Washington PoliticsNOT as Usual

Presented by

Janet Trautwein, Executive Vice President & CEO

National Association of Health Underwriters

Senator Barack Obama

Individual Mandate

• Obama does not require a blanket individual mandate for adult health insurance coverage

• He does propose a coverage mandate for all American children.

• To achieve this, he would expand coverage options for children, including raising the national dependent age to 25.

• Obama also would expand Medicaid and SCHIP income-eligibility levels individuals, although the amount of expansion is not specified.

• The enforcement mechanism for the mandated children’s coverage is not revealed in Obama’s current plan details.

Employer Mandate• Employers would be required to offer “meaningful”

coverage or a make a “meaningful” contribution to the cost of quality health coverage for their employees

• Employers that don’t do this would be required to contribute an unspecified percentage of their payroll toward the cost of the new national health plan.

• Details like how the employer mandate would be enforced, what employer coverage and contribution terms would be, which employees would have to be covered and how employer plans would be evaluated are not specified.

Obama’s New Public Program• Obama has put forth a three-part plan to

improve the nation’s health care system, which he feels will save the typical American family up to $2,500 a year on medical expenditures.

• He makes provisions for and encourages new state health insurance market innovations, provided that state efforts and plans adhere to the minimum standards of a new national plan.

Obama’s New Public Program

• This new national public insurance program would be made available to uninsured Americans who do not qualify for Medicaid or SCHIP or who do not have access to employer-based coverage.

• This program would also be made available as a coverage option to small employers wishing to provide coverage to their employees, although what would constitute a small business is undefined.

Obama’s New Public Program

• This new government program would offer coverage on a guaranteed-issue basis.

• The benefit design would be based on the Federal Employees Health Benefit Program model and be inclusive of preventive care, maternity, mental health care and disease-management programs.

• Obama plans to offer fair premiums for this coverage, as well as minimal deductibles and co-payments, but dollar amounts are not specified.

Obama’s New Public Program

• He also plans to offer subsidies for low-income individuals who do not qualify for either Medicaid or SCHIP, and these subsidies would be available for the purchase of either the public coverage plan or private-market coverage.

• The amount and structure of such subsidies is not included in his plan details.

Obama’s National Exchange• Obama proposes the creation of a national

health insurance exchange “to help individuals who wish to purchase a private insurance plan”

• The exchange would also enroll people in the new public health insurance program.

• It would appear to be structured as a body with regulatory authority over private insurers, including the ability to create rules and standards for plans, authorize private plan rate increases, and evaluate the differences between private plans

Obama’s National Exchange

• Coverage offered through the exchange would be guaranteed-issue and premiums would have to be “fair and stable” and could not be determined on the basis of health status.

• Policies offered through the exchange would be mandated to include as least as many benefits as the new public program and they would be required to adhere to the same quality standards.

Affordability and Quality

• Obama proposes a reinsurance plan for small employers that incur health insurance expenses above certain thresholds if they promise to use their savings to reduce the cost of employee premiums.

Affordability and Quality

• In addition to a potential small business reinsurance plan, Obama proposes reducing health care costs and supporting patients through– increased disease-management programs, – the use of care-management,– medical home models, – increased transparency,– pay-for-performance mechanisms,– and efforts to reduce disparities in health care

treatments.

Affordability and Quality• Obama supports requiring hospitals and

providers to collect and publicly report cost and quality measures like data on preventable medical errors, staffing ratios, hospital-acquired infections and disparities in care and cost.

• Health insurance companies would be required to publicly disclose loss ratios.

• A new independent federal institute would be created to guide reviews and research on provider and treatments and comparative effectiveness.

Affordability and Quality

• Obama proposes a $10 billion expenditure over the next five years to encourage “broad adoption of standards-based electronic health information systems, including electronic health records,” while preserving patient privacy.– He does not specify if he will require providers to

use interoperable technology, which health plans and the business community consider to be key.

• For insurers, Obama proposes strict but undetermined limits on loss ratios to help reduce the amount of money insurers spend on administrative costs.

Affordability and Quality

• He plans to allow for the reimportation of prescription drugs from other countries, provided that the drugs are safe and costs are lower.

