Health care reform legislation that Senate Majority Leader Harry Reid (D-Nev.) rolled out in mid-November includes a new tax that has drawn serious concerns from Oakland-based Kaiser Permanente and other California stakeholders.

Section 9010 of Reid’s HR 3590 would ask insurers to pay a percentage of premiums or fees from third-party administration agreements to the federal government to help cover the cost of reform legislation.  The tax would be based on each insurer’s market share of net premiums and fees from TPA agreements.

Insurers collect TPA fees for processing claims for companies that self-insure their employees.

Insurers would be faced with the tax beginning in 2010.

The Joint Committee on Taxation estimates that the provision would generate $60.4 billion from 2010 to 2019.

Under the Senate Finance Committee’s reform plan, the tax would not have applied to insurers that administer health benefits for firms that self-insure employees.

That proposal drew strong criticism from Professor Alain Enthoven of Stanford Business School.  Citing statistics indicating that 89% of employers with more than 5,000 workers self-insure versus 13% of firms with fewer than 200 employers, Enthoven argued that the Finance Committee’s approach would disproportionately hit small businesses.  He maintained that the tax likely would trickle down to employers and workers at an annual cost of about $75 per person.

California was poised to take a disproportionate hit under the Finance Committee plan because self-insurance is less common among California employers. According to the California HealthCare Foundation, 30% of insured California workers were enrolled in self-insured plans in 2008, compared with 55% nationally. CHCF attributed the gap between self-insurance in California and the nation to the state’s high enrollment in HMOs, which are less likely than other health plans to be self insured. (Editor’s note: CHCF is the publisher of California Healthline.)

Kaiser and other integrated health systems, such as Pennsylvania’s Geisinger Health System and Utah-based Intermountain Healthcare, fired off a letter to senators earlier this month, voicing their opposition to the Senate Finance Committee’s proposal. 

Reid’s modification will shift more of the $6.7 billion annual tax on health insurers from Kaiser, Geisinger and Intermountain to large, for-profit insurers that derive more of their business from TPA agreements.

Kaiser spokesperson Chris Stenrud told Dow Jones that the tax is unfair even after Reid’s change because it would apply to the full cost of health plans for fully insured coverage, while only the TPA fees would be subject to the tax for self-insured plans. TPA fees account for about 6% of the cost of self-insured plans.

The insurance industry remains opposed to the plan across the board and is pushing for it to be dropped from the final Senate bill.

More news on the push for health care reform appears below.

News From the Administration

• During a joint media conference call on Nov. 25, White House Office of Management and Budget Director Peter Orszag and White House Office of Health Reform Director Nancy-Ann DeParle reiterated the Obama administration’s support for the Senate’s health reform bill, saying that it meets the requirements laid out by President Obama to reduce wasteful spending and offer more cost-efficient health care, the New York Times reports (Herszenhorn, New York Times, 11/26). Orszag and DeParle also noted that the bill includes provisions for an excise tax on high-priced insurance policies and the creation of an independent Medicare commission, ideas Orszag and DeParle said are two of the “four pillars” important to major health reform legislation (Murray, Washington Post, 11/26).
• During Obama‘s first seven months in office, several top White House officials met with health care industry officials, lobbyists and influential health care community members, according to new visitor records released on Nov. 25, the Washington Post reports (Eggen, Washington Post, 11/26).  In August, the Associated Press requested the records of health care reform-related communications and meetings with 21 White House officials, including Chief of Staff Rahm Emanuel and senior advisers David Axelrod and Valerie Jarrett (Theimer, AP/San Diego Union-Tribune, 11/25).

Senate Debate

• While debate on health care reform legislation (HR 3590) began on the Senate floor, Senate Majority Leader Harry Reid (D-Nev.) met with top Democratic officials in his office on Nov. 30 to discuss a potential compromise on a public option, Politico reports (Budoff Brown, Politico, 11/30). Meeting attendees included former Senate Majority Leader Tom Daschle (D-S.D.), White House Office of Health Reform Director Nancy-Ann DeParle, White House Chief of Staff Rahm Emanuel, Interior Department Secretary Ken Salazar and HHS Secretary Kathleen Sebelius (Werner, AP/Atlanta Journal-Constitution, 12/1).
• On Nov. 25, Sen. Chuck Grassley (R-Iowa) said that the Senate debate will likely focus on Republican ideas and amendments, The Hill‘s “Blog Briefing Room” reports. In a conference call with Iowa reporters, Grassley said Senate Republicans likely will not offer “one comprehensive alternative” but instead will “probably have a lot of different subsection amendments.” According to Grassley, GOP amendments likely will focus on reforming the medical malpractice system, improving the pooling opportunities of small businesses and eliminating the Medicare cuts included in the bill (O’Brien, “Blog Briefing Room,” The Hill, 11/25).
• Late on Nov. 24 on MSNBC, Sen. Bernie Sanders (I-Vt.) said that the Senate might need to “scale down” the health care reform bill to make it easier to get the 60 necessary votes for passage, The Hill‘s “Blog Briefing Room” reports. According to Sanders, a scaled down bill would have to include a “significant” expansion of Medicaid, a greater emphasis on primary care, development of community health centers, and provisions aimed at reducing the costs of prescription drugs (Fabian, “Blog Briefing Room,” The Hill, 11/25).

