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CCH® BENEFITS — 11/09/09

Republicans Offer Health Reform Substitute, CBO Scores It, And Democratic Proposal Readied For Debate

from Spencer’s Benefits Reports: On November 3, House Minority Leader John Boehner (Ohio) released the text of a proposed substitute amendment to H.R. 3962, the Affordable Health Care for America Act, and the next day the Congressional Budget Office (CBO) released a preliminary cost estimate of the Republican alternative.

Rep. John Dingell (Mich.) introduced the Democratic version of H.R. 3962 on October 29, and on November 3 House Democratic leaders released a “Manager’s Amendment” that includes $1 billion in new resources to states to restrict cost increases by insurance companies. The release of the Manager’s Amendment allows Democratic leadership to bring H.R. 3962 to the floor of the House for debate, possibly as early as November 7. Whether the Republican substitute amendment will be debated is unclear and will be determined by Rep. Nancy Pelosi (Cal.), Speaker of the House.

Republican Proposals

The Boehner substitute amendment includes these provisions:

• regulatory reforms in the small group and nongroup markets, including establishing association health plans (insurance coverage that is offered to members of an association) and individual membership associations, and allowing states to establish interstate compacts with a unified regulatory structure;
• a “State Innovations” grant program to provide federal payments to states that achieve specified reductions in the number of uninsured individuals or in the premiums for small group or individually purchased policies;
• federal funding for states to use for high-risk pools in the individual insurance market and reinsurance programs in the small group market;
• changes to health savings accounts (HSAs) to allow funds in such accounts to be used to pay premiums under certain circumstances, to make net contributions to HSAs eligible for the saver’s tax credit, and to provide a 60-day grace period for medical expenses incurred prior to the establishment of an HSA;
• limits on costs related to medical malpractice (“tort reform”), including capping noneconomic and punitive damages and making changes in the allocation of liability;
• requirements that the Secretary of Health and Human Services (HHS) adopt and regularly update standards for electronic administrative transactions that enable electronic fund transfers, claims management processes, and verification of eligibility, among other administrative tasks;
• establishment of an abbreviated approval pathway for follow-on biologics (biological products that are highly similar to or interchangeable with their brand-name counterparts); and
• an increase in funding for HHS investigations into fraud and abuses.

CBO Estimate

The CBO estimates that the Republican substitute amendment would reduce federal deficits by $68 billion over the 2010-19 period; it also would slightly reduce federal budget deficits in the following decade, relative to those projected under current law, with a total effect during that decade that is in a broad range between 0% and 0.25% of Gross Domestic Product.

The CBO also estimates that the Republican provisions would increase federal budget deficits by about $8 billion over the 2010-19 period, reducing the number of nonelderly people without health insurance by about 3 million in 2019 and leaving about 52 million nonelderly residents uninsured. According to the CBO, “The share of legal nonelderly residents with insurance coverage in 2019—83%—would be roughly in line with the current share.”

Finally, the CBO anticipates that the combination of provisions in the amendment would “reduce average private health insurance premiums per enrollee in the United States, relative to what they would be under current law—by 7% to 10% in the small group market, by 5% to 8% for individually purchased insurance, and by 0% to 3% in the large group market.” As in previous reports, the CBO notes that these averages “are subject to a great deal of uncertainty.”

CBO health reform budget estimates are available at http://www.cbo.gov; the original H.R. 3962 and the Manager’s Amendment can be found at http://waysandmeans.house.gov/; and the Boehner substitute amendment is at http://www.gop.gov/solutions/healthcare.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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