By Jane Norman, CQ HealthBeat Associate Editor

October 14, 2009 – Democrats' war with the health insurance industry escalated in the Senate Judiciary Committee on Wednesday, as senators harshly criticized insurers' domination of markets and vowed to modify federal antitrust exemptions extended to the industry since 1945.

Senators seemed particularly infuriated by an aggressive strategy launched this week by America's Health Insurance Plans (AHIP), the trade group for the health insurance industry. It included a television advertising campaign that focuses on reductions in Medicare Advantage spending in the health care overhaul and a study that argues the bill approved by the Senate Finance Committee will raise Americans' health care premiums over time.

Senate Majority Leader Harry Reid, D-Nev., in an unusual appearance testifying at a committee hearing, said the insurance industry is determined to halt the overhaul via a "barrage" of advertising. "They really are desirous of continuing the monopoly they have," Reid said. "There isn't anything we can do to satisfy them in this health care bill."

Sen. Charles E. Schumer, D-N.Y., said that the industry "blundered so badly" in recent days that it may give lawmakers an additional opportunity to approve an overhaul bill with a public insurance option and push for an end to the antitrust exemption. Schumer said he wants to see Judiciary Chairman Patrick J. Leahy, D-Vt., work with Reid to include the antitrust provision as part of the overhaul.

The insurance industry "lacks a moral compass," said Sen. Dianne Feinstein, D-Calif.

Leahy introduced the antitrust bill (S 1681) on Sept. 17. He said that nothing in the McCarran-Ferguson Act approved in 1945 would allow health or medical malpractice insurance issuers "to engage in any form of price fixing, bid rigging or market allocations." Leahy said he scheduled the hearing before the AHIP campaign unfolded.

Leahy said the bill is a scaled-back version of legislation supported in the past by former Sen. Trent Lott, R-Miss. (1989–2007), who also served as party leader in that chamber. Leahy said the bill is directed at health insurance alone. "Insurers should not object to being subject to the same antitrust laws as everyone else," he said. "It is time for Congress to stick up for consumers, not roll over for the insurance industry."

But Orrin G. Hatch of Utah, the top Republican on the Judiciary Committee, said he has seen little evidence to repeal McCarran-Ferguson. It has allowed providers to collaborate in certain areas such as sharing information, he said, which assisted smaller firms. "A ban on collaboration in the insurance industry could result in higher prices," Hatch said.

No other Republicans attended the hearing.

Christine Varney, assistant attorney general in the antitrust division of the Justice Department, testified that prior to 1944, regulation of what's known as "the business of insurance" was seen as the exclusive province of the states.

The McCarran-Ferguson Act was intended to specifically delegate to the states the authority to continue to regulate and tax insurers, and it also created a broad antitrust exemption based on state regulation, she said.

There's been perennial interest in repeal or reform of the exemption since then, Varney said. The Justice Department generally is opposed to exemptions from antitrust laws, and she characterized the health insurance industry exemption as "very expansive with regard to anything that can be said to fall within the business of insurance, including premium pricing and market allocations."

While the department did not take a position on the Leahy bill, Varney said that Justice "generally supports the idea of repealing antitrust exemptions" and supports efforts to bring more competition to the health insurance marketplace.

Democratic Sen. Russ Feingold of Wisconsin said a single insurance company covers at least half the population in 26 states. "This lack of competition has hurt both patients and doctors," Feingold said.

But an industry spokesman rejected charges that there is not enough done to rein in insurance companies. Robert Zirkelbach, a spokesman for AHIP, said in an e-mail that health insurance is one of the most regulated industries in America at both the federal and state level.

"McCarran-Ferguson has nothing to do with competition in the health insurance market," Zirkelbach said. "The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs."

Lawrence Powell of the University of Arkansas, speaking on behalf of the Physicians Insurers Association of America, said the exemption provided by federal law "enhances competition" and that price fixing and anti-competitive conduct already are prohibited by state law in insurance markets. Powell, the university's chair of insurance and financial services, said there's no valid evidence of anti-competitive behavior in insurance markets.

But Reid said the concern is real. He criticized the rising cost of health care and health care "monopolies" that he said are so powerful they can block competitors from entering the market. They influence business practices and exert tremendous influence over public policy, he said.

"More than 30 percent of claims made are turned down," said Reid, by the "armies" of employees who work for the insurers. "Health insurance monopolies shouldn't be making health care decisions for patients and their doctors," he said. "There's no reason the insurance companies should have exemptions from anti-trust laws."

