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

WASHINGTON–Reacting to the health care legislationpassed by the House, insurance and employer groups voiced deepconcerns over what they see as a lack of provisions designed toreduce costs.

Meanwhile, a doctors group, Physicians for a National HealthProgram, described the bill as a measure that would leave to manypersons uninsured and be an unwarranted bonanza for healthinsurers.

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

The House then passed H.R. 4872, the "Reconciliation Act of2010," On a 220-211 vote. H.R. 4872 is a companion package makingchanges sought by House Democrats to the larger bill. This"reconciliation" measure under Senate rules requires only 51 votesto pass. The Senate Democratic leadership has already told theHouse it has the votes to pass that bill.

Karen Ignagni, president and chief executive officer ofAmerica's Health Insurance Plans, said that "The access expansionsare a significant step forward, but this legislation willexacerbate the health care costs crisis facing many workingfamilies and small businesses."

The Independent Insurance Agents and Brokers of America alsocriticized the bill for lack of a provision designed to reducehealth care costs.

Robert Rusbuldt, IIABA president and CEO, said the measure "doeslittle to stem the skyrocketing cost of health care and will befinanced on the backs of small businesses during one of the mostdelicate financial periods in American history."

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

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

"A tax increase, especially during today's tough economicclimate, will put many small businesses in the untenable positionof deciding between job cuts, employee pay cuts, or shutting theirdoors," said Charles Symington, IIABA senior vice president ofgovernment affairs.

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

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

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

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

Without stronger mandates, he said, "the market reforms that areeffective 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 itssupporters and critics."

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

But, he said, several aspects of the legislation will inevitablyincrease, rather than mitigate, health care costs; "and the overallfinancial integrity of the measure depends on future Congresses andPresidents making very tough political decisions."

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

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

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

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

At the same time, Andrew Kligerman, a life insurance analyst atUBS, discounted the impact of the additional Medicare tax. "We donot think this new Medicare tax will have a substantial impact onthe attractiveness of deferred annuities since it will have asimilar impact on competing non-qualified investment products."

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

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

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

However, one of the most controversial provisions, one thatwould allow the Department of Health and Human Services to pre-emptstate rate regulation, was deleted.

That was the industry's greatest concern.

Health care insurance industry officials told NationalUnderwriter it was left out because the Senate parliamentarianruled that including such a provision would not comply with theso-called Byrd rule.

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

Mr. Kopperud lauded that decision.

He said inclusion of that provision in the reconciliationmeasure "was the most significant potential change for our membersand was the centerpiece of President Obama's proposal for whatshould be included."

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

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

Amongst other provisions critical to the industry in thereconciliation measure, the medical loss ratio will be 85 percentfor Medicare Advantage plans. Meaning 85 percent of premiums mustbe 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 smallplans.

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

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

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

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

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

Physicians for a National Health Program said, "Instead ofeliminating the root of the problem – the profit-driven, privatehealth insurance industry – this costly new legislation will enrichand further entrench these firms. The bill would require millionsof Americans to buy private insurers' defective products, and turnover to them vast amounts of public money."

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

Physicians estimated about 23 million people will remainuninsured nine years out leading to an estimated 23,000 unnecessarydeaths annually.