill 60-39 on Senate passed their reform bill 60-39 on December 24December 24

• CBO estimates that bill would cost $850 CBO estimates that bill would cost $850 billion over 10 yearsbillion over 10 years

• Significantly different than House billSignificantly different than House bill

HR 3590HR 3590

• The Patient Protection and Affordable The Patient Protection and Affordable Care ActCare Act

• Would establish a government-run public Would establish a government-run public plan option to be sold through new state plan option to be sold through new state exchanges with the opportunity for states exchanges with the opportunity for states to opt out. to opt out.

• Payment rates to providers would be Payment rates to providers would be determined by HHS and capped at the determined by HHS and capped at the average rate of private plans. average rate of private plans.

HR 3590HR 3590

• Start-up funds are provided for the creation of Start-up funds are provided for the creation of co-ops and states are allowed to offer their own co-ops and states are allowed to offer their own public programs for those between 133% and public programs for those between 133% and 200% of the Federal Poverty Level (FPL) 200% of the Federal Poverty Level (FPL)

• Calls for the creation of state-based exchanges Calls for the creation of state-based exchanges beginning in 2013 and limited to individuals and beginning in 2013 and limited to individuals and small groups until 2017, when large-group small groups until 2017, when large-group participation will be allowed.participation will be allowed.• Policies sold through the exchange would have be Policies sold through the exchange would have be

done by licensed agents or brokers done by licensed agents or brokers

HR 3590HR 3590

• Requires employers of 50 or more to provide Requires employers of 50 or more to provide qualified health coverage with a $750 fine, qualified health coverage with a $750 fine, indexed for premium growth, for non-covered indexed for premium growth, for non-covered employeesemployees

• Requires individuals to obtain qualified Requires individuals to obtain qualified coverage with a fine that begins at $95 in 2014, coverage with a fine that begins at $95 in 2014, rises to $750 by 2016, and is indexed for rises to $750 by 2016, and is indexed for inflationinflation

• Expands Medicaid eligibility to those earning up Expands Medicaid eligibility to those earning up to 133% of the FPL to 133% of the FPL

HR 3590HR 3590

• Includes insurance market reforms such as Includes insurance market reforms such as guaranteed issue and renewability of all policies, guaranteed issue and renewability of all policies, no preexisting condition limitations or lifetime or no preexisting condition limitations or lifetime or annual limits, prohibitions on rating based on annual limits, prohibitions on rating based on health status and gender, and only allowing health status and gender, and only allowing rating factors of age (3:1), tobacco use (1.5:1), rating factors of age (3:1), tobacco use (1.5:1), family status and geographyfamily status and geography

• Includes a limited small-business tax credit to Includes a limited small-business tax credit to help the smallest of businesses with low-income help the smallest of businesses with low-income employees with the cost of coverage employees with the cost of coverage

HR 3590HR 3590

• CBO recently completed analysis of CBO recently completed analysis of premium impact of the billpremium impact of the bill• Premiums per person in the nongroup market Premiums per person in the nongroup market

would be 10-13% higher in 2016 than would be 10-13% higher in 2016 than projected under current lawprojected under current law

• Half of enrollees would receive subsidies that Half of enrollees would receive subsidies that would reduce costs well below premiums that would reduce costs well below premiums that would be charged under current lawwould be charged under current law

HR 3590HR 3590• The CBO estimates smaller premium effects in The CBO estimates smaller premium effects in

the group market.the group market.

• Premiums could range from a 1% percent Premiums could range from a 1% percent increase to 2% reduction in the small group increase to 2% reduction in the small group market (less than 50 employees)market (less than 50 employees)

• In the large group market, premiums would In the large group market, premiums would remain essentially flat, ranging from zero to 3% remain essentially flat, ranging from zero to 3% lower in 2016 relative to current lawlower in 2016 relative to current law

• Analysis does not factor in effect of small Analysis does not factor in effect of small business tax credit or surtax on high cost business tax credit or surtax on high cost benefit plansbenefit plans

Where Do We Go From Here? Where Do We Go From Here?

• Congressional leadership has multiple options to Congressional leadership has multiple options to proceed so it remains a very fluid situationproceed so it remains a very fluid situation

• Typically, different versions of House and Senate Typically, different versions of House and Senate bills are reconciled through a Conference bills are reconciled through a Conference CommitteeCommittee

• House and Senate negotiators then agree on a House and Senate negotiators then agree on a single bill (called a conference report) that each single bill (called a conference report) that each chamber must passchamber must pass

• Filibuster rules would still apply in the Senate, so Filibuster rules would still apply in the Senate, so 60 votes would be necessary to pass60 votes would be necessary to pass

Where Do We Go From Here?Where Do We Go From Here?

