• Senate Committee Adds Public Option, Trims Cost Of Health Reform
• House Hearing Discusses Essential Coverage Elements In Health Reform
• IOM Report Identifies Top 100 Clinical Effectiveness Research Priorities

• HHS Releases State Reports Highlighting Need For National Health Reform
• Oregon health plans must cover treatment of traumatic brain injuries

• Wal-Mart, SEIU, Think Tank Support Employer Mandate
• Commonwealth Fund Compares Alternative Paths To Health Reform
• Employers concerned about Obama's plans for health care reform
• Restaurant industry group seeks High Court review of San Francisco pay-or-play ordinance

Senate Committee Adds Public Option, Trims Cost Of Health Reform

On July 1, Sens. Ted Kennedy (D-Mass.) and Christopher Dodd (D-Conn.) distributed a revised and less expensive version of their health reform plan that originally was proposed in June and estimated by the Congressional Budget Office to cost $1.0 trillion over 10 years.

The revised proposal, the Affordable Health Choices Act, which adds a public insurance option and an employer pay-or-play requirement and which the CBO estimates would cost about $597 billion over 10 years, will form the basis of a markup session the Senate Health Education, Labor, and Pensions (HELP) Committee plans to begin this week.

According to an explanation released by Sens. Kennedy and Dodd to the HELP Committee, the public option, called the Community Health Insurance Option, would be run by the Department of Health and Human Services. The government would pay for the first three months of claims as a loan to be repaid over time. For at least the first two years, the public option also would be eligible for government-subsidies which would offset or reclaim excessive losses and gains which could result during the start-up period. Subsequently, premiums would be set to make the public option self sufficient. This would make the public health insurance option quickly available in all areas of the country.

The public option would be one of the choices in the proposed Gateway Exchange, and would follow the same rules as private plans for defining benefits, protecting consumers, and setting premiums that are fair and based on local costs. Under the health insurance exchange, or Affordable Health Benefit Gateway, the federal government would provide grants to states to facilitate the establishment of gateways in each state. A gateway would facilitate the purchase of health insurance at an affordable price by qualified individuals and groups.(modeled after the Federal Employee Health Benefits Program). There could be more than one gateway per state or one regional gateway for several states.

The payment rates paid by the public option would be no more than the local average private rates – but could be less. The Secretary would negotiate these rates.

Shared Responsibility

The current HELP proposal includes employer and individual requirements. Employer requirements would be as follows:
Employers who do not offer adequate coverage to their full-time workers would be assessed an annual fee of $750 for each uncovered employee;
Employers who do not offer adequate coverage to their part-time workers will be assessed an annual fee of $375 for each uncovered employee;
Firms with fewer than 25 employees will be not assessed.
Employers must contribute at least 60 percent to the cost of monthly premiums to avoid the assessment;
Assessments will be collected quarterly.

The CBO estimated the employer assessments would raise approximately $52 billion over 10 years; however, small business credits would cost approximately $56 billion.

Individuals who do not to purchase adequate medical coverage could fined up to $1,000. The CBO estimated the individual fines would raise around $36 billion over 10 years.

House Hearing Discusses Essential Coverage Elements In Health Reform

"For health care reform to provide all Americans with secure coverage, changes must be adopted and enforced to ensure that health insurance is always available, affordable, and adequate," Karen Pollitz, research professor at Georgetown University’s Health Policy Institute, testified at a June 25 House Energy and Commerce Committee hearing on the Tri-Committee Draft Proposal for Health Care Reform. Ms. Pollitz addressed the first five titles of the draft legislation.

Essential benefits package—The draft proposal includes a maximum out-of-pocket limit whether people receive care in or out of network. For many proposals, the benchmark standard for coverage adequacy is the Federal Employees Health Benefits Program’s (FEHBP) Blue Cross/Blue Shield Standard Option plan that currently covers most federal employees and many members of Congress. However, the essential benefits package outlined in the draft proposal appears to provide less coverage than the FEHBP Standard Option, and Ms. Pollitz recommended that additional resources be added to the bill to raise the minimum benefits standard to the level of the FEHBP. In addition, the standards must be monitored and strengthened regularly to ensure benefits adequacy.