Said Varney, "When you don't have to compete, you can get pretty big profits.

By Jane Norman, CQ HealthBeat Associate Editor

October 15, 2009 –The nation's health insurers are fully committed to ending policies that charge women higher premiums or deny them coverage because of their age, gender or "pre-existing conditions" such as pregnancy, the head of the industry's trade association told a Senate committee Thursday.

But Karen Ignagni, president and chief executive of America's Health Insurance Plans (AHIP), also said repeatedly that health care overhaul legislation approved by Congress must ensure an individual mandate is included in which every American is required to obtain health coverage.

A study by PricewaterhouseCoopers released by AHIP this week caused a firestorm of criticism among Democrats because it projected an increase in premiums under the bill approved Oct. 13 by the Senate Finance Committee, which weakened the individual mandate by lessening penalties for those who decline to purchase insurance. But Ignagni defended the study, saying the message is that "costs are going to go up for individuals and working families if we don't have everyone participate."

In an interview after the hearing, Ignagni said insurers sent a letter to the Finance Committee when the individual mandate was changed and requested the study on Sept. 29 after detecting "alarming" trends in their own data on the impact of the bill. "Now members of Congress need to decide whether they want to focus on the cost issue, and we think they will focus on the cost issue because they don't want constituents to be disappointed," she said.

Ignagni appeared before the Health, Education, Labor and Pensions (HELP) Committee as a part of a panel that examined "equal health care for equal premiums" for women's health insurance. Committee member Barbara A. Mikulski, D-Md., said a 25-year-old woman is charged up to 45 percent more for a health insurance policy in the individual market than a man of the same age, and once she reaches 40 it can be 140 percent more.

Women also are denied coverage because they are pregnant, had a baby via cesarean section, or are victims of domestic violence, Mikulski said. And policies may exclude basic health needs, preventive care or maternity coverage.

Mikulski was especially disturbed by the testimony of Peggy Robertson of Centennial, Colo., who told of her problems obtaining insurance. Robertson, the mother of two boys, said that because her husband is self-employed, they applied for an individual policy with Golden Rule Insurance Co. shortly after the youngest child was born. She was denied coverage because she had undergone a cesarean section.

"I called Golden Rule, and they said that if I would get sterilized, they would then be able to offer insurance to me," Robertson said. She said she was "shocked" by this comment, but she learned from state insurance regulators that it was entirely legal for the company to deny coverage based on a previous cesarean and there was nothing she could do. She also read from a letter the company sent her.

Mikulski called that revelation "bone chilling" and said, "It put me on the edge of my chair." She added, "No one, no one, in the United States of America, in order to get health insurance, should ever be coerced into getting a sterilization."

John Parker, a spokesman for United Health, which owns Golden Rule, said that today Golden Rule in all the states in which it operates offers coverage to women who have had previous cesarean deliveries. "Also, if the reforms we have proposed, such as the elimination of pre-existing condition limitations coupled with a personal coverage requirement to bring everyone into the system are enacted, we could be certain that the circumstances in this case would not be replicated," he said.

Al Franken, D-Minn., said it's bad for everyone if women don't have access to adequate health care, and in the overhaul all women for the first time will have access to comprehensive benefits including maternity care, without paying more. "It's also a top priority for me that health reform includes a crucial women's health service, access to affordable family planning services," Franken said. "Access to contraception is a fundamental right of adult Americans."

The hearing featured witnesses from both the left and right. Mikulski said she worked with Republican Richard M. Burr of North Carolina to hear all sides. "We welcome diverse views—that's how we arrive at what we hope will be the sensible center," Mikulski told the witnesses. "Every single panelist will be treated with the utmost respect, dignity and civility."

Thus, HELP Committee Democrats listened poker-faced as they were harshly criticized for the overhaul bill they approved last summer.

"Unfortunately, the bills in front of Congress right now, the House Democrats' bills and the two bills in the Senate, are anti-women, anti-men and anti-American," said Diana Furchgott-Roth, a senior fellow at the conservative Hudson Institute. "They would provide worse care for all Americans. They would hurt our economy by raising taxes, increasing our national debt, raising the deficit. This would lower job creation and stop women from progressing."

But Marcia Greenberger, founder and co-president of the liberal-leaning National Women's Law Center, said the overhaul is needed to ensure justice and fairness for women. Greenberger said women face many challenges in the individual market, including a difficult and costly hunt for policies that will cover maternity care. A 2008 report on treatment of women by insurance policies by the center found just 12 percent offered comprehensive maternity coverage within policies. Some others may offer riders that can cost up to $1,000 a month in addition to regular premiums.

