What Direction Healthcare What Direction Healthcare Reform? A Federal UpdateReform? A Federal Update

By Wayne SakamotoBy Wayne Sakamoto

Southwest Florida Association Southwest Florida Association of Health Underwritersof Health Underwriters

January 6, 2010January 6, 2010

Overview of House ActionOverview of House Action

•House of Representatives passed HR 3962 220-215 on November 7•House passage is just one step in a lengthy political process •The Senate still has yet to formalize a merged bill, go through what is expected to be a protracted an intense Senate floor debate and amendment process lasting, probably, into 2010•Whatever passes the Senate must be combined with the House bill•Differences between the two bills must be resolved in such a way that the legislation will pass both chambers (Another Conference Committee)•The health reform effort is still a long way from over.

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 Acceptable coverage includes “qualified

health benefit plans” (QHBP), an employer-health benefit plans” (QHBP), an employer-based plan, a grandfathered individual plan, based plan, a grandfathered individual plan, Medicare (Part A), Medicaid, or TRICARE/VA Medicare (Part A), Medicaid, or TRICARE/VA coveragecoverage

• Nonresident aliens, individuals residing Nonresident aliens, individuals residing outside of the US, etc are exemptoutside of the US, etc are exempt

HR 3962HR 3962

• Individual MandateIndividual Mandate• Individuals that do not maintain acceptable Individuals that do not maintain acceptable

coverage would be subject to tax penalty coverage would be subject to tax penalty equal to 2.5% of modified adjusted gross equal to 2.5% of modified adjusted gross income or the national average premium for income or the national average premium for applicable single or family coverage as applicable single or family coverage as determined by the Secretarydetermined by the Secretary

• Hardship waivers are includedHardship waivers are included

HR 3962HR 3962

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

QHBP or grandfathered plans as permittedQHBP or grandfathered plans as permitted

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

• Part time employees must be covered on a Part time employees must be covered on a pro-rated basis based on average hours pro-rated basis based on average hours workedworked

HR 3962HR 3962

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

• Small employers with annual payroll up to Small employers with annual payroll up to $500,000 are exempt$500,000 are exempt

• Employers with payroll up to $585,000 would Employers with payroll up to $585,000 would pay a fine equal to 2%pay a fine equal to 2%

• Employers with payroll between $585,000 and Employers with payroll between $585,000 and $670,000 would pay fine equal to 4%$670,000 would pay fine equal to 4%

• 8% fine kicks in at payroll above $750,0008% fine kicks in at payroll above $750,000

HR 3962HR 3962

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

would be required to issue coverage would be required to issue coverage regardless of health statusregardless of health status

• Elimination of pre-existing condition Elimination of pre-existing condition exclusionsexclusions

• Prohibition on annual or lifetime limitsProhibition on annual or lifetime limits

• Dependent coverage to age 26Dependent coverage to age 26

HR 3962HR 3962

• Applies HIPAA guaranteed renewability and Applies HIPAA guaranteed renewability and guaranteed issue small group market rules to guaranteed issue small group market rules to all health insurance markets.all health insurance markets.

• Imposes modified community rating to all Imposes modified community rating to all qualified plans regardless of size. Allows qualified plans regardless of size. Allows variances only for family enrollment, variances only for family enrollment, geographic area and age (2:1 age band)geographic area and age (2:1 age band)

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

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

HR 3962HR 3962

• CMS concluded that : “With the exception CMS concluded that : “With the exception of proposed reductions in Medicare of proposed reductions in Medicare payments rates for providers, HR 3962 payments rates for providers, HR 3962 would not have a significant impact on would not have a significant impact on future health care cost growth rates. In future health care cost growth rates. In addition, the longer-term viability of the addition, the longer-term viability of the Medicare reimbursement rate reductions is Medicare reimbursement rate reductions is doubtful.”doubtful.”

