Federal Legislative Issue Update and A Look at What the Future May Hold for Health Care Financing

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Federal Legislative Issue Updateand A Look at
What the Future May Hold for Health Care Financing

• Presented by
• XXXXXX
• XXXXXXXXXXX
• National Association of Health Underwriters

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Lots of Unresolved Business in 2008

• Reauthorization and possible expansion of or
  changes to the STATE Childrens Health Insurance
  Program (SCHIP)
• Mental Health Parity
• Genetic Discrimination
• Other Congressional Efforts
• Medicare for All and Various reform bills
• Presidential Candidates

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State Childrens Health Insurance Program

• NAHUs current top federal legislative priority
  is the SCHIP reauthorization, with our focus on
  increasing access to private premium assistance
  programs to minimize the effects of crowd out.
• Substitution of public for private health
  insurance coverage occurs when public subsidies
  are provided. Crowd out is inevitable. CBO
  estimates SCHIP crowd out to be between 25-50.
• The goal for policy makers should be to mitigate
  the effects of crowd out, to ensure that SCHIP
  plays a coordinated partnership role with
  existing private sector health insurance
  coverage.

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State Childrens Health Insurance Program

• The 1st Session of the 110th Congress produced a
  stalemate on SCHIP reauthorization
• Funding for SCHIP expired on September 30, 2007
  Congress has passed short term extension of
  current law to buy more time for reauthorization
  agreement
• President Bush and many Republicans objected to
  the size of SCHIP expansion being proposed in
  Congress

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State Childrens Health Insurance Program

• Many members of Congress would like to expand the
  program
• Some would like to expand eligibility to the
  parents of eligible children
• Some would like to increase the poverty level so
  that more people would be covered
• Some would like to make it an entitlement instead
  of a block grant program that must periodically
  be reauthorized

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State Childrens Health Insurance Program

• In July 2007, both the House and the Senate
  passed very different versions of SCHIP
  reauthorization legislation
• The House measure H.R. 3162, significantly
  expanded the scope of SCHIP, including providing
  coverage to individuals up to age 25
• Rather than improving the current premium
  assistance provisions of S-CHIP, it did just the
  opposite, by allowing employers to buy into the
  S-CHIP program
• As a partial funding mechanism, it significantly
  cut funding to Medicare Advantage plans.
• Passed mostly on party lines 225-204

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Senate S-CHIP

• The Senate-passed legislation, H.R. 976, also
  expands program funding, but would do so in a
  more limited way and primarily through an
  increase in the federal tobacco excise tax
• Greatly improves current premium assistance
  provisions would help reduce crowd-out by phasing
  out SCHIP coverage of childless adults
• Senate bill passed with a veto-proof margin of
  68-31
• President Bush promised veto of both the Senate
  bipartisan measure and the House bill, citing too
  large an expansion of the government program and
  opposition to tobacco tax increases

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Comparison of House / Senate SCHIP Bills
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House Senate Compromise Agreement

• Largely followed Senate bill
• Adopts Senate premium assistance provisions,
  expanding on current options for states
• Allows states to offer a premium assistance
  subsidy for qualified, cost-effective
  employer-sponsored coverage to children eligible
  for SCHIP and who have access to such coverage
• Changes federal rules governing
  employer-sponsored insurance to make it easier
  for states and employers to offer premium
  assistance programs

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House Senate Compromise Agreement

• Congress attempted to send President Bush two
  different versions of SCHIP reauthorization (H.R.
  976 and H.R. 3963), essentially Senate bills 35
  billion expansion and tobacco tax funding
  increase
• Newer versions sought to tighten income
  eligibility levels, speed termination of coverage
  of childless adults, make stronger proof of
  eligibility rules
• President Bush vetoed both versions, and Congress
  failed to override vetoes (2/3 of each chamber
  needed)

