Heat Turns Up On Healthcare Reform

The debate over healthcare reform has taken a tumultuous turn as constituents voice their concern to members of Congress returning to their districts for the summer recess, but healthcare analysts still believe legislation will ultimately be enacted by the first quarter of next year.

Ironically, congressmen appear to be taking heat for proposed reforms even though the critical bill, being drafted by a bipartisan group within the Senate Finance Committee, is unlikely to be unveiled before Sept. 15.

Even so, current bills, one written by a House Committee as its members struggled to finish up and leave by July 31, do contain provisions with critical implications for insurance underwriters and agents.

At the same time, a key insurance industry player, America’s Health Insurance Plans, appears committed to seeing enactment of health reform legislation even as its members endure withering criticism from the public as well as the Obama administration and House Democratic leadership.

In a statement last week, AHIP President and CEO Karen Ignagni defended the industry. “Health plans last year proposed health insurance reform to make sure that no one is denied coverage because of a pre-existing condition,” she said. “Our proposal includes new consumer protections and market rules to guarantee coverage for pre-existing conditions, discontinue basing premiums on a person’s health status or gender, and get everyone covered through a personal coverage requirement.”

Ignagni also said AHIP is “encouraged” that policymakers in both parties are coalescing around health insurance reform as an essential component of comprehensive health care reform.

The strong constituent criticism, on top of activities by extremists to disrupt town meetings convened by congressmen, may delay action, but is unlikely to derail ultimate enactment of healthcare reform legislation, says a buy-side analyst group.

In comments to investors, Washington Analysis says it maintains its view that the House and Senate will both pass legislation sometime in September.

That will “set the date for a conference with the House bill in the fourth quarter,” the analysts say. “This would conform to our view that enactment of healthcare reform will not take place until the fourth quarter or the first quarter of 2010.”

But tough negotiations over final language lie ahead for the insurance industry.

For example, a provision added to the Energy and Commerce Committee version of healthcare reform legislation, approved by the committee on July 31, just before the House left town, would shift oversight of the Medicare Advantage program to the states. Rep. Henry Waxman, D-Cal., is chairman of the committee.

This conflicts with a provision adopted by another of the House committees working on the bill that would create a federal health czar to protect consumers.

Another provision agreed to under a compromise by conservative and liberal members of the committee would give federal regulators the power–but not the mandate–to set drug prices under Part D, the prescription drug program under Medicare.

The provisions are contained in H.R. 3200, “America’s Affordable Health Choices Act of 2009.”

The E&C bill also contains three other provisions stirring controversy within the insurance industry.

Specifically, the provisions would:

–Require that a new public health insurance option use a formulary and must negotiate payment rates with providers rather than setting rates at 5% above Medicare payment levels.

–Require that insurers selling plans in the new health insurance exchange obtain government approval for premium increases exceeding 150% of the annual medical inflation increase.

–Increase the small business exemption from “pay or play” requirements.