House Health Bill Should Be A Model for The Senate

The House has passed its health reform bill and the Senate will soon bring a bill to a floor vote. While no draft of the final Senate bill is yet available, we know what is in the two committee bills that now have to be combined (the HELP Committee's and the Finance Committee's (PDF)). From those two bills we can see the ways the House bill is stronger and more progressive than the final Senate bill might be.

As Roger Hickey and Diane Archer of the Campaign for America's Future stated in their letter of support for the House's "Affordable Health Care for America Act of 2009" (H.R. 3962):

"While we would've preferred stronger provisions in some key areas, this legislation constitutes a momentous step toward making a guarantee of quality affordable health care a reality for all Americans. And we hope that it serves as a model for action by the Senate."

Below are key areas in which the Senate should follow the House's example:

1. The Health Insurance Exchange.

The House bill creates a national Health Insurance Exchange that will be open to small businesses (100 employees or less) and individuals who do not have employer coverage. Over time, more employers will be able to offer their employees insurance through the Exchange. States may opt to operate the national Exchange if they create their own Exchange that follows federal rules. The House bill designs the Exchange to be an active negotiator.

The Senate bill, on the other hand, will likely leave the creation of the Health Insurance Exchange to the states and relegates the Exchange to a passive price-taker role.

As Timothy Jost explains:

"HR 3692 creates a single national exchange (from which states can opt out if they meet stringent requirements) as compared to the state-based exchanges the Senate bills create. A national exchange should have greater bargaining power and lower administrative costs. Federal oversight and enforcement should be more effective than the approach of the Senate bills, which leave oversight and enforcement to the states. If history and experience tell us anything about insurance regulation, it is that big insurers will often out gun state regulators — assuming the states even have the will and resources to oversee the insurers...

"The most important feature of the House exchange, however, is that it would have the power to negotiate and contract with insurers. Insurers wishing to sell insurance through the exchange would have to justify their proposed premiums, which the Commissioner would review for their affordability with the power to deny excessive premiums or premium increases. By contrast, the exchanges in the Senate bills are passive price takers with no authority over premiums (indeed, the Senate Finance Committee rejected an amendment offered by Senator Kerry to give the exchanges negotiating authority). Negotiations could be an important lever for controlling health insurance premiums, although it must be remembered that a group health insurance market will continue to exist outside of the exchange, and there is nothing to keep insurers from refusing to negotiate if they are willing to give up the nongroup market."

2. The Public Health Insurance Plan.

The House bill creates a national public health insurance option available through the Exchange to ensure choice, competition and accountability. Like other private plans, the public option must survive on its premiums. The public option would be administered by the Secretary of Health and Human Services and negotiate rates for providers that participate.

The Senate bill is likely to create a national public health insurance option available through the Exchange, but allow states to opt out of offering the public plan to their members in the state's Exchange.

According to Timothy Jost:

"State-based plans would inevitably become hostages to the vagaries of state politics, and the federal government has a poor track record in making the states comply with federal requirements. Consider the federal government's performance in getting the state's to comply with Medicaid requirements or in enforcing the HIPAA individual market insurance reforms. A national plan could get underway much more rapidly and should have lower administrative costs.

"The other significant strength of the House approach is that it would begin with the Medicare network of providers. One of the biggest barriers facing a new entrant into any health insurance market is assembling a provider network at competitive prices. The public option would start with the Medicare network, which exists in every part of the country, except insofar as providers opted out. The bill also encourages innovative approaches to provider payment and support for delivery system reforms and allows the plan to vary premiums by locality, permitting it to be more competitive in areas where private insurers offer lower rates.

"The House public option is weakened considerably, however, by the requirement that it negotiate rates with providers."

3. Insurer Transparency and Accountability.

The House bill gives the Commissioner of the Exchange the power to demand insurance companies provide clear information (PDF) about how they do business and what they are offering in order to participate in the Exchange:

"Sec. 233. Requiring information transparency and plan disclosure. Requires qualified plans to meet standards established by the Health Choices Commissioner relating to transparency and timely disclosure of plan documents and information, including providing health care providers with information regarding their payments. It also requires the use of plain language in the disclosures (including the issuance of guidance as to what 'plain language' means) and advance notice of changes to the plans."

The Senate bill may include very few such requirements.

As CQ Today reported on November 9th in its article "Insurers Object to Expanding Federal Reporting Power Over Industry":

"The legislation (HR 3962) — which narrowly passed the House on Nov. 7 — includes language that would broaden the FTC's power to issue reports not only on health and medical malpractice insurers but also on the insurance industry as a whole. Under current law, the FTC is barred from issuing reports on any part of the insurance industry unless a specific request is made by a congressional committee.

"More broadly, the insurance industry is overseen at the state level, not by federal regulators. The industry fears that bringing federal regulators into the mix, even just to write reports and studies, could create oversight problems and possibly add new regulatory costs.

"But proponents of the change, which would repeal an exemption granted by Congress in the early 1980s, say that to protect consumers, the FTC needs the ability to study the whole industry, not simply a part of it."

