Senate Reform Bill Could Benefit Agents

Washington

A compromise bill calling for nonprofit cooperatives rather than a government plan as an alternative health insurance source, eliminating a "navigator" feature opposed by agents, and opening the door for medical malpractice reform was unveiled in the U.S. Senate last week.

"America's Healthy Future Act" includes placeholder language dealing with curbs on medical malpractice suits until more specific details can be added during the amendment process as the Senate Finance Committee deals with the bill this week.

But an immediate benefit would be that in 2011 and 2012, small businesses that provide health insurance for employees could receive a tax credit for up to 35 percent of their contribution, according to Sen. Max Baucus, D-Mont., chair of the Finance Committee, who drafted the bill.

Once the health insurance exchanges proposed in the legislation are up and running in 2013, Sen. Baucus said, qualified small firms purchasing coverage through the exchanges could receive a tax credit for two years that covers up to 50 percent of the employer's contribution.

However, the legislation will impose $214.9 billion over 10 years in new taxes on health insurers, according to the Congressional Budget Office. This includes the cost of imposing a 35 percent tax on premiums paid on insurance plans running more than $8,000 for individuals and $21,000 for families.

When fully implemented, the bill would also impose a levy of $400 per employee if health coverage is not offered by large employers. Americans for Tax Reform warned that "this is a huge incentive to drop coverage, as $400 is much less than the average plan cost of $11,000 for families or $5,000 for singles."

Under the legislation, insurers would be required to issue coverage to all individuals regardless of health status. Moreover, insurers would no longer be allowed to limit coverage based on pre-existing conditions.

However, limited variation in rates would be permitted for tobacco use, age and family composition. Rating rules for the individual market would also apply to the small-group market, as defined by each state. The legislation also includes several provisions designed to reduce the value of Health Savings Accounts.

The compromise legislation omits the so-called "public plan" of such concern to the insurance industry, as well as the equally controversial proposal for a so-called "navigators" system that would bar insurance agents from providing advice and soliciting new business from those accessing the new health insurance exchange.

The legislation replaces the controversial "public plan" strongly supported in the House with a "Consumer Owned and Oriented Plan," with such co-ops able to operate at the state, regional or national level to serve as nonprofit, member-run health plans to compete in the reformed individual and small-group markets. Some $6 billion in federal seed money would be provided for start-up costs and to meet solvency requirements, Sen. Baucus said.

Replacing the navigators system under the legislation would be state-based Web portals that would direct consumers purchasing policies on the individual market to every option available in their ZIP code.

The bill would also give small-businesses access to a state-based "Small Business Health Options Program," or SHOP exchanges. Like the individual market exchanges, these would be Web portals that make comparing and purchasing health coverage easier for small businesses, Sen. Baucus said.

Janet Trautwein, chief executive officer of the National Association of Health Underwriters, voiced concern about the provision to impose taxes on health insurers, but said that "although no reform proposal is perfect, NAHU is pleased that Sen. Baucus has sought to build on areas in which there is considerable bipartisan agreement, including the need to constrain the growth of health care costs and improve quality and value through prevention and wellness, greater price and quality transparency, and insurance and medical liability reforms."

Karen Ignagni, president and CEO of America's Health Insurance Plans, said that new health insurance reforms and consumer protections in the bill "will guarantee access for all Americans without the need for a new, untested government-created co-op that could disrupt the quality coverage on which millions of Americans rely today."

However, she warned, "new taxes on health care coverage will have the opposite effect by making coverage less affordable for families and employers across the country."

John Greene, NAHU's vice president of congressional affairs, said one point critical to insurance agents is who will have access to the co-ops. Under the Baucus proposal, people will be allowed to buy through a co-op even though their employer offers insurance if the cost of the coverage exceeds 13 percent of their income.

"We feel that if someone is offered private insurance, they should not be given access to a co-op or even an exchange that will also offer lower-cost coverage," said Mr. Greene. "The reason is that if too many people aren't included in a group, it will raise the cost of coverage to all others to an unacceptable level. Moreover, it will also raise the cost of insurance to the government."

He said agents will also be seeking to ensure there is an appropriate transition to the individual mandate that will require everyone to get insurance–which will provide marketing opportunities for agents. "There needs to be an enforcement mechanism to ensure compliance with the individual mandate," Mr. Greene added.

Joel Kopperud, a director of government relations for the Council of Insurance Agents and Brokers, said that the latest bill left his group "encouraged that the government option is not included."

However, he added, "we are concerned that Americans accessing their insurance through any exchange have access to the same insurance professionals as those accessing coverage outside the exchange."

He said CIAB will be "working closely" with the Finance Committee "to preserve consumer access to licensed insurance professionals."

Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, said the Baucus bill is "an important development in the health care reform debate as it presents at least the possibility for bipartisan action by the U.S. Senate."

He added that while IIABA has "concerns about aspects of the bill as introduced–such as the creation of co-ops–the association is pleased that the current language does not include a government-run insurance option and preserves the insurance agents' role in the sale and delivery of health insurance."

The draft will form the basis for negotiations within the committee. The bill will then be melded with legislation reported out in July by the Senate Health, Education, Labor and Pension Committee before it is sent to the Senate floor for action. It would then have to be reconciled with legislation being drafted in the House.

The bill attracted no Republican support despite efforts by Sen. Baucus and the White Office to win bipartisan backing.

However, Sen. Charles Grassley, R-Iowa, ranking minority member of the committee, said he will continue to work toward a compromise agreement, but didn't totally commit himself. Among his concerns were that the document he would support in the Senate would be undone through negotiations with the more-liberal House.

He also sought a commitment on several other issues, including language barring payment by the federal government for abortion and language that would ensure that illegal aliens not get subsidized for health insurance through a final bill.

"We've been clear from the start that we're willing to stay at the table," he said. "There's no reason not to keep working until we get it right. In the end, legislation that impacts every American should have strong bipartisan support."