HR 3962HR 3962

• Bill is basically dead on arrival in SenateBill is basically dead on arrival in Senate

• House will have little leverage in House will have little leverage in conference committee negotiations with conference committee negotiations with such a small vote marginsuch a small vote margin

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• Two bills need to be merged into one and Two bills need to be merged into one and

pass each chamber before sent to the pass each chamber before sent to the president for his signaturepresident for his signature

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

• Establishes an employer mandate for groups of Establishes an employer mandate for groups of 50 or more to provide qualified coverage with a 50 or more to provide qualified coverage with a $750 fine, indexed for premium growth, for non-$750 fine, indexed for premium growth, for non-covered employeescovered employees

• 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 The CBO estimates smaller premium effects in the group market.group market.

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

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

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

• Fillibuster rules would still apply in the Senate, Fillibuster rules would still apply in the Senate, so 60 votes would be necessary to passso 60 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 signed by the would like to have a bill signed by the president before his State of the Union president before his State of the Union address, but that may not happenaddress, 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 likely would not expedite the committee likely would not expedite the process much, but would prevent some process much, but would prevent some delaying tactics.delaying tactics.

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• Should be limited to medically needyShould be limited to medically needy• Will also impact the cost-shift and state budgetsWill also impact the cost-shift and state budgets

• FinancingFinancing• House Bill—Disproportionably impacts our House Bill—Disproportionably impacts our

nation’s small business owners and also will nation’s small business owners and also will cause more than 6 million privately insured cause more than 6 million privately insured seniors to lose their Medicare Advantage seniors to lose their Medicare Advantage coverage coverage

• Senate—Is their financing sustainable? Will Senate—Is their financing sustainable? Will all plans eventually be “Cadillac” plans? Also all plans eventually be “Cadillac” plans? Also cuts Medicare (but will this happen?)cuts Medicare (but will this happen?)

Key ConcernsKey Concerns• Government-run public plan optionGovernment-run public plan option

• No matter how limited, never can truly be level and No matter how limited, never can truly be level and will cause cost-shiftwill cause cost-shift

• Employer mandate to provide coverage is Employer mandate to provide coverage is unnecessary and would have a devastating unnecessary and would have a devastating economic impacteconomic impact• House Bill—72.5% employee coverage, 65% House Bill—72.5% employee coverage, 65%

dependents, part-time workers, kicks in at $500K dependents, part-time workers, kicks in at $500K payroll, 8% payroll penaltypayroll, 8% payroll penalty

• Senate HELP—60% premiums, part-time workers, Senate HELP—60% premiums, part-time workers, 50+ employees50+ employees

• Senate Finance—No direct mandate. Requires Senate Finance—No direct mandate. Requires employers of 50+ to pay a fine for low income employers of 50+ to pay a fine for low income employees who aren’t offered “affordable coverage”employees who aren’t offered “affordable coverage”

NAHU ActionNAHU ActionHouse House

•Formal letter and press statement Formal letter and press statement opposing H.R. 3962opposing H.R. 3962•Grassroots support to thank “no” votersGrassroots support to thank “no” voters•Meetings and HUPAC action to key Meetings and HUPAC action to key House moderates to prepare for House moderates to prepare for conferenceconference

SenateSenate•Targeted action to grass tops and Targeted action to grass tops and members with Moderate Senatorsmembers with Moderate Senators•Senate meetings and HUPAC action to Senate meetings and HUPAC action to key moderateskey moderates•Behind the scenes suggestions to Behind the scenes suggestions to negotiating staff negotiating staff •Working on potential floor amendmentsWorking on potential floor amendments•Assisting with value of the agent Assisting with value of the agent materials for floor debatematerials for floor debate

OverallOverall•Outreach to employersOutreach to employers•Work with coalition partnersWork with coalition partners•Media interviewsMedia interviews•Press StatementsPress Statements•Op-Eds / Letters to the EditorOp-Eds / Letters to the Editor•Social mediaSocial media

COBRACOBRA• COBRA Subsidy provisions enacted as part of American COBRA Subsidy provisions enacted as part of American

Recovery and Reinvestment Act of 2009 were set to Recovery and Reinvestment Act of 2009 were set to expired at the end of the yearexpired at the end of the year• Subsidy program allows Fed. Govt to pay 65% of COBRA or Subsidy program allows Fed. Govt to pay 65% of COBRA or

state continuation premiums for up to nine months for state continuation premiums for up to nine months for employees involuntarily let go between Sept 1, 2008-Dec 31, employees involuntarily let go between Sept 1, 2008-Dec 31, 20092009

