Obama Health Care Reform Bill Calls For Health Insurer Rate Regulation

Authority to regulate health insurers at the federal level—including the power to roll back rate increases—will be included in President Obama's proposal for a new health care reform bill.

The new proposal attempts to “bridge the gap” between the current House and Senate bills, according to a copy of the proposal obtained by National Underwriter.

Among other provisions, it includes a requirement that everyone have health insurance or pay a penalty, as well as elements of both the House and Senate health care bills restricting the compensation rate for private providers who serve the Medicare Advantage program.

It also would extend prescription drug program coverage. At present Medicare stops paying for prescriptions after the plan and beneficiary have spent $2,830 on prescription drugs, and only starts paying again after out-of-pocket spending hits $4,550. This gap or “doughnut hole” would be removed under the proposal.

It would also implement health insurance exchanges but does not indicate whether these would be state, regional or nationally based.

The president’s proposal would also include the Community Living Assistance Services and Supports (CLASS) Act, which would amend the Public Health Service Act to create a national, voluntary disability insurance program.

The summary said the president’s proposal “makes a series of changes to the Senate bill to improve the CLASS Act program’s financial stability and ensure its long-term solvency.”

Concerning the Senate’s so-called “Cadillac tax” on expensive health insurance plans, the president’s proposal changes the effective date from 2013 to 2018 to provide additional transition time for high-cost plans to become more efficient.

It also raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500, and indexes these amounts for subsequent years at general inflation plus 1 percent.

The proposal imposes a responsibility on employers to shoulder the cost of health insurance for employees.

Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.

“Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” the summary said.

In dealing with health insurer rate increases, the president’s proposal would seek to ensure that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.

“A new Health Insurance Rate Authority will be created to provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior,” the summary said.

In responding to the proposal, a spokesman for America’s Health Insurance Plans defended the current spate of large increases in health insurance, especially in the individual and smaller markets.

“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” said Robert Zirkelbach, an AHIP spokesman.

He explained, “In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs.”

He added, “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”

Currently, only 26 state insurers have the power to set rates.

The summary also said the president’s proposal would seek to strengthen a provision of the Senate bill that includes a “grandfather” policy allowing people who like their current coverage to keep it.

The president’s proposal would add certain important consumer protections to these “grandfathered” plans.

Specifically, the summary said, “Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate review, backed up by the oversight of the secretary of the Department of Health and Human Services.”

When the exchanges begin in 2014, the president’s proposal adds new protections that prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals.

Beginning in 2018, the president’s proposal requires “grandfathered” plans to cover proven preventive services with no cost sharing.

Regarding Medicare Advantage, the president’s plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area.

“It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” the summary said.

It provides bonuses for quality and enrollee satisfaction and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating.

Under the proposal, plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate).

Finally, the president’s proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggest is warranted, based on actuarial analysis.

“This is the primary source of additional savings compared to the Senate proposal,” the summary said.

Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers, reacted to the president’s proposal by voicing concern rate regulation “in a vacuum.”

He explained, “It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority intact. We don't fear federal oversight; we fear Balkanization of the oversight.”