• Obama would increase the use of generic drugs and “prohibit large drug companies from keeping generics out of the market.”

• He would repeal the ban on direct negotiation with drug companies by the federal Medicare program and slash reimbursements to providers participating in private Medicare Advantage plans.

Affordability through Malpractice Reform

• Unlike other Democratic candidates, Obama recognizes the impact that the cost of medical malpractice insurance is having on our nation’s overall health expenditures.

• BUT, instead of recommending tort reform like most Republican candidates, he favors “strengthening antitrust laws to prevent insurers from overcharging physicians for their malpractice insurance.”

• He also supports increased patient-safety measures to reduce the need for malpractice suits.

Focus on Wellness

• The final part of the Obama plan is a new focus on preventive care, wellness and public health.

• He pledges to dedicate resources, incent wellness and improve preventive care through employers and schools and within families.

• He also will lead the effort to develop national and regional public health strategies and undertake a national review of federal policies and programs including agricultural, educational, environmental and health policies to assess and improve their effect on our national public health.

Cost of the Program

• Obama says his plan will cost $50-65 billion a year when fully phased in.

• He estimates that some of this cost will come from efficiencies created by the new system.

• The balance of the cost will come from letting the Bush tax cuts expire for families with AGI over $250,000 per year.

Senator John McCain

Individual and Employer Mandates

• McCain does not propose either a mandate for individuals to purchase coverage or a mandate for employers to provide coverage.

• Rather, McCain proposes changes to bring down the cost of care and coverage, allowing the market to work without mandates.

Containing Medical Care Costs

• McCain is convinced that containing medical care costs is the key to a successful health reform program.

• One way he feels this could be accomplished is by promoting competition throughout the health care system, including among providers, and by promoting a more patient-centric health care system.

• He supports provider transparency requirements regarding medical outcomes, quality of care, costs and prices, and would like to see the development of national standards for measuring and tracking patient treatments and outcomes.

Containing Medical Care Costs

• To reduce pharmaceutical costs, McCain plans to encourage the development of generic and biologic drugs.

• He supports allowing prescription drug reimportation from other countries, and would develop unspecified safety protocols to protect Americans from the potential dangers of imported medicines.

Containing Health Care Costs• McCain is in favor of tort-reform legislation that he

hopes will eliminate frivolous lawsuits and prevent excessive damage awards, but the exact terms of the medical liability reform measures he would support is not specified.– McCain does note that in addition to favoring

limits on judgment awards, he also plans to offer safe harbors to doctors who follow clinical guidelines and adhere to patient-safety protocols.

• In addition to his ideas to constrain health care costs, McCain has proposed a number of specific private-market reforms that he believes will increase the variety and affordability of health insurance coverage.

McCain’s Health Reform Ideas

• The centerpiece of his reform ideas would be to eliminate the current federal income tax exclusion for employer-provided health insurance benefits and to replace it with a $2,500 individual (or $5,000 for families) federal health insurance tax credit available to all health insurance purchasers, both group and individual policies

Health Plan Affordability

• McCain would like to encourage the sale of multiyear health insurance policies, which he feels will be less expensive than traditional annual policies. – People who buy one of these multi-year

policies can deposit any remaining credit funds in expanded Health Savings Accounts, provided their annual premium is less than the credit amount.

Health Plan Affordability

• McCain would like to see health insurance policies sold “across state lines,” meaning that a resident of one state could purchase a product that is now currently only licensed and available in another. – This would afford individuals living in states with

regulatory burdens that drive up health insurance costs to purchase less-expensive policies licensed in other states.

– Exactly how the mechanics of this plan would work, though (i.e., provider network issues, varying health care costs in different states, etc.), is not specified.

Access and Affordability

• Because the individual market is key to McCain’s health reform proposal, he proposes enhancing subsidies to high risk pools.

• He also proposes restructuring the pools to function more effectively nationwide.

Health Plan Affordability

• Senator McCain also supports allowing individuals to purchase health insurance through any organization or association that they choose, including their employers, church or professional association, and through the individual health insurance market.

• Association policies would be available as a purchasing option for small businesses and the self-employed.

• To prevent against association health plan fraud, McCain indicates that such plans would have to be certified and meet unidentified standards. – Whether or not these plans would have to be fully

insured or if they could be self-funded is not noted.