The draft proposal also provides for the sale of certain so-called excepted benefits in traditional health insurance markets, including cancer policies and other dread disease and limited benefit policies. "Consumers are vulnerable to abusive marketing practices when it comes to these policies and state regulators have long warned they are a poor value," Ms. Pollitz warned. "At a minimum, such policies should contain warning labels that they do not constitute qualified health benefit plans and that coverage is duplicative of that provided under qualified health benefit plans."

Subsidies and Medicaid expansion—Instead of setting the qualification for the subsidy for health insurance at a percentage of the federal poverty level, the Committee might consider a rule that no individual or family will have to pay more than 10% of income on health insurance premiums (with lower limits, say 5% of household income, set for low-income individuals, as the Tri-Committee draft does). "Cutting subsidies off entirely at an arbitrary income level can leave families vulnerable," Ms. Pollitz stated, "A subsidy system that caps people’s liability for premiums at no more than 10% of income would be more protective and subsidies would taper off gradually, avoiding a cliff."

Private health insurance market reforms—The draft legislation would require private insurers to guarantee issue and renewability and bar insurers from denying coverage or basing premiums on health status or health history. The legislation also would provide for network adequacy standards, timely claims payments, and minimum loss ratios of at least 85%. However, the draft proposal would allow rating for age, and Ms. Pollitz recommended that legislators consider tighter limits on age adjustments to premiums or that they eliminate such age-based premium adjustments altogether, or seniors (especially baby boomers) will be unable to afford coverage.

Oversight and enforcement—For market reforms to be meaningful, Congress must authorize and appropriate resources for oversight and enforcement, both at the federal level—where resources are particularly inadequate—and the state level. A witness for the Department of Labor testified that after HIPAA was enacted, the DOL had resources to review each employer-sponsored health care plan under its jurisdiction once every 300 years. In addition, the Centers for Medicare and Medicaid Services, which is responsible for oversight of HIPAA private health insurance protections, last summer had only four part-time staff dedicated to HIPAA health insurance issues. "In order for new promised consumer protections to be real, strong oversight and enforcement will be essential," Ms. Pollitz emphasized.

Establishment of a national health insurance exchange—To protect against adverse risk selection, requirements must be identical, in terms of design and price, for all qualified health care benefit plans, whether they are sold in or outside of a health insurance exchange. Furthermore, sanctions for violations of market rules, as well as anti-dumping (into the exchange) rules, must be the same for insurers that sell coverage outside of the exchange as for those in the exchange.

A public plan option—Offered in the exchange along with private plans, a public plan must meet the requirements of other qualified health care benefit plans offered by private insurers. A public plan option "can address failures of competitive health insurance markets today," Ms. Pollitz noted.

"First, it offers consumers an alternative to private health plans that, for years, have competed on the basis of discriminating against people when they are sick. If consumers are required to buy health insurance, having a public coverage option that does not have to compete on the basis of profits will give many peace of mind.

"Second, a public plan option will promote cost containment," Ms. Pollitz continued. "Research shows that health insurance markets today do not compete to hold down costs. Rather, insurers and providers negotiate to pass cost increases through to policyholders while maintaining and even growing corporate profits." A public plan initially would pay medical providers based on the Medicare fee schedule, but at a higher level than Medicare pays; negotiate prescription drug payments with drugmakers; offer bonuses to providers that participate both in Medicare and the public plan; and develop innovative payment methods that contain costs and promote quality. "This will help move the market in the direction of competition based on the efficient delivery of health care services," Ms. Pollitz explained.

Shared responsibility—The draft proposal would continue the employer role in the provision of health insurance, allow individuals to keep their current coverage if they are happy with it, and add a play-or-pay mandate for employers. These provisions "will help keep employer resources in the financing system," Ms. Pollitz stated.

IOM Report Identifies Top 100 Clinical Effectiveness Research Priorities

At the behest of Congress, the Institute of Medicine (IOM) has issued a report recommending the top 100 health topics that should be reviewed and funded first, as well as funding for new national comparative effectiveness research. This project would identify health care services that work best for certain medical conditions. The IOM report also specifies actions and resources needed to ensure that this comparative effectiveness research initiative will be sustained through a continuous process for updating priorities and ensuring that the results are put into clinical practice. "Effective coordination and governance among the agencies and disciplines involved will be crucial for ensuring the sustainability of the enterprise," according to the report, Initial National Priorities For Comparative Effectiveness Research.

