The Obama administration and the U.S. Congress are currently engaged in the process of creating legislation that will dramatically reform the way Americans receive heath insurance and related services. Three separate U.S. House of Representatives committees have approved two different versions of a reform bill, but the Energy and Commerce Committee may still consider nearly 60 additional amendments before the full House could vote on either version. The U.S. Senate Committee on Health, Education, Labor & Pensions (HELP) approved a portion of reform legislation dealing mainly with insurance industry reforms. On Wednesday, September 16, 2009, a select bi-partisan group of U.S. Senate Finance Committee members, led by Committee Chairman Max Baucus (D-Mont.), released its long-awaited health insurance reform bill after months of bipartisan negotiations. The Baucus proposal received no Republican support and received a lukewarm reception by Democrats, especially liberal Democrats. The U.S. Senate Finance Committee will begin the arduous task of amending the bill on September 22, 2009.

With the lack of any Republican support, Democratic leadership in the Senate is considering the possibility of splitting a reform package into two separate bills. One bill would concern health insurance industry reforms such as requiring insurance coverage and would follow normal Senate procedure, which requires 60 votes to limit debate and proceed to a vote. Leadership could push the second bill, which would include revenue-raising measures and possibly a controversial public health insurance option, through the Senate using a tactic called “budget reconciliation,” which protects the bill from filibuster and requires only 51 votes to pass. The final contents of both the House and Senate versions of these bills are unknown at this time and may remain so for much of September. Moreover, the outlook for any health insurance reform package is dependent on the ability of the White House and the Democratic congressional leaders to recover from a major decline in public support for a health insurance system overhaul.

On September 9, 2009, in an effort to garner congressional and public support for health insurance reform, President Barack H. Obama presented his vision to a joint session of Congress. President Obama came to the podium facing potential opposition at every turn, with moderate Democrats opposing inclusion of a strong public health insurance option, liberal Democrats insisting that health insurance reform cannot be done without it, and Republicans opposing the bill altogether. President Obama reiterated his support for a controversial public option, but stopped short of describing its parameters. He left the door open for options such as a nonprofit cooperative insurance alternative or a fallback “trigger option,” which would hold the public option in reserve, and only activate if private insurance companies fail to expand coverage and lower costs. While the Baucus proposal opts for a co-op approach, the House will not likely pass a bill without a stronger public option.

President Obama focused his speech on the moral imperative of covering those who cannot obtain health insurance and invoked the memory of the late Sen. Edward Kennedy, who spent his 40-year career in the Senate advocating for national health insurance. Emphasizing the cost of inaction, Obama stated that his $900-billion plan would not raise the deficit, but would instead be paid for by cutting wasteful spending currently within the system. However, he did not provide details on those savings during the speech.

The president challenged Republicans, who have been extremely critical of Democratic plans, to offer their own solutions to the problems within the health insurance system. While several Republicans have introduced their own proposals, the party has not united behind a single alternative solution. During his speech, President Obama proffered the possibility of implementing some malpractice reform as a bargaining chip with Republicans, who have long advocated for lawsuit caps and review panels. Following up on that promise, the president instructed the U.S. Department of Health & Human Services on Thursday, September 17, 2009, to issue grants to states for experiments in reducing medical malpractice and related lawsuits. The Baucus proposal also includes nonbinding language supporting grants to fund such state projects.

The House may vote on a bill in early October 2009, but first House leadership must resolve some of the differences between the versions that emerged from the separate committees. The Senate is likely to move forward with Sen. Baucus' bill, integrating components of the HELP bill, which was approved in July 2009. If Democrats cannot garner significant Republican support, they may consider splitting the package as discussed above. Any Senate legislation will then have to be reconciled with the final House package, leading to another round of tough negotiations to resolve major differences between the two chambers' bills. Leadership in both chambers is committed to passing a health insurance reform bill this year, following through on President Obama's campaign promise, and completing a contentious agenda item before going into an election year.

The final product is still unknown, but the common themes of the various proposals indicate major regulatory changes ahead for health insurers. Notably, a major pillar in the movement to reform health insurance is the goal to ensure that every citizen has affordable and effective health insurance. Key to achieving this goal is reforming the insurance market so that all individuals are given the opportunity to purchase affordable coverage. All of the current proposals include provisions designed to accomplish these goals by prohibiting insurers from excluding potential members because of pre-existing conditions and requiring guaranteed issue and renewal of insurance policies. The proposals limit the variation in insurance rates to a few specified categories while also limiting the overall range of rating based on age.

Another key provision in all of the proposals is an individual mandate. An employer mandate is present in the House and HELP bills, but is absent from the Baucus bill. If an employer does not provide insurance to its employees or an individual does not secure health coverage, they may be subject to a tax penalty. The other provisions affecting insurers include, without limitation, required policy features/coverage (i.e., mandated benefits), the creation of a new health insurance exchange marketplace where individuals and small businesses can purchase health coverage, and the taxation of insurance companies on their most expensive health insurance policies. Despite these provisions, the debate on health insurance reform is far from over and there will likely be numerous changes before the legislation is finalized. Therefore, we will continue to monitor these developments and will keep you informed of forthcoming legislation.