Health System Reform Health System Reform OutlookOutlook

October 21, 2009October 21, 2009

Janet Trautwein, CEOJanet Trautwein, CEONational Association of Health UnderwritersNational Association of Health Underwriters

Predicting the future is tough businessPredicting the future is tough business"I THINK THERE IS A WORLD MARKET FOR MAYBE FIVE "I THINK THERE IS A WORLD MARKET FOR MAYBE FIVE

COMPUTERS." COMPUTERS."

-- THOMAS WATSON, PRESIDENT OF IBM, 1943-- THOMAS WATSON, PRESIDENT OF IBM, 1943

““BARACK OBAMA IS NOT GOING TO BEAT HILLARY CLINTON IN BARACK OBAMA IS NOT GOING TO BEAT HILLARY CLINTON IN A SINGLE DEMOCRATIC PRIMARY. I’LL PREDICT THAT RIGHT A SINGLE DEMOCRATIC PRIMARY. I’LL PREDICT THAT RIGHT NOW.”NOW.”

-- WILLLIAM KRISTOL, DECEMBER, 2006-- WILLLIAM KRISTOL, DECEMBER, 2006

"TWO YEARS FROM NOW, SPAM WILL BE SOLVED.""TWO YEARS FROM NOW, SPAM WILL BE SOLVED."

-- BILL GATES, FOUNDER OF MICROSOFT, 2004-- BILL GATES, FOUNDER OF MICROSOFT, 2004

““I PREDICT THE INTERNET WILL SOON GO SPECTACULARLY I PREDICT THE INTERNET WILL SOON GO SPECTACULARLY SUPERNOVA AND IN 1996, WILL CATASTROPHICALLY SUPERNOVA AND IN 1996, WILL CATASTROPHICALLY COLLAPSE." COLLAPSE."

-- ROBERT METCALFE, FOUNDER OF 3COM, 1995-- ROBERT METCALFE, FOUNDER OF 3COM, 1995

““BEAR STEARNS IS FINE! DON’T MOVE YOUR MONEY FROM BEAR STEARNS IS FINE! DON’T MOVE YOUR MONEY FROM BEAR!!”BEAR!!”

-- JIM CRAMER, -- JIM CRAMER, MAD MONEYMAD MONEY HOST, MARCH 2008 (6 DAYS LATER, SHARES HOST, MARCH 2008 (6 DAYS LATER, SHARES PLUNGED 90%)PLUNGED 90%)

Overview of Congressional ActionOverview of Congressional Action• Three House committees with responsibility over health Three House committees with responsibility over health

care marked up one bill (H.R. 3200) and passed different care marked up one bill (H.R. 3200) and passed different versions out of each committee in Julyversions out of each committee in July

• Senate HELP committee marked up bill and passed it out of Senate HELP committee marked up bill and passed it out of committee on July 15committee on July 15

• Senate Finance Committee passed it’s mark on October 13 Senate Finance Committee passed it’s mark on October 13 by a vote of 14-9 with Senator Olympia Snowe (R-ME) as by a vote of 14-9 with Senator Olympia Snowe (R-ME) as the only GOP supporterthe only GOP supporter

• Finance and HELP bill being merged for floor Finance and HELP bill being merged for floor consideration at the end of the monthconsideration at the end of the month

• Potential House floor action on a “manager’s amendment” Potential House floor action on a “manager’s amendment” to H.R. 3200to H.R. 3200 likely to follow Senate likely to follow Senate

Key Senate PlayersKey Senate Players

Key House PlayersKey House Players

President ObamaPresident Obama

“If you like your health plan, you can keep it, the only thing that will change is that you’ll pay less.”President Barack Obama

President ObamaPresident Obama• Key promises:Key promises:

• Undocumented immigrants will not be coveredUndocumented immigrants will not be covered• No public financing of abortionsNo public financing of abortions• If you like your plan you can keep itIf you like your plan you can keep it• Existing coverage will not change, just become better and less Existing coverage will not change, just become better and less

expensiveexpensive• Public option, if there is one, will be limited to small employers Public option, if there is one, will be limited to small employers

and uninsured individualsand uninsured individuals• Bill will not increase federal deficit by one pennyBill will not increase federal deficit by one penny• Bill will cost about $900 billion and be financed most through Bill will cost about $900 billion and be financed most through

administrative savings and cuts to waste, fraud and abuse in the administrative savings and cuts to waste, fraud and abuse in the current systemcurrent system

• Still allowing Congressional lead in negotiations but staff is Still allowing Congressional lead in negotiations but staff is becoming more active behind the scenesbecoming more active behind the scenes

• Main activity is public appearances and the pressMain activity is public appearances and the press

Congressional Budget OfficeCongressional Budget Office

• The CBO is responsible for putting a price tag or “score” on all of the bills

• Limited to 10 year budget window

• Limited to the law without changes, actions of political appointments

• Federal government costs only

• Doesn’t include infrastructure costs

Key IssuesKey Issues• Government-Run Public Plan (or Government-Run Public Plan (or

Co-Operative? Or Trigger?)Co-Operative? Or Trigger?)