In her Congressional testimony (PDF), Diane Archer described the problem of lack of information currently available in the private health insurance market:

"The health insurance market is broken. In a competitive market, insurers would be marketing to health care users, demonstrating why they deliver the best value health care for people with cancer, diabetes and heart disease. Their message would appeal to the 20% of the population who consume 80% of health care dollars. Instead, if they deliver great care to people with costly needs, they don't want people to know. It's like the automobile companies marketing their cars to people who don't drive much.

"Twelve years ago, in a New York Times Magazine cover story, Helen Darling, then manager of health care strategy and programs for Xerox and now President of the National Business Coalition on Health made this point very succinctly: 'I have been sworn to secrecy by one plan that has the best AIDS program in the world. They don't want people knowing about it. They couldn't handle the results. Ideally, if we lived in a wonderful world, we would want a plan to win prizes for their wonderful care. But in reality that would kill them.'

"To maximize their profits, health plans compete for enrollees least likely to use their product. Therefore, health plans do not advertise the specific treatments and tests covered, the conditions under which they are covered or the price of services. This is precisely the information we need to know.

"Different private plans offer different value health care. The best of them come between doctors and their patients to ensure good care is received. Yet, their medical necessity and utilization review decisions are largely considered proprietary and unknown. And, we don't know whether their interventions add value, or simply increase their profits. For one example, a September New York State Medical Society survey revealed that 90% of doctors said they have had to change the way they treat patients based on restrictions from an insurance company; and 92% said insurance company incentives and disincentives regarding treatment protocols 'may not be in the best interest of the patients.' We need to be able to understand the conditions under which insurers direct the care doctors provide their patients and the extent to which insurer behavior reins in costs and drives value or keeps people from getting needed care."

4. Affordability.

The House bill makes health coverage and health care more affordable (PDF) by providing generous affordability credits and limiting their out-of-pocket costs:

"Sec. 341. Availability through Health Insurance Exchange. Creates affordability credits to ensure that people with incomes up to 400% of federal poverty have affordable health coverage. These credits are phased out according to a schedule defined in the act as individual and family incomes up to 400% of poverty and the credits apply only to Exchange-participating plans. Affordability credits reduce the costs of both premium and annual out-of-pocket spending."

The Senate bill may not be as generous.

As Timothy Jost explains:

"On the whole, the premium subsidies [in the House bill] are much more generous than those found in the Senate Finance Committee but less generous than those in the HELP bill, while the cost-sharing subsidies are generally more generous than those found in either of the Senate bills."

5. Employer Responsibility.

The House bill requires everyone — individuals, government and employers (PDF) — share in the responsibility of guaranteeing access to quality affordable health care to all.

"Employers [with annual payrolls above $500,000] must either provide health insurance to their employees or make a contribution to help fund affordable health insurance. Employers that choose to offer coverage contribute at least 72.5 percent of premium for workers, 65 percent for families. However, if the coverage is unaffordable for low-wage workers, that worker can choose subsidized coverage in the Exchange and the employer makes a contribution to the Exchange. Employers who do not offer qualified coverage contribute 8 percent of their payroll to help cover expenses of employees who seek coverage through the Exchange."

"Small businesses [with annual payrolls below $500,000] are exempt from requirements to offer or contribute to coverage, including the 8 percent payroll contribution for failure to provide health benefits to their workers... There is also a tax credit program to help low-wage small businesses offer coverage to their employees."

The Senate bill may impose few requirements on employers. According to Timothy Jost, "The Senate Finance bill has a much weaker [employer] mandate, but the final bill is likely to include a mandate of some sort."

6. Financing.

The House bill includes progressive financing by requiring the wealthiest one percent of Americans to pay their fair share instead of taxing health care benefits. The bill would impose a 5.4 percent surcharge on taxpayers with adjusted gross income in excess of $1 million (couples) or $500,000 (individuals).

The Senate bill may impose bad health policy by taxing high-premium plans that may simply provide good, comprehensive coverage to people in high-risk occupations like coal miners and firefighters.

One Area the Senate Should Not Follow

The Senate should not include the regressive language on abortion coverage added at the last minute to the House bill through the Stupak Amendment.

As an editorial in the Detroit Free Press explains:

"There are principled stands against abortion. And there are ways in which current law prohibits the kind of 'abortion on demand' decried by abortion opponents — strictures involving minors, the use of federal funds and procedures to end late-term pregnancies.

"But there's nothing principled about the position U.S. Rep. Bart Stupak, D-Menominee, took when he insisted that health care reform include an abortion restriction that goes far beyond current federal law.

"Stupak's amendment, which passed as part of the landmark bill and is credited with bringing along several anti-abortion Democrats (including U.S. Rep Dale Kildee, D-Flint), will make it more difficult for poor women to obtain abortions. The amendment in effect prevents insurance companies from participating in the bill's insurance exchanges — where many low-income families and small businesses will go for their policies — unless they exclude abortion coverage from any policy that might be purchased by someone who qualifies for a federal subsidy.

"It went further than a compromise already written into the health care legislation that would have segregated federal funds in the exchange to comply with existing laws that prohibit federal funding of discretionary pregnancy terminations."

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future