House Moves To Strip Antitrust Shield From Health Carriers, But Spares Med Mal

Washington

Legislation repealing the antitrust exemption afforded health insurers through the McCarran-Ferguson Act, but keeping the shield intact for medical malpractice carriers, was approved overwhelmingly last week by the U.S. House of Representatives.

Approval for the "Health Insurance Industry Fair Competition Act"–on a 406-19 vote–came the day before President Barack Obama convened his health reform summit with leading Democrats and Republicans, and two days after the White House released its own plan, which would give the federal government a say over health insurance rates.

State regulators vowed to fight any federal intrusion into their rate oversight function (see related story).

As for the antitrust bill–whose prospects for passage in the U.S. Senate appear to be dim–a provision in earlier versions of the legislation was knocked out that would have allowed health insurers and medical liability carriers to share historical data and the performance of actuarial services–a move condemned by Republicans before the vote was taken.

The original bill was reported out by the House Judiciary Committee last October after an amendment sponsored by Rep. Dan Lungren, R-Calif., was added that would have allowed health and medical liability insurers to share data. The entire provision was included in health care reform legislation passed by the House in December.

However, provisions repealing the antitrust exemption afforded medical liability insurers, as well as the provisions regarding sharing of data, were not included in the bare-bones version of the legislation that was the subject of debate on the House floor last week.

Because the provision is not in the current bill, Rep. Lungren said it is "entirely possible that as currently drafted, [the bill] will have precisely the opposite effect of its stated intention."

Rep. Lamar Smith, R-Texas, the ranking minority member of the House Judiciary Committee, also noted that he doesn't see how the bill would do anything to reduce the cost of health care.

The Office of Management and Budget issued a statement from the Obama administration voicing support for the bill.

The bill was taken up by the House as part of an effort by the Democratic leaders to salvage components of sweeping health care reform legislation by taking them up piecemeal. However, insurance industry lobbyists said the antitrust bill–sponsored by Rep. Tom Perriello, D-Va., and Rep. Betsy Markey, D-Colo.–is unlikely to see the light of day in the Senate because of a lack of support.

"We've heard too many complaints about the health insurance industry engaging in price-fixing, bid-rigging, and other anti-consumer and anti-competitive practices," said Rep. Louise Slaughter, D-N.Y., chair of the House Rules Committee, who managed the bill on the House floor. "This industry has enjoyed a big giveaway for far too long, and it's about time that it plays by the same rules as everyone else."

But America's Health Insurance Plans, which represents most of the nation's health carriers, warned in a statement sent to all members of the House that the bill "is likely to do more harm than good."

AHIP officials said the rhetoric surrounding the call for repealing the antitrust exemption afforded health insurers through the McCarran-Ferguson Act "does not match the reality of the situation."

Absence of the provision allowing insurers to share historical data stirred up the most fireworks during the House floor debate. Rep. Lungren, a former attorney general of California, said the insurance industry's economics are such that companies depend on shared information to price their products.

"And here is the rub–it is the small companies which depend on the availability of information the most," he argued. "Smaller companies simply do not have a sufficiently large volume of information to price their products efficiently It is for this reason that it is of the utmost importance that insurers have the ability to share historical data."

In this regard, Rep. Lungren noted, a Congressional Research Service Report "raises the possibility that were such data not available to small insurance companies, we might see the ironic outcome of further concentration in the insurance industry."

As this edition went to press, President Obama was in the midst of his health reform summit. Prior to the meeting, the White House unveiled an omnibus proposal based on the version of the bill passed by the Senate on Christmas Eve.

The Obama plan includes a provision giving the federal government authority to roll back unreasonable rate increases, albeit with state support. Specifically, the Obama bill includes a provision creating a Health Insurance Rate Authority.

Oklahoma Insurance Commissioner Kim Holland, secretary-treasurer of the National Association of Insurance Commissioners, immediately criticized such a plan, saying rate regulation is a prerogative of the states.

If White House health care reform proposals grant power to a federal rate authority to disallow increases approved by the states, she said, "I think we would work hard to make a strong case to not do that." (See related story)

The White House immediately sought to clarify what it is seeking. In a briefing after the president's plan was unveiled, Press Secretary Robert Gibbs said the proposal was a "starting point," adding that "the White House envisions the U.S. Department of Health and Human Services working with state insurance regulators to oversee health insurance prices, rather than creating a new price review agency.

The new proposal attempts to "bridge the gap" between the current House and Senate bills, he added.

In dealing with health insurer rate increases, the president's proposal would seek to ensure that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.