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S-CHIP

• No agreement with President seen as yet
• Congress adopted a short-term current-level
  funding fix (through March 2009) with S. 2499
  (P.L. 110-173)
• Modest spending increase to keep coverage for
  those already enrolled
• Leaves in tact new Bush administration directive
  (from August 2007) that makes it harder for
  states to cover middle-income children
• Directive provides that before states cover
  higher-income children, they must prove that at
  least 95 percent of children eligible for
  Medicaid and SCHIP with incomes less than twice
  the poverty level be enrolled in those programs

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S-CHIP

• Still possible reauthorization compromise
  attempted again in 2008. But unlikely Bush
  says tobacco tax increase is non-starter, and he
  objects to size of expansion (35 billion)
• Good resource on S-CHIP and crowd-out issues
  Alliance for Health Reform Toolkit
  www.allhealth.org/publications/Child_health_insura
  nce/Crowd-out_and_SCHIP_toolkit_70.pdf

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What Health Issues is Congress Working on Now?

• Reauthorization and possible expansion of or
  changes to the Childrens Health Insurance
  Program
• Mental Health Parity
• Genetic Discrimination
• Other Congressional Efforts
• Medicare for All and Various reform bills
• Presidential Candidates

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Mental Health Parity

• Since 1996, current law has required parity for
  mental health coverage
• Defines parity as no lower annual or lifetime
  dollar limit for MH coverage than any annual or
  lifetime dollar limits that may apply to medical
  and surgical benefits covered by a plan
• Current law explicitly permits plans to have
  separate cost sharing provisions, limits on the
  duration of coverage and to define what benefits
  the plan chooses to cover
• Also does not apply to coverage for substance
  abuse at all

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Mental Health Parity

• Current law included a 5-year sunset provision
• Each year since the sunset, Congress has extended
  the 1996 provisions by one year
• Proponents, led by the late Sen. Paul Wellstone
  (D-MN) and Sen. Pete Domenici (R-NM) have pushed
  each year to significantly expand current law to
  require parity in plan cost sharing provisions,
  limits on the duration of coverage of services,
  coverage of all conditions listed in the
  so-called DSM-IV manual, and limit plans ability
  to manage this benefit
• Employers and health plans have (previously)
  vigorously resisted efforts to expand current
  law, leading to a stalemate where the temporary
  extension of current law was the only common
  ground action on which all sides could agree.

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Mental Health Parity

• 110th Congress -- Sen. Domenici and his new
  co-sponsors, Sen. Ted Kennedy and Sen. Mike Enzi
  (R-WY) agreed to take a fresh look at issue and
  work to find consensus.
• More moderate bipartisan agreement reached (S.
  558) -- requires parity on all cost sharing and
  duration of coverage limits, but leaves plans and
  employers the ability to define benefits and to
  use medical management practices to control
  health costs, make sure enrollees receive the
  right care for their conditions.
• The House sponsors of H.R. 1424 proceeded into
  the new Congress with essentially the same,
  highly restrictive version of parity legislation
  as before.

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Major Differences in the Bills

• Mandated Benefits
• Definition of Mental Illness
• Medical Management
• The right care at the right time
• Network Management
• Requirement of out-of-network services
• Expanded Remedies
• State vs. federal
• Effective Dates
• January 1, 2008 vs. 12 months from enactment

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What Health Issues is Congress Working on Now?

• Reauthorization and possible expansion of or
  changes to the Childrens Health Insurance
  Program
• Mental Health Parity
• Genetic Discrimination
• Other Congressional Efforts
• Medicare for All and Various reform bills
• Presidential Candidates

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Genetic Discrimination - Status

• The House passed April 25 (420-3 vote) H.R. 493,
  prohibiting employers and insurance companies
  from collecting or using genetic information when
  making decisions about hiring, firing, providing
  health coverage or setting insurance premiums.
• The White House issued a statement indicating
  that the president would sign it.
• In the Senate, Tom Coburn, R-OK., wants more time
  to consider S. 358.  Staff working to resolve
  several objections to the bill, which is similar
  to the House measure.
• The HELP Committee approved the Senate bill Jan.
  31 on a 19-2 vote.  Coburn and NC Republican
  Richard M. Burr cast the no votes.
• Kennedy said he thought Coburns concerns could
  be addressed.

