NAHU Washington Update - 05/09/2006 (Plain Text Version)

Senate Floor this Week

Janet Trautwein

Yesterday was the first day of Senate Health Week. The first item under consideration was medical liability reform, S 22, Medical Care Access Protection Act of 2006. This is a new bill and is based on medical liability legislation passed in Texas that has resulted in a 22% medical liability insurance rate reduction. The bill was debated Monday and a vote on cloture did not garner the 60 yes votes needed to stop the debate and move to a vote on the bill itself. This was roll call vote number 115.

The Senate then moved to S 23, Healthy Mothers and Healthy Babies Access to Care Act, which is the same bill as S 22 but limited to OB/GYNs. The cloture vote on this bill also failed to garner 60 yes votes. This was roll call vote number 116.

What this effectively means is that these bills are dead for now – without the ability to get the 60 votes needed to stop debate, the bill itself cannot come up for a vote, where a simple majority of yes votes would be required.

Today, the Senate continued Health week with a vote to allow up to 30 hours of debate on S 1955, The Health Insurance Marketplace Modernization and Affordability Act. Senator Mike Enzi (R-WY), chair of the Senate Health, Education, Labor and Pensions Committee, introduced S 1955 to address some of the health insurance affordability issues faced by small employers. S 1955 attempts to improve health insurance markets across the country by creating new ways to access coverage and greater uniformity among states with respect to small group rating laws and mandated benefits requirements. Some of the provisions of the bill are still being negotiated and are subject to change prior to a final vote. As a reminder, a final vote on the bill can only come IF, at the appropriate time, there are 60 yes votes to stop the debate and move to a vote on the bill itself. Here is what we know about changes to the bill at this time:

Rating rules:
• Creates a base level of rating flexibility. Any state that is at least that flexible will not need to change their rating laws and will automatically be considered an adopting state. If a state is considered an adopting state, their current rating laws will prevail and any other plan entering the state must abide by them.
• If a state’s current laws are not as flexible as the base level, they will be considered a non-adopting state. This would be 10 to 11 states. They have two choices: either become an adopting state and bring their current rating laws up to the base level (several states in this category are close and would probably choose this option), or they can remain a non-adopting state. In that case, there is a three year transition plan established on a state-specific basis by the Secretary to allow carriers and small business health plans to come into the state to offer plans with more flexible rating rules on a graduated basis. The exact nature of the transition rule will differ with each state since it depends on what the state’s current rating rules are now. If a carrier or small business health plan wanted to offer health coverage during the transition period in year one, it would be able to offer a plan subject to the 1st year transition rules established by the Secretary. By the third year, they could be offering a plan at the base level; however, they could not go beyond that.
• Base level – In previous versions of the bill, the base level was the 1993 NAIC model with +/- 25% for health status and 15% for renewals. This base level is being modified to allow some states to qualify as adopting states even if they do not use health status, if their other rating factors are flexible enough. Although some of the specifics of the base level plan are still being negotiated, it is likely to require states to have rating flexibility of at least 5 to 1, meaning one that would allow the premium difference between the group with the worst demographics from a rating perspective to be five times higher than one with the best characteristics. Of that 5 to 1 variance, at least 3 to 1 would be required to be based on age or health status. This is to ensure a spread of healthy and less healthy individuals and allows age to be used as a reasonable substitute for health status in establishing the base line. So if you’re in New York that has community rating, and you move toward a base level rating model like this one, you most certainly would bring more young and presumably healthy people into the mix of insured individuals. By making New York’s laws five times more flexible than they are today, the result would be rates that are considerably more affordable than they are under the current rating rules.
• Small Business Health Plans – may be offered through associations only if they are fully insured, and if they play by all market rules that apply to other plans, including state rating and mandate requirements. They would be regulated by the state in the same manner as other fully insured plans.
• Mandates - The bill would allow plans with more limited mandates to be sold nationwide. This does not mean mandate free. The specifics in this area are changing and are still being negotiated.
• Health plans would still be regulated by states and would all be subject to the same rules.
S 1955 is being debated on the Senate floor today. Again, the plan is to allow up to 30 hours for debate (and this may be reduced) equally divided between Republicans and Democrats. At the end of the allotted time, there will be a vote on cloture to stop the debate and move to a vote on the bill itself. The cloture vote will require 60 votes, and although there may be a majority of yes votes for S1955 itself, that vote cannot take place unless there are 60 yes votes on cloture to stop the debate. If there are not 60 votes in favor of cloture at the end of the debate period, the bill itself will not come up for a vote.

If you are following this debate on C-Span 2, you will also hear quite a bit of discussion about S 2510, Small Employers Health Benefits Program of 2006. As a reminder, this bill includes some of the following:

• A purchasing pool run by OPM (Office of Personnel Management – agency that runs the federal employees health benefits program)
• For groups of 1 to 100
• Adheres to state mandates but not state rating laws – has some flexibility for age but none for health status
• Provides carriers in the pool with reinsurance for some high claims
• Provides other potential reimbursement in the form of a risk corridor for carriers who have expenses higher than anticipated
• Provides a tax credit to employers who pay a certain percentage of employee premiums and a bonus in the first year they sign up
• Does not provide these subsidies for carriers that operate outside the pool, creating a massive unlevel playing field for any plan operating outside the purchasing pool.

We will update you as other news becomes available.