In responding to the proposal, Joel Kopperud, director of government relations at the Council of Insurance Agents and Brokers, voiced concern about "rate regulatory authority in a vacuum."

"It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority in act," he said. "We don't fear federal oversight–we fear Balkanization of the oversight."

A representative for America's Health Insurance Plans, Robert Zirkelbach, defended the current spate of large increases in health insurance, especially in the individual market. "Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance," he said.

"Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs," he added.

Janet Trautwein, CEO of the National Association of Health Underwriters, said the White House plan "will exacerbate our nation's economic crisis by driving up private health insurance costs so significantly that millions of American families and businesses will be priced out of coverage, disrupting the quality coverage on which millions of Americans rely."

She added that "the high cost of health care is the primary problem with our current system, and unfortunately the president's plan does little to truly rein in these costs."

WHAT'S NEXT?

Should President Obama fail to achieve any compromise with Republicans on health reform, Sen. Michael Bennet, D-Colo., outlined what many industry lobbyists and Republicans believe Democrats will do over the next few weeks as part of a last-ditch effort to push through a "big solution."

In a letter seeking support for a Senate vote on the public option, Sen. Bennet proposed passing health reform legislation that included a public option under budget reconciliation rules, which do not require a 60-vote supermajority.

He cited findings from the nonpartisan Congressional Budget Office that said a public option could yield cost savings of at least $25 billion. Sen. Bennet also pointed to the fact that a public option would provide Americans with a low-cost alternative to private insurance and improve market competitiveness.

In addition, the letter noted that there is substantial Senate precedent for using reconciliation to enact important health care policies, including the Children's Health Insurance Program (CHIP), COBRA and Medicare Advantage.

"Too many people in Washington believe that just saying you are for health care reform is a substitute for actually getting something done," said Sen. Bennet. "While some choose to stall progress under the pretext of principle, more and more Americans are losing the health care coverage they need."

In comments to reporters last week, Sen. Judd Gregg, R-N.H., acknowledged that Republicans anticipate that Democrats will seek to pass the Obama administration proposal through budget reconciliation.

However, in advance of the White House bipartisan summit, Rep. Steny Hoyer, D-Md., said that while comprehensive reform would be best, it's not all or nothing. "We may not be able to do all. I hope we can do all–a comprehensive piece of legislation that will provide affordable, accessible, quality health care to all Americans," Rep. Hoyer said at his weekly media briefing.

"But having said that, if we can't, then you know me–if you can't do a whole, doing part is also good. I mean there are a number of things I think we can agree on," he added.

OTHER PROVISIONS

The Obama bill also includes a requirement that everyone has health insurance or pay a penalty; includes elements of both the House and Senate bills in rolling back Medicare Advantage costs; and closes the doughnut hole under Part D, Medicare's prescription drug program.

It would also implement health insurance exchanges and adapt the medical loss ratio mandates as envisioned in the Senate bill, requiring that a certain percentage of premium dollars be spent on medical care.

In President Obama's proposal, the effective date of the Senate policy on a proposed "Cadillac tax" on high-cost health plans is delayed from 2013 to 2018 to provide additional transition time.

The plan raises the amount of premiums exempt from the assessment from $8,500 for singles to $10,200, and from $23,000 for families to $27,500, and indexes these amounts for subsequent years at general inflation plus 1 percent.

The proposal also imposes a responsibility on employers to shoulder the cost of health insurance for employees.

Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.

"Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies," the summary says.

The summary also said the president's proposal would seek to strengthen a provision of the Senate bill that includes a "grandfather" policy allowing people who like their current coverage to keep it. The bill would add certain important consumer protections to these "grandfathered" plans.

Specifically, the summary says: "Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate reviews, backed up by the oversight of the secretary of the Department of Health and Human Services.

When the exchanges begin in 2014, the president's proposal adds new protections that prohibit all annual and lifetime limits, bans preexisting condition exclusions, and prohibits discrimination in favor of highly compensated individuals.

Beginning in 2018, the president's proposal requires "grandfathered" plans to cover proven preventive services with no cost sharing.

Regarding Medicare Advantage, the president's plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area. "It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area," the summary said.

It provides bonuses for quality and enrollee satisfaction, and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan's quality rating.

Under the proposal, plans with low-quality scores receive lower rebates (that is, they can keep less of any savings they generate).

Finally, the president's proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees' health status and costs suggests is warranted, based on actuarial analysis.

"This is the primary source of additional savings compared to the Senate proposal," the summary said.