• Senators Brown (D-OH) and Casey (D-PA) introduced S. Senators Brown (D-OH) and Casey (D-PA) introduced S. 2730: COBRA Subsidy Extension and Enhancement Act 2730: COBRA Subsidy Extension and Enhancement Act that President signed on December 19that President signed on December 19• Extend subsidy timeframe by 6 months (from 9 to 15)Extend subsidy timeframe by 6 months (from 9 to 15)

• Extend subsidy to individuals involuntarily terminated between Extend subsidy to individuals involuntarily terminated between Jan 1, 2010-June 30, 2010Jan 1, 2010-June 30, 2010

• Extend to employees whose hours are reduced so they no Extend to employees whose hours are reduced so they no longer qualify for employer-group planlonger qualify for employer-group plan

• Increase subsidy amount from 65% to 75% of the employees Increase subsidy amount from 65% to 75% of the employees premiumpremium

2010 Elections2010 Elections• Mid Term Elections set for November Mid Term Elections set for November

20102010• All House SeatsAll House Seats• 1/3 of Senate Seats1/3 of Senate Seats

• Including Senators Reid, Dodd, Lincoln, Including Senators Reid, Dodd, Lincoln, Bayh Bayh

• 37 Governor’s Races37 Governor’s Races• May effect timing of health care reform in May effect timing of health care reform in

20102010• Hesitant to take on such major legislation in Hesitant to take on such major legislation in

an election yearan election year

ConclusionConclusion

• Reconciling House and Senate bills will be Reconciling House and Senate bills will be difficult, but some kind of legislation will difficult, 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.

Upcoming NAHU EventsUpcoming NAHU Events

• COBRA Subsidy Seminar – Jan 6COBRA Subsidy Seminar – Jan 6thth & 7 & 7thth

• NAHU Legislative Town Hall Webinar – NAHU Legislative Town Hall Webinar – January 8January 8thth

• FAHU & NAIFA’s Florida Health Care FAHU & NAIFA’s Florida Health Care Summit in Tallahassee – Jan 11Summit in Tallahassee – Jan 11thth

• NAHU’s 2010 Capitol Conference – March NAHU’s 2010 Capitol Conference – March 88thth – 10 – 10thth

Unauthorized EntitiesUnauthorized Entities

• The State of Florida has taken a very strong position on the issue of The State of Florida has taken a very strong position on the issue of unauthorized entities. An unauthorized entity is an insurance unauthorized entities. An unauthorized entity is an insurance company that is not licensed by the Florida Department of Financial company that is not licensed by the Florida Department of Financial Services. Agents and brokers have responsibility for conducting Services. Agents and brokers have responsibility for conducting reasonable research to ensure that they are not writing policies or reasonable research to ensure that they are not writing policies or placing business with unauthorized entities. Lack of careful placing business with unauthorized entities. Lack of careful screening can result in significant financial loss to Florida residents screening can result in significant financial loss to Florida residents due to unpaid claims and/or theft of premiums. Agents may be held due to unpaid claims and/or theft of premiums. Agents may be held liable when representing these unauthorized entities. It is the liable when representing these unauthorized entities. It is the agents and brokers’ responsibility to give fair and accurate agents and brokers’ responsibility to give fair and accurate information regarding the companies they represent. Any questions information regarding the companies they represent. Any questions about the authorized status of a company can be checked by calling about the authorized status of a company can be checked by calling the Florida Department of Financial Services at 1-877-693-5236 or the Florida Department of Financial Services at 1-877-693-5236 or 850-413-3089.850-413-3089.

Wayne SakamotoWayne Sakamotowayne@healthii.com, (239) 591-1199, (239) 591-1199

Michael J. KeeganMichael J. KeeganNAHU Dir of State Affairs – Reg 5 NAHU Dir of State Affairs – Reg 5 mkeegan@nahu.org, (703) 276-3809, (703) 276-3809