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Genetic Discrimination - Status

• Some concerns addressed in the House measure via
  amendment and related to providing protections
  for fetuses and embryos, but do not provide any
  new rights that would affect the debate over
  abortion laws
• Some Republicans also objected fearing unintended
  consequences, concerns about sweeping some
  diagnostic tests regularly used by doctors to
  assess patient health into the definition of a
  genetic test under the new law
• Some Republicans also see problems with
  provisions for self-insured companies, believing
  the language would expose companies to lawsuits
  under both insurance and employer regulations,
  which have different sets of penalties

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What Health Issues is Congress Working on Now?

• Reauthorization and possible expansion of or
  changes to the Childrens Health Insurance
  Program
• Mental Health Parity
• Genetic Discrimination
• Other Congressional Efforts
• Medicare for All and Various reform bills
• Presidential Candidates

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Other Issues Congress is Working On

• Trade Adjustment Assistance Act
• Authorization expired in 2007, but Congress
  extended current law for a few months to allow
  time for agreement
• Trying to make it easier for states with
  purchasing options
• Possible expansion to other populations S. 1848
  was introduced by Sen. Baucus to modify the bill
  and expand it to service workers and others
• High-Risk Pools
• FY08 appropriations bill provides 49 million in
  federal funding

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Other Issues Congress is Working On

• Health Information Technology (IT)
• Significant interest in House and Senate to
  employ greater Health IT to improve the quality
  of patient care and lower costs
• House and Senate measures would seek to establish
  national standards, provide grants and loans to
  health care providers and to states to spur
  adoption of health information technology
• Failure to reach agreement in past couple of
  years due to funding amounts and privacy issues
• E-Prescribing
• S. 2048 and other measures being promoted as
  first step to Health IT -- would require all
  doctors to use electronic prescriptions for
  Medicare patients, starting in 2011
• Proponents seek to make this part of any
  physician fee schedule fix under Medicare Part
  B

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Other Issues Long-Term Care

• NAHU is working with a coalition to pass
  legislation to allow long-term care insurance to
  be sold pre-tax under cafeteria 125 and FSA
  arrangements
• Senators Grassley and Lincoln have sponsored S.
  2337 and Rep. Pomeroy sponsored H.R. 3363
• Bipartisan but cost of bill must be paid for in
  other tax increases or spending reductions

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Other Issues ERISA

• Subcommittee in House Education and Labor
  Committee held hearings last year
• Some interested in changing ERISA to permit more
  state-based attempts to establish benefit or
  coverage requirements for all residents, or
  require all employers to either offer benefits or
  pay into a funding pool for the uninsured
• Reforms to the current health and retirement
  benefits system must continue ERISA's goals of
  promoting simplicity and predictability 

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Other Issues Congress is Working On

• Insurance Producer Oversight in Medicare Sales /
  Ethics
• Widespread press reports in 2007 of bad apples
  in our industry who have been behaving in what
  appears to be an unethical manner
• NAHU led the way in getting out in front in
  communications with CMS and Congress, touting and
  reinforcing considerable time, effort and
  resources educating our membership about the
  rules concerning Medicare-related product sales.
  Also working closely with CMS and state
  regulatory agencies.

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What Health Issues is Congress Working on Now?

