It’s been a whirlwind week in the U.S. Senate regarding health reform developments. On Tuesday, Senate Majority Leader Harry Reid (D-NV) announced that he, along with five more liberal senators (Schumer-NY, Feingold-WI, Rockefeller-WV, Harkin-IA) and five moderate Democrats (Ben Nelson-NE, Carper-DE, Pryor-AR, Landrieu-LA and Lincoln-AR) had come to terms on a plan that would replace the public option in the current Senate bill with a new national insurance plan offered by private insurers, and provide a chance for older Americans to buy in to Medicare.

Much like last month when Reid announced he and key moderates and progressives had come to terms on the inclusion of a public option with a state opt-out provision (an idea that is now apparently off the table), no real details or legislative language on the “deal” have been released–even to other senators. However, the group did agree to send information over to the Congressional Budget Office for scoring–a process that is expected to take the weekend and perhaps be completed by next Monday or Tuesday. Reid has told reporters and his caucus that the final details of the proposal, which could be offered as a “Manager’s Amendment” to H.R. 3590 as early as the middle of next week (depending on its cost) will not be released until the CBO has completed its work. Some of the consensus details that are known include:

• The creation of a national insurance plan to be administered by the federal Office of Personnel Management, which is the same agency that oversees the Federal Employees Health Benefits Program (FEHBP). Like FEHBP (which is really just the nation’s largest employer-sponsored health plan offering), the insurance options within the new plan would be offered by private carriers. And while the new plan would have many similarities to FEHBP, it would not be an opening of the FEHBP pool to the general public.

• A trigger option for a government-run plan if private carriers fail to participate in the new program.

• Expanded access to Medicare allowing people age 55 to 64 to purchase coverage in the program. Details of who would be eligible within that age group are unclear, as is if the rating and pricing for this population would be separate from the rest of the Medicare population. Some of the Senate negotiators have indicated that the buy-in period could start in 2011 (three years earlier than most other market reforms and the exchanges would take effect), but that no subsidies would be available for such coverage until 2014. 

• A medical loss ratio requirement for insurers to spend at least 90% of premium money on medical care, rather than on administrative costs or profits. It is unclear at this time if this requirement would apply to just the new national insurance program or to other markets/the exchanges as well.

• A reauthorization of the Children’s Health Insurance Program, which was set to expire on October 1, 2013. It is unclear at this time how the program would be impacted, whether or not this population would eventually move to the exchange, as is proposed in H.R. 3590 and if the mandatory premium assistance provisions in H.R. 3590 (which NAHU strongly supports) will be impacted.

While we are waiting for actual legislative details to emerge, NAHU is opposed to all of the components of the compromise deal in concept. A new national insurance option is both unnecessary and a new government expense, and we believe the other significant market reforms under consideration should be given a chance to work before any type of new government-run plan is considered. A buy-in to Medicare would create an enormous adverse selection problem for an already financially troubled program and it would further exacerbate the existing Medicare/private insurance cost-shift, which already costs privately insured American families almost $1800 a year. We believe that it could represent a gateway to the full government takeover of American health care. Furthermore, it is unnecessary, as the new market reforms and high-risk pool provisions in the current bill will provide immediate access to coverage to anyone in this population who does not have it currently. 

Finally, the 90% MLR idea is completely unworkable and unprecedented—no state insurance market has anything remotely similar, and we have seen the negative impact in state markets that have tried to set MLR levels at lower levels than those proposed. It will result in higher premiums and the loss of necessary consumer services that are not considered direct medical care costs, like claims processing, fraud protections, disease management, and more, not to mention its potential impact on the role of health insurance agents and brokers and the education and service they provide to consumers.

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