Filed Under:Carrier Innovations, Regulation/Legislation

Insurers Decry Health Bill For Lack Of Cost Restrictions

NU Online News Service, March 22, 11:15 a.m. EDT

WASHINGTON--Reacting to the health care legislation passed by the House, insurance and employer groups voiced deep concerns over what they see as a lack of provisions designed to reduce costs.

Meanwhile, a doctors group, Physicians for a National Health Program, described the bill as a measure that would leave to many persons uninsured and be an unwarranted bonanza for health insurers.

The Patient Protection and Affordable Care Act Bill (H.R.3590) passed the House last night 219-212. All the Republicans and 33 Democrats voted "no."

The House then passed H.R. 4872, the "Reconciliation Act of 2010," On a 220-211 vote. H.R. 4872 is a companion package making changes sought by House Democrats to the larger bill. This "reconciliation" measure under Senate rules requires only 51 votes to pass. The Senate Democratic leadership has already told the House it has the votes to pass that bill.

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, said that "The access expansions are a significant step forward, but this legislation will exacerbate the health care costs crisis facing many working families and small businesses."

The Independent Insurance Agents and Brokers of America also criticized the bill for lack of a provision designed to reduce health care costs.

Robert Rusbuldt, IIABA president and CEO, said the measure "does little to stem the skyrocketing cost of health care and will be financed on the backs of small businesses during one of the most delicate financial periods in American history."

He also criticized the decision to impose a .9 percent Medicare surtax on some individuals as well as small businesses that file as individuals.

The legislation would also impose a new 3.9 percent tax on nonwage income for these same individuals and small businesses.

"A tax increase, especially during today's tough economic climate, will put many small businesses in the untenable position of deciding between job cuts, employee pay cuts, or shutting their doors," said Charles Symington, IIABA senior vice president of government affairs.

"Health care reform should not be financed on the backs of small businesses that are struggling to make ends meet in this very difficult economic time," he said.

But officials of the Council of Insurance Agents and Brokers and the American Benefits Council were more balanced in their comments.

Joel Kopperud, CIAB director of government relations, said that, "While the bill is significantly flawed and risks damaging the employer-provided benefits system, we're relieved to see the role of agents and brokers secured in the state exchanges, and a workable minimum medical loss ratio.

He said that, "We hope the Senate is able to quickly consider the reconciliation package, thereby strengthening the weak mandates that were included in the senate bill."

Without stronger mandates, he said, "the market reforms that are effective immediately may result in even higher premiums."

James Klein, president of the American Benefits Council said the "truth about the bill is more complicated than that voiced by its supporters and critics."

He said that, "The legislation significantly expands coverage for millions of Americans, and takes steps toward aligning what we pay for health care and the quality of those services."

But, he said, several aspects of the legislation will inevitably increase, rather than mitigate, health care costs; "and the overall financial integrity of the measure depends on future Congresses and Presidents making very tough political decisions."

Mr. Klein said that, "For all stakeholders - including the employer members of the American Benefits Council, who sponsor the best coverage in the country - there are many unknowns."

He said ABC members will "urge the Senate to make much-needed improvements to the new law - starting this week - as it considers the budget reconciliation measure."

He said that, "We recognize that to do so will require further action by the House of Representatives; but it is essential that health reform be done right at this critical stage in the legislative process."

Regarding the reconciliation measure Mr. Klein talked about, Senate Democrats told House Democrats before the House vote that they hope to approve the reconciliation bill unchanged and send it directly to Obama, though Republicans intend to attempt parliamentary objections that could extend the debate.

At the same time, Andrew Kligerman, a life insurance analyst at UBS, discounted the impact of the additional Medicare tax. "We do not think this new Medicare tax will have a substantial impact on the attractiveness of deferred annuities since it will have a similar impact on competing non-qualified investment products."

In fact, he said, this tax may make deferred annuities more appealing for retirement planning since some annuity-holders may be able to postpone the application of this Medicare tax until they are in a lower tax bracket.
He noted, however, that "more clarity is needed on how this Medicare tax will apply to annuities."

The nonpartisan Congressional Budget Office said the legislation the president will sign this week would extend coverage to 32 million Americans who lack it, ban insurers from denying coverage on the basis of pre-existing medical conditions and cut deficits by an estimated $138 billion over a decade. If realized, the expansion of coverage would include 95 percent of all eligible individuals under age 65.

The reconciliation measure the Senate will consider this week includes a number of controversial provisions, including a larger-than-expected tax hike on the wealthy.

However, one of the most controversial provisions, one that would allow the Department of Health and Human Services to pre-empt state rate regulation, was deleted.

That was the industry's greatest concern.

Health care insurance industry officials told National Underwriter it was left out because the Senate parliamentarian ruled that including such a provision would not comply with the so-called Byrd rule.

This rule, included in legislation allowed to pass the Senate only on a majority vote through the reconciliation process.

Mr. Kopperud lauded that decision.

He said inclusion of that provision in the reconciliation measure "was the most significant potential change for our members and was the centerpiece of President Obama's proposal for what should be included."

He said that of all the proposed changes, "it was hardest to identify how even a colorable argument could be made for including this in a reconciliation package (based on the fact that it is a policy change and wouldn't fit in the fiscal contours of budgetary reconciliation)."

That fact, he said, "along with the pragmatics of trying to create a new oversight regime on the fly," may have been dissuasive to Democratic leaders."

Amongst other provisions critical to the industry in the reconciliation measure, the medical loss ratio will be 85 percent for Medicare Advantage plans. Meaning 85 percent of premiums must be spent on purchasing medical services.

Otherwise, the MLR provisions track with the Senate-passed bill - 85 percent for plans of more than 100; 80 percent for small plans.

Under the legislation for the first time, the Medicare payroll tax would be applied to investment income, beginning in 2013.

The reconciliation bill would also impose a new 3.8 percent tax on interest, dividends, capital gains and other investment income for individuals making more than $200,000 a year and couples making more than $250,000.

The bill will also increase the Medicare payroll tax by 0.9 percentage point to 2.35 percent on wages above $200,000 for individuals and $250,000 for married couples filing jointly.

The new tax on investment income is higher than the 2.9 percent tax proposed by President Obama.

House Democratic leaders increased it so they could reduce the impact of a new tax on high-cost health insurance plans strongly opposed by labor unions.

Physicians for a National Health Program said, "Instead of eliminating the root of the problem - the profit-driven, private health insurance industry - this costly new legislation will enrich and further entrench these firms. The bill would require millions of Americans to buy private insurers' defective products, and turn over to them vast amounts of public money."

Insurance firms, the group said "will be handed at least $447 billion in taxpayer money to subsidize the purchase of their shoddy products. This money will enhance their financial and political power, and with it their ability to block future reform."

Physicians estimated about 23 million people will remain uninsured nine years out leading to an estimated 23,000 unnecessary deaths annually.

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