• Reauthorization and possible expansion of or
  changes to the Childrens Health Insurance
  Program
• Mental Health Parity
• Genetic Discrimination
• Other Congressional Efforts
• Medicare for All and Various reform bills
• Presidential Candidates

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Health Reform Proposals

• Bush Tax Proposal Removing employer paid
  benefit tax exclusion and replacing it with a
  deduction
• Senator Wyden Dismantles existing
  employer-based system, state pooling
  arrangements, community rating and guarantee
  issue, Individual Mandate, Employer Mandate
• Senator Kennedy/Representative Dingell Medicare
  for All
• Senator Bingaman/Representative Baldwin -- Grants
  to states to carry out any of a broad range of
  strategies to increase health care coverage
• Senator Enzi Individual mandate, guarantee
  issue and tight rating requirements on all
  products, pooling of individual and group
  markets, required community rated and
  price-controlled products from each carrier,
  small business health plans, and standard
  deduction to pay for individual or employer
  coverage.
• Senator Harkin Allows employers a 50 tax
  credit for the costs of providing employees with
  a qualified wellness program

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Changing Tax Exclusion of Employer-Sponsored
Insurance

• Health benefits a big potential target for
  raising revenue
• Currently, the amount that employers contribute
  toward health benefits and health insurance is
  generally excluded, without limit, from workers
  payroll and income taxes.
• Tax treatment of health benefits established in
  the tax code through a series of laws and rulings
  that date back to the 1920s.

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Changing Tax Exclusion of Employer-Sponsored
Insurance

• Estimated value of the income tax exclusion
  100 billion per year payroll tax exclusion
  50 billion per year
• Tax exclusion reduces the after-tax cost of
  health insurance to individuals and families
  almost 70 percent of workers and their dependents
  (more than 160 million individuals under age 65)
  are incentivized to acquire employment-based
  health insurance. ESI has take-up rate of about
  85, with fewer than 5 percent of workers
  eligible for health benefits being uninsured
• Growing discussion across ideological spectrum to
  end current preferential tax treatment for
  employment-based health benefits and replace it
  with some other tax preference

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Changing Tax Exclusion of Employer-Sponsored
Insurance

• Advantages of Employer-Sponsored Insurance could
  be lost
• No means for spreading risk
• Loss of group purchasing efficiencies
• Workers less likely to have their employer as an
  advocate in coverage disputes
• Employers less likely to involve themselves in
  matters of quality assessment and innovation
• Lower productivity / higher labor costs for
  employers? (less people purchase health
  insurance)

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Changing Tax Exclusion of Employer-Sponsored
Insurance

• Other Issues to Consider
• How do you value health benefits under
  self-insured plans?
• Absent individual insurance market reforms,
  high-risk individuals would continue to be unable
  either to get insurance or afford insurance in
  the individual market (individual market lt 10 of
  noninstitutionalized population under 65)

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What Congress is Working On

• Reauthorization and possible expansion of or
  changes to the Childrens Health Insurance
  Program
• Mental Health Parity
• Genetic Discrimination
• Medicare for All and Various reform bills
• Other Congressional Efforts
• Presidential Candidates

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Presidential Candidates

• Health care will be the top domestic policy issue
  during this extended campaign cycle.
• Many candidates favor comprehensive reform that
  could dismantle the private market
• Single payer, national exchanges, shift away from
  the employer-based system all under serious
  debate.
• NAHUs analysis of presidential health care
  reform proposals is updated regularly and
  available online.

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Who Will Pay For Health Care In the Future?
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Who Will Pay?

• Employers
• Will they be required to pay?
• Who will they be required to cover?
• What type of benefit will they be required to
  provide?
• How much will they pay or will they have to pay?

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Who Will Pay?

• Individuals
• Will the employer based health insurance system
  change to one that is individually based?
• Will employers still contribute to the cost?
• How will that change markets?
• Will individuals be required to carry health
  insurance?

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Who Will Pay?

• The Government
• Will the government continue to provide coverage
  primarily for those who are low income or
  elderly?
• Will the government also begin to subsidize the
  purchase of coverage in the private market for
  those with lower incomes
• Will the government begin to subsidize the cost
  of high risk individuals?
• Will the government provide a basic level of
  coverage or catastrophic coverage?
• Will the government be the provider for all
  coverage, i.e., a single payer system?