The hearing ended with a polite exchange between Mikulski and Ignagni that was in sharp contrast to the very tough rhetoric aimed at the insurance industry from some Democrats, including those now calling for an end to longtime exemptions from federal antitrust laws for health insurers.

Ignagni, asked about AHIP's relations with Democrats, said that PricewaterhouseCoopers was asked to meet with the Finance Committee along with members of her team. "We're going to continue to provide a great deal of data about the impacts we're seeing," she said. "We're going to continue to work on the policy. We're going to continue to offer suggestions. And we're going to continue to do what we've done since the beginning of the year, which is talk to members of Congress about how to make strategies or their proposals workable.

By David Clarke, CQ Staff

October 15, 2009 –House leaders assured a group of fiscally conservative Democrats that final legislation to prevent cuts in Medicare payments to physicians would not be brought to the floor unless it is paid for or the deficit-fighting "pay-as-you-go" rule becomes law first.

Leaders of the 52-member Blue Dog Coalition, whose primary concern is combating deficit spending, received the assurance from Speaker Nancy Pelosi, D-Calif., and Majority Leader Steny H. Hoyer, D-Md., at a Thursday morning meeting, said Rep. Jim Matheson, D-Utah.

"I think it's really important we stick to our guns," Matheson said.

If House leaders do hold firm on the vow, first made in April, it would set off a potentially tense showdown with Senate Democrats, who plan to bring legislation (S 1776) to the floor next week to change the formula that determines how much Medicare reimburses physicians, without offsetting the cost.

Senate Majority Leader Harry Reid, D-Nev., filed a cloture motion on the bill Thursday. The cloture vote is scheduled for 5:30 p.m. Monday.

Under the current budget formula, known as the "sustainable growth rate," Medicare payments to doctors are scheduled to be cut each year. But under pressure from physician groups, Congress never allows this to happen.

Congressional leaders and the Obama administration want to permanently change the formula and end the annual practice of preventing the cuts. That will be expensive.

The House health care overhaul bill (HR 3200) contains such a fix, and it is estimated to cost about $245 billion over 10 years. Senate Democrats want to remove this policy change from the health care overhaul legislation. Republicans argue that Democrats are only trying to make the overhaul bill look less expensive.

The administration, meanwhile, says the cost of the Medicare payment legislation should not be offset because it is an extension of a policy Congress implements each year, not a new policy.

To tamp down resistance from the Blue Dogs, House leaders had to promise that they would not put a payment change conference agreement on the floor unless it is fully offset, a statutory pay-as-you-go bill has already been signed into law or the conference agreement contains language that would put pay-as-you-go into law. The promise also covers legislation dealing with extending middle class tax cuts that expire at the end of 2010 and the long-term cost of changing the estate and alternative minimum taxes.

The House and Senate pay-as-you-go rules require the cost of new tax cuts or mandatory spending to be offset by revenue increases or spending cuts elsewhere. But those rules have been waived several times, and Blue Dogs argue that putting them into law would strengthen the requirement.

The House passed a pay-as-you-go bill (HR 2920) in July, but Senate leaders have yet to show enthusiasm for the measure.

The Senate leaders' decision has also irked Senate Budget Committee Chairman Kent Conrad, D-N.D., who as argued that, at most, a two-year physician payment bill should be enacted.

Conrad has been trying to build the case for establishing a task force or special process so that Congress could come up with policy proposals next year for overhauling the tax code and addressing the long-term fiscal problems facing the government.

Several tax policies are set to expire at the end of 2010, and Conrad said that having the doctor payment issue addressed only that long would build momentum for Congress to address broader fiscal issues next year. Under this scenario, Conrad argues the payment change could be fully offset.

The Senate leaders' decision is a blow to his plan.

Conrad said he would vote against the physician payment bill next week and didn't hold out hope he could convince Senate leaders to change their strategy.

"I'm trying to work out something else, but right now it's on a course to come to the floor," he said.

Conrad has also opposed moving the statutory pay-as-you-go bill now, arguing it would exempt too many expensive policies and should instead be part of a broader budget agreement next year. His stance has annoyed House Democrats, who argue that the Senate is the body that waives the rules most often and that House Democrats and the administration want to at least set a benchmark for what policies don't have to be offset.