Comparative effectiveness research weighs the benefits and detriments of various ways to prevent, diagnose, treat, or monitor medical conditions to determine which work best for particular types of patients and in different settings and circumstances. Study results can help consumers, clinicians, policymakers, and purchasers make more informed decisions, ultimately improving care for individuals and groups, the IOM explained.

An IOM committee developed the priority list as part of a $1.1 billion effort, outlined in the American Recovery and Reinvestment Act of 2009 (ARRA) to improve the quality and efficiency of health care through comparative effectiveness research. The committee’s report provides independent guidance, taking into consideration extensive public input, to Congress and the Secretary of Health and Human Services (HHS) on how to spend $400 million on comparative effectiveness research.

"Health care decisions too often are a matter of guesswork because we lack good evidence to inform them," said IOM committee cochair Harold C. Sox, editor of Annals of Internal Medicine for the American College of Physicians of Internal Medicine. "For example, we spend a great deal on diagnostic tests for coronary heart disease in this country, but we lack sufficient evidence to determine which test is best."

"This report lays the foundation for an ongoing enterprise to provide the evidence that health care providers need to make better decisions and achieve better results," added cochair Sheldon Greenfield, professor of medicine and executive director of the University of California at Irvine Health Policy Research Institute. "To make the most of this enterprise, HHS will need to ensure that the results are translated into practice and that the public is involved in priority-setting to ensure that the research is relevant to everyday health care."

Health care professionals, consumer advocates, policy analysts, and others submitted 1,268 unique topic suggestions through an online form that was open to any individual or organization, and through presentations at public meetings. The 100 topic priority list reflects a range of clinical categories, populations to be studied, categories of interventions, and research methodologies, the IOM explained. It was developed independently from other comparative effectiveness research of other organizations recruited for the ARRA task.

http://www.nap.edu.

HHS Releases State Reports Highlighting Need For National Health Reform

On June 29, the Department of Health and Human Services (HHS) Secretary Kathleen Sebelius released a series of reports that detail how each state would benefit from national health care reform. Each report includes information on health care costs and quality.

"In states across the country, health care costs are going up and families are struggling to get the quality care they need and deserve," Ms. Sebelius said. Each state report includes the same information, such as:

The percentage increase in family premiums since 2000. For example, in Illinois, family premiums have increased 89% since 2000.

The hidden tax that individuals and families pay as a result of subsidizing care for the uninsured. In New York, businesses and families shoulder a hidden health care tax of approximately $800 per year on premiums as a result of subsidizing the costs of the uninsured.

Percentage of state residents without insurance. In California, 19% of the population is uninsured, and 71% of them are in families with at least one full-time worker.

Overall quality ratings for health care in each state. The overall quality of care is rated as "average" in Wyoming, while the quality of care is rated as "weak" in Georgia.

The impact of failing to adequately invest in preventive measures that could prevent disease and illness. For example, in Missouri, 14% of children are obese; 23% of women older than age 50 have not received a mammogram in the past two years; and 39% of men older than age 50 have never had a colorectal cancer screening.

For more information, visit http://www.healthreform.gov/healthcarestatus.html.

Oregon health plans must cover treatment of traumatic brain injuries

A new law in Oregon will require health benefit plans, health care service contractors, and trusts carrying out multiple employer welfare arrangements (MEWAs) to cover medically necessary therapy and services for the treatment of traumatic brain injury.

The measure also expands existing coverage mandates for orthotic and prosthetic devices, as well as acupuncture services performed by a licensed acupuncturist, to health care service contractors and MEWA trusts.

The law applies to health benefit plans, policies or certificates issued or renewed on or after January 1, 2010 (S. 381 (L. 2009), enacted June 18, 2009).

Wal-Mart, SEIU, Think Tank Support Employer Mandate

On June 30, Mike Duke, president and chief executive officer of Wal-Mart Stores; Andrew W. Stern, president of the Service Employees International Union; and John D. Podesta, the president of the Center for American Progress, wrote a letter to President Barack Obama that supports "an employer mandate which is fair and broad in its coverage."

Most employer groups, including the U.S. Chamber of Commerce, the National Retail Federation, and the National Federation of Independent Business, oppose an employer.

The June 30 letter notes that supporting health care reform legislation will "require employers to consider the trade-off of agreeing to a coverage mandate and additional taxes versus the promise of reduced health care cost increases."

