Healthcare Reform Bill Close to Being Finalized

SIIA's Government Relations Staff has learned from our contacts in House and Senate Leadership offices that the Congressional negotiators are reaching agreement on many of the most contentious differing issues. While at any point in the process, negotiations can hit a time-delaying snag, all indications at this moment point to negotiations possibly being completed as early as within the next 5 days. Once that happens, the agreed upon language will be presented to rank-and-file Members to see where support is and if there is enough support for both the House and Senate to pass the bill. The House needs only a simple majority, where the Senate needs 60 Senators to pass. Once enough commitments are made, the bill will be shipped to the Congressional Budget Office for an official cost and coverage estimate. Upon CBO's completion, the bill will be ready for House and Senate consideration. SIIA's Staff estimate that official floor consideration would take place approximately 3 weeks after negotiators reach an agreement.

Democrat Leadership, White House Reach Deal with Labor on “Cadillac” Tax - Most Union Plans Exempted

One of the more contentious issues that Congressional negotiators have been debating over are the differences in the tax increase provisions that will be a large part of the reform's financing. The Senate bill would place a tax on generous health coverage, the House's bill increases taxes on middle and high-income earners. According to SIIA's Government Relations Staff's sources, a deal has been reached on this matter. The deal will essentially exempt the “Cadillac” tax for all union collectively bargained health benefits, except for State and Federal unions, which will have a delay in having the tax accessed until 8 years after implementation.

SIIA Officially Raises Concerns to Capitol Hill

SIIA has expressed the following concerns that negotiators will be considering to our contacts on the Hill. To view a summary of the Senate's bill (the main vehicle for a final bill), click here.

Employee “Free Choice” Vouchers:

SIIA strongly opposes the provision added into the Senate bill that would force employers to pay for their employees to opt out of their plan. The group most likely to take advantage of these vouchers would be the younger and healthier populations of the group. These beneficiaries have very low health costs to the plan and as such, subsidize the higher-cost beneficiaries. It is likely that this population would opt for the voucher to purchase less-expensive coverage through the exchange in order to obtain the rebate. When this low-cost population leaves the employer, the health of the risk pool decreases and costs will therefore increase for all remaining.

Group health plans are comparatively the most cost-efficient as they are able to spread administrative costs and risk among a large group of participants. Group plans also have strong negotiating power with providers, a tool that also helps to lower costs. Decreasing the size of a plan's pool will eliminate these very effective cost-saving drivers.

Lastly, allowing employees to leave their coverage for a less comprehensive plan gives a financial incentive for many to be underinsured. This is counterintuitive to the original goals of healthcare reform.

Instead of forcing an employer to offer a “free choice” voucher for their employees to flee their plan, Federal tax subsidies targeted for use by low-income workers should be allowed to be used for coverage in an employer plan. Employers would benefit by ensuring that their employees have adequate healthcare coverage. Employees would benefit through a larger pool size and the economies of scale that go along with it. And the Federal government would benefit by being able to focus their limited resources on those who truly have no access to adequate healthcare coverage.

Prohibition on Annual and Lifetime Limits

SIIA is strongly concerned on the effects of prohibiting any limits whatsoever that plans can impose on an annual basis. Each year, a plan goes through its underwriting process, estimating what its liability will be, and then calculates premiums and contributions accordingly. Prohibiting these limits will result in plans having open-ended risk exposure and a complete inability to accurately price a plan effectively. Assuming a plan somehow estimates a pricing point, one major catastrophic claim would cause at best; significant financial hardship to the plan sponsor as well as fellow beneficiaries who by design, would ultimately contribute to pay for that claim, and at worst; cause the plan to become financially insolvent resulting in a loss of healthcare coverage for all plan beneficiaries. Again, these outcomes run counter to the goals of healthcare reform.

Tax Credits Prohibited From Use In Employer Plans

This provision would result in anyone eligible for low/middle class tax credit, to leave the employer-sponsored plan. A flow of beneficiaries out of the plan, negatively affects the risk-pool, reduces the spread of administrative costs, and limits the plan's negotiating power with providers. As most young employees are at the lower end of the salary spectrum, they are the ones most likely eligible for tax credits and the ones most likely to leave the plan for the exchange where they can use those credits. Along with decreasing the risk pool, this would significantly decrease the health of the risk pool, further raising costs for those remaining in the pool. The provision also would be a government imposed advantage for non-employer plans.

Elimination of Tax Exclusion for Employer Medicare Part D Subsidy:

Proposed is an elimination of the current tax subsidy plans receiving for providing Medicare eligible beneficiaries prescription drug coverage. The loss of the advantageous tax status of the Part D subsidy will cause many plan sponsors to no longer be able to afford their retirees prescription drug coverage. For those employers who do continue to offer retiree drug coverage, it is highly-likely that they will increase an employee's cost-share to make up some or all of their additional tax liability.

Mandated Plan Regulation - Plan Structure/Reporting Requirements

There are currently numerous proposed provisions that would place numerous requirements on mandated benefits, plans structure and plan administration. While many plans make most, if not all of the required information available in a manner preferable to their beneficiaries, it is likely that the Federal government will impose burdensome and costly regulations on how and when to do so. Sponsors will need to hire additional support for such efforts. As self-insured health plans act as non-profit entities, sponsors have no choice but to pass increased costs on to the beneficiaries.

Appeals Process Implementation:

The proposed appeals provisions would force certain self-insured plans to have numerous appeals mechanisms in place, most onerous being a requirement to allow beneficiaries the opportunity to request an external review. This provision will force plans to maintain costly appeals procedures as well as a team of legal staff. This provision would also likely increase liability for plan sponsors and administrators. Recourse provisions currently available under ERISA strike a balance between providing an adequate process of appeals for plan beneficiaries and allowing for manageable and predictable plan costs for sponsors.

SIIA Urges the Self-Insurance Industry to Make our Message Heard

SIIA urges all those in the self-insurance industry interested in preserving the way we do business and the benefits we provide to 75 million Americans covered by self-insured plans, to use the resources provided in SIIA's Grassroots Toolkit and contact their Members of Congress to voice our message.

The threat to the self-insurance industry and the employer-based system under which we operate in has never been more significant. Now is the time to voice our powerful and unified voice to politicians in Washington that we will not stand for any proposals that would cause significant damage to our industry and to those lives we cover.

SIIA's Grassroots Toolkit can be found at www.siia.org/grassroots. If you have any questions, or would like any further information, please contact SIIA's Government Relations office.