Hoyer has said he would gladly push the House to offset the policies that would be exempted under the pay-as-you-go bill if Conrad could get the Senate to do the same.

By Jane Norman, CQ HealthBeat Associate Editor

October 13, 2009 – Young adults will be able remain on their parents' health insurance policies until they reach the age of 27 under the Democratic health bill being developed in the U.S. House, Speaker Nancy Pelosi said at a press conference Tuesday.

The California Democrat also repeated her support for a public option within the health insurance exchanges, on the same day the Senate Finance Committee approved, 14–9, legislation that substituted a co-op system for the public plan. House leaders are continuing to work on a final version of their legislation (HR 3200) following approval by three separate committees.

"We in Congress are saying to the American people that you are mandated to have health insurance," Pelosi said. "But unless we have a public option, we are putting them at the mercy of the health insurers."

The Finance Committee already has softened monetary penalties for not obtaining mandated health insurance, arousing deep unhappiness among insurance companies worried that healthy young adults will continue to opt out of the system. House Democrats said their approach would add that same group to the larger insurance pool, spreading out risk.

Pelosi said that one out of every three young adults goes without insurance, a group often referred to as "young invincibles" because of their belief they won't fall sick, become injured or need hospital care. Many lose coverage under their parents' policies when they turn 19 or, if they are full-time students, when they graduate from college.

The Commonwealth Fund reported in August that 13.2 million Americans between the ages of 19 and 29 lacked insurance coverage in 2007, up by more than 2 million since 2000. While 26 states have approved legislation to expand coverage under parents' policies, there's no national requirement, and the high rate of unemployment among young adults has made the uninsured problem even worse, the fund's report said.

Rep. Chris Van Hollen, D-Md., said at the event with members of a coalition of youth organizations that it's not yet clear how much in additional savings the provision adding young adults to their parents' policies would add to the House bill. "We're in the process of trying to get that piece teased out by the Congressional Budget Office," he said. "It stands to reason it would reduce overall costs."

Pelosi wouldn't commit to a date when negotiations on the House bill would conclude and the bill would come to the floor. She said leaders continue to "go back and forth" with CBO over costs but said a final product will emerge from Congress yet this year. "I'm hopeful we'll have a bill by Thanksgiving, others say Christmas, certainly this year," she said.

By Drew Armstrong, CQ Staff

October 13, 2009 – Negotiations to meld the Senate's competing health care bills will begin Wednesday, a process expected to last at least a week.

The meetings will be hosted by Majority Leader Harry Reid, D-Nev., in his spacious Senate office, according to Majority Whip Richard J. Durbin, D-Ill.

Finance Committee Chairman Max Baucus, D-Mont., whose committee approved an $829 billion health care bill by a vote of 14–9 on Tuesday, will join Sen. Christopher J. Dodd, D-Conn., who shepherded a very different version (S 1679) through the Health, Education, Labor and Pensions (HELP) Committee in midsummer, will negotiate with Reid. White House officials will be there as well.

The combined bill is expected to come to the floor the week of Oct. 26, according to a senior aide to Democratic leadership. "We will need to merge the bills, but then will need to get a [Congressional Budget Office] score before floor action, so it depends on that," said the aide.

Reid will have to resolve key differences between the two pieces of legislation, including whether to include any version of a government-run insurance option, a proposal that exists in the HELP Committee bill but not in Baucus' draft.

Other than Reid, Baucus, Dodd and officials from the White House, it is unclear who else will be in the sessions. A spokesman for Sen. Olympia J. Snowe of Maine, the only Republican who voted for the Finance bill, did not know if Snowe would be invited to the sessions.

But Snowe made clear before casting her vote for the Baucus draft that Democrats can't count on her support going forward unless she is satisfied with whatever emerges from the Reid-led negotiations and an eventual House-Senate conference committee.

Aides to the Senate negotiators have already started meeting, Dodd said last week, but the biggest questions—like that of the public plan—remain unresolved.

Floor action could take several weeks. Scores of amendments are expected from both sides, and Republicans will almost certainly force Reid to surmount several filibusters—which could push a vote on final passage into November.

Kathleen Hunter contributed to this story.

By Alex Wayne and Kate Davidson, CQ Staff

October 13, 2009 – Republican Olympia J. Snowe of Maine gave critical momentum to a Senate health care overhaul bill Tuesday as she joined panel Democrats in voting for the Senate Finance Committee's complex health care overhaul.

The vote was 14–9, with Snowe joining all 13 committee Democrats in support of the measure, which would cost an estimated $829 billion over 10 years.

