Filed Under:Life Insurance, Life Products

House OKs H.R. 3590 - The Patient Protection And Affordable Care Act Bill

Insurance and employer groups are talking about the lack of cost control provisions in H.R. 3590, the Patient Protection and Affordable Care Act bill, which passed by a 219-212 vote at 10:48 p.m. Sunday in the House.

H.R. 3590 is the same bill that the Senate passed early on Christmas Eve a few months back, and it now is awaiting the signature of President Obama.

House members also voted 220-211 at 11:36 p.m. to pass H.R. 4872, the Reconciliation Act of 2010. The Senate still must approve that bill, but it would revise and extend many provisions of H.R. 3590. Senate leaders have told House leaders that they have the votes to pass H.R. 4872 using a special budget reconciliation process.

Under normal Senate rules, bills need 60 votes to pass. Budget reconciliation measures need just 51 votes.

Some Republican lawmakers said during floor debate that they or colleagues would try to block implementation of H.R. 3590 -- and of H.R. 4872, if H.R. 4872 becomes law -- by turning to the courts for relief.

H.R. 3590 and H.R. 4872 passed with no Republican support; 34 Democrats voted against H.R. 3590, and 33 voted against H.R. 4872.

Democrats were jubilant about winning the H.R. 3590 battle and getting H.R. 4872 to the Senate.

"This is what change looks like," Obama said during an appearance shortly after the vote on H.R. 3590 took place.

"I know this wasn't an easy vote for a lot of people," Obama said. "But it was the right vote."

House Majority Leader Steny Hoyer, D-Md., smiled at the reporters at a press conference on Capitol Hill. "For all of you who pursued all of us: We had the votes," Hoyer said.

Insurance say they still have concerns the current versions of the bills.

"The access expansions are a significant step forward" Karen Ignagni, president of America's Health Insurance Plans, Washington, says in a statement about the health bills. "But this legislation will exacerbate the health care costs crisis facing many working families and small businesses."

The bill "does little to stem the skyrocketing cost of health care and will be financed on the backs of small business during one of the most delicate financial periods in American history," says Robert Rusbuldt, president of the Independent Insurance Agents and Brokers of America, Alexandria, Va..

WHAT'S IN H.R. 3590?

H.R. 3590 -- the PPACA bill that the Senate passed late on Christmas Eve -- is on track to become law whether or not the Senate approves H.R. 4872.

A detailed summary of H.R. 3590 and H.R. 4872 provisions posted by the Henry J. Kaiser Family Foundation, Menlo Park, Calif.

The final version of H.R. 3590 would:

- Enact the Community Living Assistance Services and Supports Act long long term care benefits program.

- Require insurers selling in the individual market, in the small group market and through the exchange system to sell coverage on a guaranteed issue and guaranteed renewable basis. Plans could base rating variations only on age, family use, tobacco use and location, and the rates for the oldest insureds could be only 3 times higher than the rates for the youngest insureds. Rates for tobacco users could be only 50% higher than the rates for non-tobacco users.

- Create a new health insurance exchange system that individuals and employers with up to 100 employees could use to buy subsidized health coverage, and 4 "tiers" of coverage, ranging from catastrophic plans to platinum plans.

- Create a new system of nonprofit health insurance co-ops.

- Permit states to form multi-state health insurance compacts, to create multi-state markets for health insurance.

- Create a health insurance tax credit for employers with 25 or fewer employees and average annual wages of less than $50,000.

- Impose penalties on employers with more than 50 employees that fail to provide health coverage and on inidividuals with incomes over a minimum income threshold who fail to have health coverage.

- Require employers with more than 200 employees to enroll employees in health plans automatically.

- Impose a $750 per-employee penalty on employers with more than 50 employees that fail to provide health coverage.

- Impose minimum medical loss ratios that are similar to those in H.R. 3590: 85% for group plans with more than 100 participants; 80% for small group plans; and 85% for Medicare Advantage plans.

- Impose a 40% "Cadillac plan" excise tax on insurers that sell relatively expensive health plans. Insurers now would pay the tax when they sold plans that cost more than $8,500 for individuals and $23,000 for families.

- Tighten health savings account and flexible savings account reimbursement rules. Individuals could not use account funds to pay for over-the-counter medications unless the medications were prescribed by doctors.

