National Health Reform Proposals and Potential Implications for The Foraker Group Benefit Plan

by Stephen Issacs and Paul Jellinek

Recently two consultants who have helped with our group benefit plan -- Stephen Isaacs and Paul Jellinek -- provided an analysis of how the current debate could affect us.  Their report follows and originally appeared in the Foraker Group September newsletter.

When they return from summer vacation, members of the House of Representatives will consider a bill, known as the Tri-Committee Plan or Tri-Committee Bill, that represents the thinking of the three House committees with jurisdiction over the issue (Ways and Means, Education and Labor, and Energy and Commerce—which has issued a number of amendments to the Tri-Committee Plan to satisfy Blue Dog Democrats) and members of the Senate will consider a bill proposed by the Health, Education, Labor, and Pensions (HELP) Committee, chaired by Senator Edward Kennedy. Still to come is the bill of the Senate Finance Committee, though many of its views are known from its policy statements and interviews with the committee’s chairman, Senator Max Baucus.

Some of the elements of the pending bills pertinent to the Foraker Group Benefit Plan are outlined below.

Individual mandate. Both the Senate HELP and the House bills require individuals to have health insurance or pay a penalty. Those falling below certain income levels will be eligible for premium subsidies. The Senate Finance Committee is likely to issue a bill with a similar provision.

Employer mandate. Similarly, the Senate HELP and the House bills require all businesses above a certain size (Senate HELP bill: 25 employees; House bill: depends on payroll) to contribute a significant percentage toward premiums or pay a penalty. Some small businesses (based on number of employees and average wages) will be eligible for a tax credit. The Senate Finance Committee has indicated that its bill, too, will contain an employer mandate.

Central insurance pooling body. The two plans on the table include establishment of a central body—called the Gateway in the Senate HELP bill and the Exchange in the House bill—to serve as an intermediary, pooling those who need premium subsidies and linking them with certified health insurance plans. In both plans, states would be permitted to create their own insurance pooling body. The Senate Finance Committee is likely to adopt a similar provision.

The Public Option. Both the House and Senate HELP bills propose creation of a new public health insurance option to be offered through the Gateway or Exchange. The Senate Finance Committee has been cool toward a public option, preferring, according to press reports, the creation of very large purchasing cooperatives.

Medicaid and the Children’s Health Insurance Program. Both the Senate HELP and the House proposals would raise eligibility levels for these two programs.

Benefits. The benefits are not specified in either of the two bills that have been reported out of committee; each calls for a “comprehensive” package. The Senate HELP bill proposes a temporary, independent commission to advise the HHS Secretary on the essential benefit package. The House bill suggests creation of a Health Benefits Advisory Council to make recommendations on the benefit package and cost-sharing levels.

Insurance exclusions. Both bills require guaranteed issue and renewability, prohibit denial of coverage based on pre-existing conditions, and allow rating variability based on limited factors (The Senate HELP bill states that variability can be based only on family structure, geography, the actuarial value of the plan benefit, tobacco, and age. The House bill restricts variability to age, premium rating area, and family enrollment).

Prevention and wellness. Both plans emphasize prevention and wellness and encourage insurers to follow suit. The Senate Finance Committee is expected to report out a bill with similar emphases. The House plan proposes eliminating cost-sharing for proven preventive services in Medicare and increasing payments for certain [unspecified] preventive services. The Senate HELP bill proposes increasing the allowable premium discount to employees participating in wellness programs.

Quality of care. Both plans propose a variety of measures to improve the quality of patient care, including establishing a federal center to evaluate comparative effectiveness, testing different approaches to improving quality, and increasing public reporting.

Cost containment. The Senate HELP proposal does not really deal with cost containment, perhaps because that lies largely within the jurisdiction of the Senate Finance Committee. The House bill contains a number of recommendations, including simplifying health insurance administration, testing ideas such as medical homes and accountable care organizations, encouraging health information technology, bundling acute and post-acute payments, reducing payments for unnecessary hospital readmissions, and reducing Medicare Disproportionate Share Hospital payments (though not until 2019).

Commentary. This commentary must be preceded by a mild disclaimer. Since nobody knows what the final bill will look like when it emerges from a House-Senate Conference Committee (or, given strong Republican opposition and conservative Democrat doubts, whether any bill at all will emerge from Congress), the comments below are speculation, albeit informed speculation.

The overall direction that health reform is likely to take is known from the plans already on the table and the papers issued by the Senate Finance Committee. Essentially whatever is passed (if something is passed) will look a lot like the Massachusetts plan, with individual and employer mandates and an outside authority to pool buyers and link them with health plans, plus a strong emphasis on prevention/wellness and cost containment. Important details and key elements—such as whether to have a public plan and how to pay for insuring an additional 46 million individuals—are still to be worked out and will depend as much on politics as on sound policy making.

Though it may be premature for the Foraker Group to make plans around what might transpire, it might keep in mind the following: (a) there will probably be a large number of previously uninsured people who will now need to buy health insurance; (b) a lot of employers will be looking to sign up for a health plan; (c) wellness, which the Foraker Group is already encouraging, will be heavily promoted. If the Foraker Group can offer competitive rates, it might have a leg up in the new health care marketplace.