Access to Care• Access to care is another area that Senator

McCain has prioritized. • In particular, he wants to provide better access

to care to the temporarily and chronically uninsured, as well as those living in rural areas and in inner cities where access to physicians is often limited.

• To solve these access problems, McCain proposes allowing health care providers, as well as health insurance carriers, to operate on a nationwide basis.

Access to Care

• He also says that he would like to see more innovative delivery systems, such as clinics in retail outlets, telemedicine and community clinics.

• McCain makes a special point in his health care proposal of noting that he plans protect the health care consumer against collusion, unfair business actions and deceptive consumer practices through vigorous enforcement of federal protections.

Reform of Public Program Payment

• McCain would like see a reform of the Medicare payment systems. – He would support provider compensation

based on diagnosis, prevention and care coordination, with Medicare not being financially responsible for preventable medical errors or mismanagement.

• McCain also would give those with access to the Veterans’ Administration health services the freedom to use their VA benefits with other providers.

Reform of Public Program Payment

• He also proposes giving states great Medicaid program flexibility, including encouraging innovations with – “alternative forms of access;

– risk-adjusted payments per episode covered under Medicaid;

– use of private insurance in Medicaid;

– alternative insurance policies and insurance providers;

– and different licensing schemes for medical providers.”

Wellness Promotion

• Finally, like many other candidates, McCain also makes a point of emphasizing wellness and promoting preventive care and chronic disease management.

• He pledges to dedicate federal research dollars on care and cure of chronic diseases and promote public health initiatives to stem obesity, diabetes and smoking.

Cost of the New Program

• McCain doesn’t include a cost estimate for the changes he proposes.

• He estimates that any costs generated will be paid for by new system efficiencies and the removal of the tax exclusion on employer paid premiums.

Federal Market Reform Ideas

• With the 110th Congress in its waning days, it is not expected that any serious health insurance market reform legislation will be acted upon.

• However Congress has indicated its interest in seriously pursuing health reform legislation when the 111th Congress convenes in January 2009– Abundance of introduced broad-scale reform bills for

discussion purposes– Health reform hearings continuing through September in

the Senate Finance Committee and House Energy and Commerce Committee

– Earlier hearings in other committees of jurisdiction

Overview

• Current federal market reform proposals that include a connector or exchange– Senator Obama’s platform, Senators Burr and Corker

• Other federal market reform proposals that include the pooling concept, shift to individual policies over group or both– Senator Wyden, Senator Durbin, Reps. Langevin and

Shays, Reps. Velazquez and Pitts

• Other federal market reform ideas• Outlook for 2009

Every American Insured Health Act • Sponsored by Senators Burr (R-NC) and Corker (R-TN)

with several GOP cosponsors• Repeals the current individual federal income tax

exclusion for employer-provided group health insurance coverage and replaces it with a $2160 individual/$5400 family tax credit for individual or group coverage

• If a state makes efforts to give residents greater access to coverage, the tax credit becomes refundable for state residents

• Primary method state could increase access as outlined in legislation is the creation of an exchange that meets specified parameters

Healthy Americans Act• Sponsored by Senator Wyden and 16 bipartisan

cosponsors

• Individual mandate for individuals to obtain coverage through ”state “health help agencies,” which would be a type of purchasing pool

• Employer mandate to contribute to the cost of employee coverage

• Free coverage up to 100 % FPL. Sliding scale subsidies 100-400% FPL.

Healthy Americans Act

• Private health insurance offered through the state pools would have to be:– guarantee issue and guarantee renewable and subject to

either pure community rating or modified community rating based only on geography, smoking status and/or family size

– Discounts would be allowed for wellness program and disease management participation

– All plans would have to abide by all HIPAA provisions and federal mandates, and could also not discriminate based on genetic information.

• No apparent role for licensed producers

American Health Benefits Program Act

• Bipartisan measure introduce by Representatives Langevin and Shays

• Creates an expanded version federal employees health benefit plan, the American Health Benefit Plan as a coverage option for all Americans

• Individual mandate to obtain coverage though the AHBP or buy coverage that met AHBP standards

• Individuals participating in AHBP would be responsible for 28 percent of their premiums, with sliding scale subsidies available for those with family incomes of up to 300% FPL

American Health Benefits Program Act• Employer mandate to provide coverage that meets

specified standards or offer AHBP coverage and finance it through a specified payroll tax formula.