The three groups noted: "Health care reform without controlling costs is no reform at all. We are for shared responsibility. Not every business can make the same contribution, but everyone must make some contribution. We are for an employer mandate which is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry level employees." The reference to entry level employees apparently is aimed at resisting proposals in Congress that would impose a more burdensome healthinsurance requirement for companies that have lower-wage workers. Wal-Mart currently employs more than 30,000 employees who are covered by Medicaid rather than by a Wal-Mart plan.

The groups also stated in the letter that "Support for a mandate also requires the strongest possible commitment to rein in health care costs. Guaranteeing cost containment is essential. One way to ensure savings was recently advanced by former Senate Majority Leaders Howard Baker, Tom Daschle, and Bob Dole.

Neil Trautwein, vice president of the National Retail Federation, is reported to have said in response to the letter, "We are surprised and disappointed by Wal-Mart’s choice to embrace an employer mandate in exchange for a promise of cost savings."

The mandate "the groups in this letter support is the worst incarnation, the most dangerous policy," said James Gelfand, senior manager of health policy for the U.S. Chamber of Commerce. Earlier in June, Mr. Gelfand also wrote that an employer mandate and a public plan option "would not reform the health care system rather they would unravel it and badly pound our economy."

Wal-Mart has improved its health care benefits in recent years, including cutting the waiting time in half for earning benefits for both full- and part-time employees and offering more plan choices. About 52% of Wal-Mart's 1.4 million U.S. employees are covered by company-provided insurance, up from 46.2% three years ago.

Commonwealth Fund Compares Alternative Paths To Health Reform

A recent report from the Commonwealth Fund analyzes three alternative paths to reform and present estimates of impacts on health spending. Included are the following approaches:

1. a public health plan paying providers at Medicare rates, offered alongside private plans in a national health insurance exchange;
2. a public plan paying providers at rates set midway between Medicare and private plan rates, offered alongside private plans in an insurance exchange; and
3. no public plan, with only private plans offered to employers and individuals through an insurance exchange.

All three approaches, if combined with Medicare payment and system reform, would produce substantial savings over time, but option 1 would yield the most savings, according to the report—$3.0 trillion in cumulative health system savings from 2010 to 2020, compared with $2.0 trillion (option 2) and $1.2 trillion (option 3).

Although all three paths would achieve the goal of health insurance coverage for all, each would have different implications for major stakeholders and sources of coverage. Most important, these approaches would slow the growth of health spending to varying degrees and have different federal budget implications.

According to the Commonwealth Fund, the following results are likely under the three alternatives:

Health system savings. All three paths would produce substantial health system savings over the 11-year period from 2010 through 2020, with cumulative savings of $3.0 trillion under the Public Plan with Medicare Payment Rates scenario, $2.0 trillion under the Public Plan with Intermediate Payment Rates scenario, and $1.2 trillion under the Private Plans scenario.

Bending the curve in health spending. The currently projected 6.5% annual rate of growth in national health expenditures over the 2010–2020 period would be reduced to 5.2% with the Public Plan with Medicare Payment Rates path, 5.6% with the Public Plan with Intermediate Payment Rates path, and 5.8% with the Private Plans path. The Public Plan with Medicare Payment Rates approach is the most aggressive in controlling costs but still slows health care cost growth less than the 1.5-percentage-point annual savings commitment recently offered by industry groups.

Expanded coverage. Under all three scenarios, the insurance expansion would bring about near-universal coverage. The number of uninsured would drop from an estimated 48 million in 2009 (16% of the population) to 4 million by 2012 (1% of the population), with that extent of coverage maintained through the end of the decade Absent reform, the number of uninsured is projected to rise to at least 61 million by 2020.

Impact on premiums. Estimates indicate that premiums for the public plan choice in the Public Plan with Medicare Payment Rates path would initially be 25% below those currently available for a comparable benefit package in the private individual/small firm market and 16% lower under the Public Plan with Intermediate Payment Rates scenario. Private plan premiums would initially be 3% lower within the exchange as it facilitates the process of choosing plans and reduces administrative costs, especially for individuals and small businesses.