- Cap annual FSA contributions at $2,500, but increase the limit annually by a cost of living adjustment, starting Jan. 1, 2011.

- Apply the existing Medicare payroll tax to investment income starting in 2013, and increase the tax by 0.9 percentage points, to 2.35%, for wages over $200,000 per year for individuals and over $250,000 per year for couples.

- Adopt a national standard for eligibility verification and claims status by Jan. 1, 2013; a standard for electronic fund transfers by Jan. 1, 2014); and a variety of other standards by Jan. 1, 2016.

- Give states 5-year grants to develop medical malpractice reform programs.

WHAT'S IN H.R. 4872?

Originally, the Reconciliation Act was going to include health insurance rate regulation provisions. The version passed Sunday by the House excludes that version, because the Senate parliamentarian ruled that H.R. 4872 backers could not handle the provision using the budget reconciliation process.

H.R. 4872 echoes the language of H.R. 3590 in many places and changes it in others.

Provisions that are still in H.R. 4872 would:

- Create a $1 billion Health Insurance Reform Implementation Fund.

- Exempt the first 30 employees of any employer from the no-coverage penalty.

- Increase the per-employee penalty imposed on employers that fail to provide health coverage to $2,000 per employee, from $750.

- Require individuals making more than $200,000 per year and couples making more than $250,000 per to pay a new 3.8% tax on interest, dividends, capital gains and other investment income. (This new tax is higher than the 2.9% tax on investment income recently proposed by President Obama.)

- Increase the Cadillac plan tax limits to $10,200 for individuals and $27,500 for families, and to $11,850 and $30,950 for for retirees and high-risk professionals. Calculations of health benefits value now will exclude dental plans and stand-alone vision plans.- Push the effective date of the $2,500 cap on annual FSA contributions back to Jan. 1, 2013.

- Increase the no-coverage penalty for individuals with relatively high incomes and decrease the penalty for low-income individuals.

REACTIONS

Janet Trautwein, chief executive of the National Association of Health Underwriters, Arlington, Va., has put a statement criticizing the lack of health care cost control provisions in H.R. 3590.

"H.R. 3590 also contains an unworkable individual mandate which will encourage people to wait until they are sick to purchase coverage, causing premiums to skyrocket significantly for everyone," Trautwein says.

Representatives for the Council of Insurance Agents and Brokers, Washington, and the American Benefits Council, Washington, have given the health bills mixed reviews.

"While the bill is significantly flawed and risks damaging the employer-provided benefits system, we're relieved to see the role of agents and brokers secured in the state exchanges, and a workable minimum medical loss ratio," says Joel Kopperud, CIAB director of government relations.

"We hope the Senate is able to quickly consider the reconciliation package, thereby strengthening the weak mandates that were included in the senate bill."

Without stronger mandates, "the market reforms that are effective immediately may result in even higher premiums," Kopperud says.

The "truth about the bill is more complicated than that voiced by its supporters and critics," says James Klein, president of the American Benefits Council.

"The legislation significantly expands coverage for millions of Americans, and takes steps toward aligning what we pay for health care and the quality of those services," but some aspects of the legislation will increase, rather than mitigate, health care costs; "and the overall financial integrity of the measure depends on future Congresses and presidents making very tough political decisions," Klein says.

Council members will "urge the Senate to make much-needed improvements to the new law - starting this week - as it considers the budget reconciliation measure," Klein says. "We recognize that to do so will require further action by the House of Representatives; but it is essential that health reform be done right at this critical stage in the legislative process."

Andrew Kligerman, a life insurance analyst in the New York office of UBS Investment Research, writes in a commentary that the proposed H.R. 4872 investment income tax, which would be used to help pay for Medicare, should have little effect on the appeal of annuities.

"We do not think this new Medicare tax will have a substantial impact on the attractiveness of deferred annuities since it will have a similar impact on competing non-qualified investment products," Kligerman writes.

The tax may make deferred annuities more appealing for retirement planning, because some annuity holders may be able to postpone the application of the Medicare tax until they are in a lower tax bracket.

But "more clarity is needed on how this Medicare tax will apply to annuities," Kligerman writes.

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