Details Emerging on Plans for a Federal Overhaul of the Private Insurance Market

The Senate Health, Education, Labor and Pensions (HELP) Committee has released a 615-page working "draft of a draft" of its legislative proposal for expanding access and coverage entitled the "American Health Choices Act" along with a 34-page narrative detailing various legislative options for consideration by the Committee. On the House side, the Committees on Ways and Means, Energy and Commerce and Education and Labor (collectively, the Tri-Committee) have been circulating a summary outline of their draft reform plan.

The Senate HELP Committee's proposal begins with a "Declaration of Rights" that includes "the right of patients to select the doctor of their choice." Similarly, the draft plan outline by the House Tri-Committee says that it "seeks to fulfill the President's commitment to healthcare reform via legislation that reduces costs, protects current coverage and preserves choice of doctors, hospitals and health plans; and ensures affordable, quality healthcare for all." The litany of legislative options and proposals being considered under both plans, however, will result in nothing short of a remarkable transformation of the private insurance market.

Key features common to the Senate HELP and the House Tri-Committee plans include a public insurance plan option; a proposed "pay or play" mandate, where employers choose between providing employee coverage or contributing funds on behalf of their uncovered workers; and a "shared responsibility" tax imposed on individuals who forgo insurance coverage (an exception is available for financial hardship).

Both plans include a "gateway" or "exchange" for facilitating the purchase of insurance plans by individuals and employer groups, expand Medicaid eligibility (up to 150 percent of poverty under the HELP Committee's plan), provide premium subsidies up to 500 percent of poverty for individuals and families and address workforce issues. The proposals also outline options for guaranteed availability and renewability of coverage and a standardized minimum benefit package determined by a committee of experts. Each offers proposals for prohibiting lifetime or annual limits on benefits, disallowing pre-existing condition exclusion and "other discriminatory practices" and eliminating cost-sharing for certain preventative care services. Delivery system and Medicare payment issues are addressed in the House Tri-Committee plan which includes an intent to replace the "currently flawed" Medicare physician fee schedule.

The Senate HELP Committee plan directs the U.S. Department of Labor to adopt regulatory standards for preventing Multiple Employer Welfare Arrangements (MEWAs) "from escaping liability for their actions under state law by claiming that state law enforcement is preempted by federal law." Additionally, the plan provides an option for dependent coverage up to 26 years of age, requires insurers to pay out a percentage of premium revenues in benefits, includes a mechanism for redistributing funding from low-risk benefit plans to high-risk plans, limits medical loss ratios in the group and individual markets and creates a supplemental coverage benefit for community living assistance services for persons with severe disabilities.

President Obama Weighs In

Having strategically determined that now is the time to weigh in on the congressional proposals for healthcare reform, President Obama recently sent a letter to Sens. Edward Kennedy (D-Mass.) and Max Baucus (D-Mont.) outlining his specific priorities. Contained in the President's letter are several themes that echo his interest in a recent article by Atul Gawande published in The New Yorker magazine on June 1, 2009. These include the creation of accountable care organizations, the use of best practices and a focus on achieving the highest quality care at costs below the national norm (i.e., more positive press for Mayo Clinic and Cleveland Clinic -- two entities mentioned as specific examples by the President in the letter). The Obama letter also reflects his support for a public plan option, a health insurance exchange, shared responsibility among individuals and employers and responsible cost-cutting (e.g., payment reductions for MedicareAdvantage organizations, lower hospital readmissions rates and a focus on quality and reducing fraud, abuse and waste). The Obama letter makes clear that certain themes for reform are receiving wide acclaim among congressional lawmakers and the President. More importantly, it shows that he intends to weigh in on the specifics of healthcare reform, a considerable step beyond his initial set of eight principles for "transforming and modernizing" America's healthcare system espoused earlier in the year. [See the March 5, 2009, issue of the Health Law Update.]

Timeline for Reform

It is anticipated that the committees of jurisdiction (Senate HELP, Senate Finance and the House Tri-Committee) will begin a markup of their health reform bills within the next two weeks. Details regarding the Senate Finance Committee's bill have yet to be released. However, insights as to what may emerge from the Senate Finance Committee can be found in the series of policy options papers released by the Committee in April and May. [See the April 30, May 14 and May 28 issues of the Health Law Update for specific details.] Both Houses have pledged to send legislation to the floor for consideration prior to the August recess.