The committee's approval had not been in serious doubt, but Snowe had been closely watched as an indicator of nominal bipartisan support for the Finance measure.

The legislation now moves to the office of Senate Majority Leader Harry Reid, D-Nev., who will negotiate with other Democrats and perhaps Snowe to combine the Finance measure with a bill approved in the summer by the Health, Education, Labor and Pensions (HELP) Committee.

Finance Chairman Max Baucus, D-Mont, said his committee's bill is "a balanced package" that deserves support from both parties. His bill, the product of months of negotiations that involved Snowe and two other Republicans who finally walked away from the package, is markedly less liberal than the HELP measure. Most strikingly, it would not create a new government-run insurance plan to compete with private insurers.
Snowe said that the Finance bill was a better choice than not acting on an overhaul at all.

"When history calls, history calls," Snowe said, "and I happen to think that the consequences of inaction dictate the urgency of Congress to take every opportunity to demonstrate its capacity to solve the monumental issue of our time."

But she said her support for the bill on Tuesday did not mean she would continue to support the legislation after it was merged with the HELP version—and ultimately, with a House measure (HR 3200) that has yet to be finalized.

"My vote today is my vote today," she said. "It doesn't forecast what my vote will be tomorrow."

The Finance bill would expand Medicaid and create new health insurance exchanges, or marketplaces, offering tightly regulated and subsidized private plans to the 45 million Americans estimated to be without insurance. About 94 percent of the legal population would have coverage under the bill, according to the Congressional Budget Office, compared with about 83 percent today.

Additionally, the bill would impose new restrictions on health insurers' business practices, preventing them from denying people coverage for pre-existing medical conditions or dropping customers once they fall ill. All Americans would be required to obtain insurance.

"Our actions here will determine whether we extend better health care to more Americans," Baucus said before the vote. "Now is the time to get this done."

The bill would be paid for largely by reducing the growth of spending in Medicare, the health entitlement for the elderly, and by levying new taxes on high-cost insurance plans and various sectors of the health care industry, including insurers, drug companies and manufacturers of medical devices.

Republicans warned that the bill would increase taxes on middle-income families, reduce Medicare coverage, raise insurance premiums and lead to health care rationing.

Republicans Charles E. Grassley of Iowa and Michael B. Enzi of Wyoming, who had joined Snowe in the months-long quest for a bipartisan bill, said they could not support the final result.

And Grassley, the Finance Committee's ranking Republican, said the bill became more partisan during the course of a two-week markup.

"This bill is already moving on a slippery slope to more and more government-controlled health care," he said.

Another closely watched senator, Democrat Blanche Lincoln of Arkansas, indicated she would vote for the bill.

The legislation, she said, "I do believe builds on what works in health care, makes it better, and . . . I think makes greater efficiencies."

Lincoln is the only Democrat on the Finance Committee who faces a tough re-election contest in 2010. She previously voted against amendments that would have added a public insurance plan to the bill.

Insurance Industry Report
Democrats spent time Tuesday countering an attack on the bill by the insurance industry. On Sunday, the insurers' trade association, America's Health Insurance Plans (AHIP), released a report which found that insurance costs would rise faster under the legislation than if Congress did not act.

Democrats said the report, by the accounting firm PricewaterhouseCoopers, was significantly flawed. "The insurance industry should be ashamed of this report," said Sen. John Kerry, D-Mass., adding that its conclusions were "not valid."

PricewaterhouseCoopers itself acknowledges in the report that its study was limited. AHIP instructed the firm to examine only four issues related the Finance bill—penalties for people who don't obtain health insurance, excise taxes on high-premium insurance plans, cost-shifting from government insurance plans to private payers, and fees that Democrats would assess on different health industry sectors—without considering the impact of other provisions aimed at reducing health costs or subsidizing families' insurance premiums.

"We have not estimated the impact of the new subsidies on the net insurance cost to households," PricewaterhouseCoopers said in its report." Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated."

But with those caveats, the accounting firm estimated that the bill would cause average insurance premiums for family coverage to double, to about $26,000 a year, by 2019. Absent the bill, premiums would rise to about $21,900, the firm said.

Premiums for individual coverage and insurance costs for businesses would similarly increase at a faster rate under the bill, the firm said.

A spokesman for AHIP said of the Finance bill, "The current legislation is unworkable and will make health care coverage less affordable for families and employers. That is the opposite of what health care reform is supposed to accomplish."