• Employer MandateEmployer Mandate

• Will you really be able to keep Will you really be able to keep the coverage you have?the coverage you have?

• Structure of the “Exchange” or Structure of the “Exchange” or “Gateway” “Gateway”

• Is an individual mandate Is an individual mandate enforceable?enforceable?

• Cost containment Cost containment

• Cost of the PlanCost of the Plan

Public Plan? Co-Op? Trigger? State Option?Public Plan? Co-Op? Trigger? State Option?

• Concerns about effects on private Concerns about effects on private insurance marketsinsurance markets

• Crowd-out, unlevel playing fieldCrowd-out, unlevel playing field

• Cost controls likely grounded in Cost controls likely grounded in Medicare price fixing, which already Medicare price fixing, which already shifts $1,800 in annual premium shifts $1,800 in annual premium surcharges to private insurance (family surcharges to private insurance (family coverage)coverage)

• ““Trigger” mechanism possibleTrigger” mechanism possible

• Non-profit “Cooperatives” considered as Non-profit “Cooperatives” considered as alternativealternative

• State option alternatives from Senators State option alternatives from Senators Cantwell and CarperCantwell and Carper

Will You Really Be Able to Keep Your Will You Really Be Able to Keep Your Current Plan?Current Plan?

•Despite the oft-repeated promise that if you like your current health insurance policy you can keep it, the bills under consideration all contain very strict grandfathering provisions

•New plan rules include rating restrictions, an essential benefits package that is far “richer” than many current plans, new taxes on insurers and other aspects of the industry that will be passed to consumers, and a weak individual mandate

•New AHIP/PWC study concludes that by 2019 the average family will paying $4,000 a year more in premiums than they would without reform

AHIP’s CEO Karen Ignagni

Is An Individual Mandate Is An Individual Mandate Enforceable?Enforceable?

• Bills require all Americans to obtain specific levels of health Bills require all Americans to obtain specific levels of health insurance coverageinsurance coverage

• Intent is good—many uninsured are young and healthy, and Intent is good—many uninsured are young and healthy, and inclusion in the insured risk pool would stabilize costsinclusion in the insured risk pool would stabilize costs

• Insurance carriers could underwrite policies without taking into Insurance carriers could underwrite policies without taking into account preexisting conditions and basing rates on health account preexisting conditions and basing rates on health conditions if EVERYONE is in the systemconditions if EVERYONE is in the system

• Questions:Questions:

• Costs of subsidies needed to make sure everyone can afford Costs of subsidies needed to make sure everyone can afford coveragecoverage

• What counts as qualified health benefits plan?What counts as qualified health benefits plan?

• Is tax system effective enforcement? Is tax system effective enforcement?

• If enforcement doesn’t work, what is the impact on costs?If enforcement doesn’t work, what is the impact on costs?

• Impact on Employer-Sponsored plans?Impact on Employer-Sponsored plans?

Employer MandateEmployer Mandate• House Bill and Senate HELP Bill include outright mandates for House Bill and Senate HELP Bill include outright mandates for

employers to provide employees with coverage employers to provide employees with coverage

• Employers told what kind of coverage to offer, to whom they must offer it Employers told what kind of coverage to offer, to whom they must offer it (including part time employees), and how much they have to pay (including part time employees), and how much they have to pay

• Would affect fully insured and self-insured plans (COBRA equivalence); Would affect fully insured and self-insured plans (COBRA equivalence); effectively end ERISA preemption effectively end ERISA preemption

• If employers don’t comply with every specific of the mandate, they are If employers don’t comply with every specific of the mandate, they are fined, and the fine does not go toward the cost of coverage for employeesfined, and the fine does not go toward the cost of coverage for employees

• Exemptions for small employers (to a certain degree) from the mandate. Exemptions for small employers (to a certain degree) from the mandate. President Obama promised employers of less than 50 will be exemptPresident Obama promised employers of less than 50 will be exempt

