NAIFA GovWatch

Health Reform Clears Next Hurdle

Issue: Health Care

Date: December 30, 2009

Action Taken: On December 24, the Senate approved its version of health reform, H.R. 3590 - 2,409 pages. The 60-39 vote was strictly along party lines. All Democrats and the two Independents who caucus with the Democrats voted in favor and all Republicans present voted against the measure. Senator Bunning (R-KY) did not vote.

NAIFA Position: The Senate bill includes a number of improvements advocated by NAIFA including a specific role for agents in the reformed system; the HHS Secretary is not setting agent commissions; the public option is out; current law’s health/malpractice insurance antitrust exemption remains; there is no tax on most employer-provided health insurance; and the Flexible Spending Arrangement (FSA) annual cap is indexed.

NAIFA’s reform goals have been and continue to be ensuring affordable coverage for all Americans without resorting to new government programs. While the bills have been significantly improved over original drafts, NAIFA remains concerned that current proposals will increase costs to families and businesses.

Next Steps: The next step of the legislative process is a House-Senate conference to reconcile the differences between the Senate bill and H.R. 3962, the version approved by the House on November 7. Merging the bills is expected to be difficult due to crucial differences between the two versions of reform, including a public health insurance option in the House bill that is not in the Senate measure. Other conference issues of great interest to NAIFA members include:

Antitrust & FTC Exemptions – The House bill expands the authority of the Federal Trade Commission (FTC) to prepare studies and reports on the entire insurance industry and repeals the limited antitrust exemptions in the McCarran-Ferguson Act (effective upon enactment). The Senate bill does not.

High-Risk Pool – The House and Senate bills establish a temporary national high-risk pool. The House effective date is January 1, 2010 and the Senate is 90 days from enactment.

Medical Loss Ratio – The House requires an 85% medical loss ratio (MLR) for all qualified health plans (2010). The Senate limits MLR to 85% for groups and 80% for individual and small group markets (2011).

Annual Premium Tax – The Senate imposes an annual premium tax beginning at $2 billion in 2010 and ramping up to $10 billion annually by 2017. No provision in the House.

Income Surcharge - The House bill pays for the measure with an income tax surcharge slated at 5.4% for individuals earning over $500,000 annually and families earning more than $1 million annually (2011). No provision in Senate.

FSAs – The $2,500 cap on FSA contributions is now indexed for inflation in both the House and Senate bills. The only remaining difference between the two versions is the effective date: the House version has an effective date of 2013, while the Senate’s is 2011.

Exchange Structure –The House creates a new “National Health Exchange” and allows states the option of creating state or regional exchanges (2013). The Senate bill requires states to create Exchanges (2014).

"Cadillac Plan" Excise Tax – The Senate bill imposes a 40% excise tax on premiums above $8,500 for individuals, or $23,000 for family plans (2013). No provision in the House.

Employer Obligations - The House plan requires companies with more than $500,000 in annual payroll to provide health insurance for all employees or pay a penalty of up to 8% of payroll (2013). The Senate bill requires employers with over 50 employees to pay up to $750 per employee if any of the employees rely on government subsidies to purchase health coverage (2014).

Government Options – The House bill creates a government-run health plan (2013). Senate bill requires the Office of Personnel Management (OPM) to contract with insurers to offer at least two nationwide plans, one of which must be nonprofit, through the exchanges (2014).

Medicaid Eligibility - The House bill expands Medicaid eligibility to those with incomes up to 150 percent of the federal poverty level (2013), while the Senate bill would go up to 133 percent of FPL (2014).

CHIP - The House bill would end the Children's Health Insurance Program (CHIP) in 2013. The Senate bill provides funding for CHIP through fiscal year 2015.

Both bills include similar if not identical language to reform the health insurance market and establish a national voluntary long-term care insurance program (CLASS) as well as create a Consumer Operated and Oriented Program (CO-OP) to facilitate the establishment of non-profit, member-run health insurance companies.

NAIFA will remain actively engaged and will attempt to further improve the legislation to meet our reform goals including efforts to ensure a government health plan is not included; to remove the government long-term care program; to establish adequate time for coordination with existing state programs and to further address affordability and sustainability of private insurance choices.

NAIFA Staff Contact: Diane Boyle, Vice President – Federal Government Relations.

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