• Congressional leadership may forgo formal Congressional leadership may forgo formal conference committee to iron out the differences conference committee to iron out the differences between the billsbetween the bills

• House and Senate leadership could agree on House and Senate leadership could agree on changes and then submit revised bill to each changes and then submit revised bill to each chamber for votechamber for vote

• Approach might make passage easier, but is Approach might make passage easier, but is inconsistent with the pledge of transparency and inconsistent with the pledge of transparency and opennessopenness

• Final bill will likely closely resemble Senate billFinal bill will likely closely resemble Senate bill

TimelineTimeline• Administration and congressional leadership Administration and congressional leadership

would like to have a bill to the president would like to have a bill to the president before his State of the Union address (Feb. before his State of the Union address (Feb. 2), but that may not happen2), but that may not happen

• If congressional leaders go through a formal If congressional leaders go through a formal conference committee, negotiations would conference committee, negotiations would not start until mid-late January and bill would not start until mid-late January and bill would likely not be finalized until sometime in likely not be finalized until sometime in FebruaryFebruary

• Merging the bills outside the conference Merging the bills outside the conference committee would prevent some delaying committee would prevent some delaying maneuvers, but would likely not dramatically maneuvers, but would likely not dramatically speed up processspeed up process

Key Issues In A Final BillKey Issues In A Final Bill

• Health Care Cost ContainmentHealth Care Cost Containment

• None of the bills adequately address None of the bills adequately address underlying cost driversunderlying cost drivers

• Focus of the legislation is coverageFocus of the legislation is coverage

• Coverage AffordabilityCoverage Affordability

• New rules in all of the bills will make private New rules in all of the bills will make private health insurance premiums go uphealth insurance premiums go up

• Rating requirements could particularly Rating requirements could particularly impact middle-size employersimpact middle-size employers

• Ineffective individual mandate Ineffective individual mandate

• Strict mandated benefit requirements and a Strict mandated benefit requirements and a minimum level of required coverage that far minimum level of required coverage that far exceeds typical market offerings todayexceeds typical market offerings today

Key ConcernsKey Concerns• Public program expansionPublic program expansion

• FinancingFinancing• House Bill—Disproportionably impacts small House Bill—Disproportionably impacts small

businesses and will cause more than 6 million businesses and will cause more than 6 million privately insured seniors to lose their Medicare privately insured seniors to lose their Medicare Advantage coverage Advantage coverage

• Senate—Is financing sustainable? Will all plans Senate—Is financing sustainable? Will all plans eventually be “Cadillac” plans? Medicare cutseventually be “Cadillac” plans? Medicare cuts

• Government-run public plan optionGovernment-run public plan option

• Employer mandate would have devastating Employer mandate would have devastating economic impacteconomic impact

What Needs to be Changed What Needs to be Changed Clarifying the Role of the StatesClarifying the Role of the States

• Minimum Loss Ratio RequirementsMinimum Loss Ratio Requirements

• Structure of the ExchangesStructure of the Exchanges

• Agent-Broker Language needs to be Agent-Broker Language needs to be clarifiedclarified

• Regulatory authority overallRegulatory authority overall

Additional Key IssuesAdditional Key Issues

• Taxes need to be eliminated or delayed Taxes need to be eliminated or delayed until major reforms beginuntil major reforms begin

• Effective dates need to be at least 12 Effective dates need to be at least 12 months after enactmentmonths after enactment

• High risk pool funding needs to focus on High risk pool funding needs to focus on existing high risk pool and alternative existing high risk pool and alternative mechanism structures rather than creating mechanism structures rather than creating new federal entities.new federal entities.

Additional Key IssuesAdditional Key Issues

• Personal responsibility Personal responsibility requirements/individual mandate requirements/individual mandate

• Age ratingAge rating

• Insurance pooling requirementsInsurance pooling requirements

• Public Option still in House languagePublic Option still in House language

ConclusionConclusion

• Reconciling House and Senate bills will be Reconciling House and Senate bills will be challenge, but some kind of legislation will challenge, but some kind of legislation will emergeemerge

• Will Democrats in the House support a Will Democrats in the House support a watered-down Senate bill?watered-down Senate bill?

• What will the Obama Administration What will the Obama Administration accept and what kind of pressure will be accept and what kind of pressure will be brought to bear?brought to bear?

ConclusionConclusion• With so much political capital invested, some With so much political capital invested, some

kind of “healthcare reform” bill will be passed.kind of “healthcare reform” bill will be passed.

• Administration and Congressional leadership Administration and Congressional leadership will accept some reforms and declare victorywill accept some reforms and declare victory

• Final bill will surely be less ambitious than Final bill will surely be less ambitious than was originally introducedwas originally introduced

• Reforms are needed, but reform must be Reforms are needed, but reform must be done right.done right.

Michael J. KeeganMichael J. KeeganDirector of State AffairsDirector of State Affairs

mkeegan@nahu.orgmkeegan@nahu.org(703) 276-3809(703) 276-3809