• Senate Finance Committee does not impose a direct mandate on Senate Finance Committee does not impose a direct mandate on employers to provide coverage. It requires employers of more than 50 employers to provide coverage. It requires employers of more than 50 people to pay a fine for low income employees who aren’t offered people to pay a fine for low income employees who aren’t offered “affordable coverage” and instead obtain subsidized coverage through the “affordable coverage” and instead obtain subsidized coverage through the exchangeexchange

What’s An Exchange?What’s An Exchange? • Modeled after 2006 reforms enacted in MassachusettsModeled after 2006 reforms enacted in Massachusetts

• Aim is competition among plans on price of coverage and Aim is competition among plans on price of coverage and minimizing variations of benefits minimizing variations of benefits

• Intended to provide consumers / employers with transparent Intended to provide consumers / employers with transparent information about costs and covered benefits, as well as a plan information about costs and covered benefits, as well as a plan performance and subsidiesperformance and subsidies

• The House bill would establish one big national exchange, while the The House bill would establish one big national exchange, while the Senate bills establish separate exchanges at the state levelSenate bills establish separate exchanges at the state level

• The House and Senate HELP bills have an underlying purchasing The House and Senate HELP bills have an underlying purchasing pool component to the structure, but the Finance bill exchanges use a pool component to the structure, but the Finance bill exchanges use a portal structure portal structure

• Exchange participation is currently limited to individuals and small Exchange participation is currently limited to individuals and small groups, except in the Senate Finance proposalgroups, except in the Senate Finance proposal

• Could result in higher costs for employers if young, healthy opt out Could result in higher costs for employers if young, healthy opt out of employer plans for government planof employer plans for government plan

Bending the Cost Curve???Bending the Cost Curve???• All of the bills contain efficiency improvements, payment All of the bills contain efficiency improvements, payment

reforms and a greater focus on wellness and preventionreforms and a greater focus on wellness and prevention

• Almost all of the provisions targeted at public programs, not the Almost all of the provisions targeted at public programs, not the private marketprivate market

• None include substantive tort reform—would extend jurisdiction None include substantive tort reform—would extend jurisdiction over the bills to the Judiciary committeesover the bills to the Judiciary committees

• Senate HELP and Finance bills include improvements to Senate HELP and Finance bills include improvements to employer wellness programs, rating for wellness factors and tax employer wellness programs, rating for wellness factors and tax incentives for employers that provide qualified wellness incentives for employers that provide qualified wellness programs to their employeesprograms to their employees

• Senate Finance mark is the most serious attempt to constrain Senate Finance mark is the most serious attempt to constrain rising health care costs to date, with provisions on disease rising health care costs to date, with provisions on disease prevention and wellness, improving the quality and efficiency of prevention and wellness, improving the quality and efficiency of health care and value-based purchasing health care and value-based purchasing

Cost FactorCost Factor• CBO cost analysis of H.R. 3200 is $1.3 trillion dollars over 10 yearsCBO cost analysis of H.R. 3200 is $1.3 trillion dollars over 10 years

• Not deficit neutral and “Not deficit neutral and “relative to current law, the proposal would relative to current law, the proposal would probably generate substantial increases in federal budget deficits probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.”during the decade beyond the current 10-year budget window.”

• Financed by Medicare cuts and an income-tax surcharge on the Financed by Medicare cuts and an income-tax surcharge on the wealthiest of Americanswealthiest of Americans

• Senate HELP bill also scores over $1 trillion—no payment Senate HELP bill also scores over $1 trillion—no payment mechanismmechanism

• Senate Finance bill score currently hovers around $840 billion—Senate Finance bill score currently hovers around $840 billion—score is just an estimate because its not in legislative languagescore is just an estimate because its not in legislative language

• Paid for by excise tax on most expensive plans, Medicare cuts, new Paid for by excise tax on most expensive plans, Medicare cuts, new taxes on health industry sectors including insurers, pharmaceutical taxes on health industry sectors including insurers, pharmaceutical companies and medical device manufacturerscompanies and medical device manufacturers

Make Your Voice Heard!Make Your Voice Heard!• GRIP Program

• HUPAC Distributions

• Phone calls, letters, emails and Faxes

• Consumer/Employer Outreach

• Get Health Care Right

• Social Media

• Op-Eds and Letters to the Editor

• Media Outreach

• Radio Advertisements and PSAs