Effective private-sector cost containment. Offering a public health insurance plan as an alternative choice should be a catalyst for private plans to innovate in the way they operate and pay for care. It would help them reduce their administrative costs and implement payment and system reforms that lead to more appropriate utilization, better care, and slower cost growth—and, in the process, contribute to reduced premiums. Community health plans partnering with integrated health care delivery systems in particular have considerable potential to achieve economies through redesign of care, control of chronic conditions, and prevention of avoidable hospitalizations. Private plans could also be given the authority to adopt public plan payment methods and rates. If private plans adopt effective cost-containment measures sufficient to slow a rise in their premiums relative to trends in public plan premiums, over a three-to-five-year period public plan premiums and private plan premiums within the exchange would be roughly comparable.

Impact on employer costs. In all three scenarios, employers are required to cover workers or contribute 7% of workers’ earnings up to $1.25 per hour to a health insurance fund. As a result, those employers that do not now cover their employees would bear added cost. However, employers that now cover their workers would benefit from insurance, payment, and system reforms that lower insurance premiums and slow future growth in health care costs. Employers would fare best when their employees have access to a public health insurance plan that provides value for the premium dollar. Over the 2010–20 period, payment and system savings with the Public Plan with Medicare Payment Rates path would offset any additional costs that health care reform might produce for employers and workers as slower premium growth would result in net cumulative employer savings of $78 billion—although the effects on different employers would vary. Employers would incur $163 billion in increased cost under the Public Plan with Intermediate Payment Rates path and $579 billion under the Private Plans path over the 2010–20 period.

For more information, visit http://www.commonwealthfund.org.

Employers concerned about Obama's plans for health care reform

By wide margins --and regardless of their personal political affiliation --those who are responsible for structuring and managing employer-sponsored health plans expressed serious concerns about many features of health care reform that President Obama and several congressional leaders have embraced and the absence of sufficient attention to improving the quality of health care and containing the costs of health coverage. This is according to the results the second annual Corporate Health Care Policy Forecast Survey, conducted by Miller & Chevalier Chartered and the American Benefits Council.

"Clearly, this is a group of voters that supports health care reform and supports the President. A higher percentage of this group than the country as a whole --including a quarter of those who are Republicans --voted for President Obama," said James A. Klein, president of the American Benefits Council. "Yet, they are very concerned about several issues that are front and center right now. The people responsible for employer-sponsored health plans covering over 130 million Americans believe it is vital that key elements of reform be properly addressed."

The survey results also confirm that nearly unanimously, business leaders believe maintaining the federal framework of ERISA, is vital to continuing employer-sponsored coverage. Regardless of their company's size, geography, industry or even the respondent's own political affiliation, respondents overwhelmingly support maintaining ERISA standards and oppose individual regulation at the state level.

Restaurant industry group seeks High Court review of San Francisco pay-or-play ordinance

The Golden Gate Restaurant Association, an industry group for the San Francisco restaurant industry, has filed a petition for certiorari with the U.S. Supreme Court seeking review of the Ninth Circuit Court of Appeals' decision in Golden Gate Restaurant Association v City and County of San Francisco, in which the appeals court upheld the municipality's "fair share" health care ordinance. The provision requires employers either to provide a minimum level of healthcare benefits to its employees or pay into a city healthcare fund.

The Ninth Circuit, in a September 2008, ruling, held San Francisco's Health Care Security Ordinance is not preempted by the Employee Retirement Income Security Act (ERISA), reversing a lower court decision. On March 9, 2009, the appeals court denied a petition to rehear the case en banc.

San Francisco's Health Care Security Ordinance requires employers with at least 20 employees worldwide (and at least one employee in San Francisco) to make a specified level of healthcare expenditures on behalf of its San Francisco employees or pay into a city fund which supports San Francisco city health clinics and healthcare spending accounts for San Francisco employees who are ineligible for the clinics. The Association continues to assert that the ordinance conflicts with ERISA.

"The practical implications of this case are staggering. If the case is allowed to stand, employers will soon face a bewildering mismatch of rules provided by different states and cities throughout the nation," said David Bacon, a labor and employment partner at Nixon Peabody, the firm representing the Association. "As an economic matter, employers will be forced to reduce or eliminate the health care benefits that they provide to their employees."

The Supreme Court is expected to rule on whether to hear the case in October. If the case proceeds, oral arguments before the Supreme Court would likely take place in early 2010.