• Policies under the AHBP would be individual policies, and the interplay between existing federal consumer protection and access laws like COBRA and HIPAA portability rules are not addressed.

• Coverage would be guarantee issue with no preexisting condition limitations.

• Minimum loss ratio requirements of 90 percent would be imposed on insurers.

• The AHBP Act appears to replace licensed health insurance producers with a government agency, the Health Benefits Administration

SHOP Act• Bipartisan legislation offered by Senators

Durbin, Snowe, Lincoln and Coleman with a bipartisan House counterpart

• Creates a national Small Business Health Insurance Pool for small businesses and self-employed individuals to purchase coverage

• Provides small business owners with an annual tax credit of up to $1,000 per employee ($2,000 family) if they pay for 60 percent of their employees’ premiums.

• Establishes a bonus tax credit for employers that pay more than 60 percent

SHOP Act

• Employers would only be eligible for the credit if they either participate in the pool or are in a state that offers its traditional group products under specified market reform conditions (groups of one, rating rules, offering of a state-wide purchasing pool)

• The SHOP Act would phase out state health insurance rating laws that allow for underwriting based on health status or claims experience for both the pool and the traditional small group insurance market

Small Business CHOICE Act

• Bipartisan bill from the House Small Business Committee

• Promotes small business purchasing cooperatives and incents joining one by offering a refundable tax credit to small firms with no more than 100 employees that join a cooperative

• Tax credit would be 65 percent of the cost of insurance

• Employers must subsidize at least 65 percent of self-only coverage and up to 35 percent of family coverage to qualify

• Credit would only be available to businesses that purchase coverage through the cooperatives

Other Broad-Scale Federal Proposals

• Senator Kennedy/Representative Dingell, Representative Stark—Medicare Expansion for All

• Senators Graham and Feingold, Senator Bingaman and Representative Baldwin—Bills creating financial incentives to states that take measures to improve access

Other Broad-Scale Federal Proposals

• Senator Cardin—Individual Mandate

• Senator Harkin—Wellness Program Incentives

• Senator Enzi—10-point market reform bill for discussion purposes

Federal Outlook for 2009

• SCHIP authorization is scheduled to expire on March 31, 2009. Initial congressional focus on health care issues will center around SCHIP out of necessity.

• Large-scale federal health care reform bills will likely not advance until after SCHIP is completed, which may extend beyond the March 31 deadline.

• The extent to which large-scale reform will be a priority is dependent both on which party takes the White House and also Congressional majorities.

Federal Outlook 2009

• Of the broad-scale health care reform bills likely to be reintroduced in the 111th Congress the one we are watching the most closely is Senator Wyden’s Healthy Americans Act– Wide-reaching bipartisan support– Zero score from CBO– Media attention– Personal commitment of Senator Wyden to advancing the

legislation

• Others of concern include SHOP Act and Americans Health Benefit Plan Act

Federal Outlook 2009

• Depending on the administration and the congressional majorities, health care reform efforts may focus on a comprehensive bill to restructure the current system, or targeted smaller-scale reforms

• Regardless of scope, we see several recurring themes– Individual market reforms

– Small employer market reforms

– Possible changes to the tax exclusion

– Mandates for coverage

– Pooling of coverage

Federal Outlook 2009

• Many of the reform ideas being addressed include elements like rating requirements, issuance requirements, etc. that are likely to be addressed through regulation as well as legislation.

• In addition to market reforms, the idea of health care cost containment must be addressed.

• Presidential election outcome could have a strong impact on the outcome of these proposals.

• None of the broad-scale reform bills include a true consideration of how medical care costs can be reduced nationally.

Employer Impact-Your Clients

• Federal interest in individual market reforms/shift to individual coverage– Potential changes to employer exclusions and resulting

impact on participation and coverage

– Potential of an employer mandate for payment/lack of control for benefit design

– Impact a potential individual mandate on employer coverage

– Impact of a potential shift to individual policies offered through employers on existing employer laws and consumer protections