Looking at the Price Tag

• Finding a compromise between the House and Senate on how to fund health reform legislation could be more difficult than other divisive issues, such as abortion coverage or a public option, Politico reports. The White House and lawmakers in the House and Senate have each proposed different financing plans for the reform proposals “and each one is an anathema to the other players and their allies among powerful interest groups,” according to Politico  (Cummings, Politico, 12/1).
• U.S. residents likely would pay billions of dollars in taxes to fund health reform years before its major provisions take effect, McClatchy/Philadelphia Inquirer reports. Advocates for reform say the plan is a responsible way to fund the programs. However, critics maintain that there is no guarantee enough money will be raised and that taxes would hurt the economy (Lightman, McClatchy/Philadelphia Inquirer, 11/27).

What’s on the Table

• On Nov. 25, the Urban Institute released a paper advocating that health care reform legislation drop provisions for a relatively weak government-run health plan that would take effect quickly and include a trigger mechanism for a stronger public option that would kick in if the health care industry does not effectively control rising health care costs, Politico reports. The paper calls for a three- to four-year period for the health care industry to demonstrate a capability of controlling increases to health care spending. The industry’s ability to control health care cost increases would be assessed using national health expenditure data that the federal government already collects, rather than creating a new metric aimed at measuring the affordability of health insurance coverage (Rogers, Politico, 11/25).

Shaping the Debate

• The Senate bill (HR 3590) would ensure that U.S. residents would pay less for individual coverage and be protected against high out-of-pocket costs, according to a new analysis of the bill that is expected to be circulated in Congress this week, Politico reports. The “microsimulation” analysis by Jonathan Gruber, a Massachusetts Institute of Technology economist and a Treasury Department official in the Clinton administration, was based on the Congressional Budget Office‘s preliminary estimate report of the bill (Allen, Politico, 11/28).
• The American Association of Justice has purchased all 30 ad spaces at the Union Station Metro stop in Washington, D.C., for December, to highlight the estimated 98,000 people who die annually from preventable medical errors, CongressDaily reports. The group is attempting to ensure that caps on medical malpractice court awards, typically favored by Republicans, are not included in health reform legislation (CongressDaily, 12/1).
• On Nov. 27, Health Care for America Now provided stores and shopping malls in Arizona, Missouri, Nevada and Texas with leaflets encouraging shoppers to “think twice” about buying popular brands marketed by VF Corporation, whose CEO Eric Wiseman is on the board of health insurer Cigna, the New York Times‘ “Prescriptions” reports. “Greedy health insurance companies like Cigna are spending millions on scare tactics to block reform,” according to the handouts (Seelye, “Prescriptions,” New York Times, 11/26).
• Union groups have begun lobbying campaigns addressing certain issues in the Senate’s health reform bill, including provisions that would expand the employer mandate to all employers, create an excise tax on “Cadillac” plans and implement a more robust public health insurance option, The Hill reports. The campaigns could increase pressure on Senate Majority Leader Harry Reid (D-Nev.), who is up for re-election next year, because his state is home to a large number of union workers (Bogardus, The Hill, 11/30).
• HCAN, Families USA, and the Pharmaceutical Research and Manufacturers of America have launched television advertisements aimed at highlighting the votes cast by some senators who voted to allow debate to begin on the Senate health reform bill, the Washington Times reports (Haberkorn, Washington Times, 11/27). For example, HCAN is airing ads in Arkansas praising the state’s Democratic Sens. Blanche Lincoln and Mark Pryor for their votes. The group also is offering “covert” praise for Sen. Ben Nelson (D-Neb.) for his vote to begin debate on health care reform legislation in the Senate by running an ad that attacks Sen. Mike Johanns (R-Neb.) for voting against the motion, The Hill reports. The group purchased $175,000 worth of airtime in Arkansas and $125,000 worth in Nebraska (Bolton, The Hill, 11/25).
• Americans for Tax Reform is calling on Nelson and Sen. Arlen Specter (D-Pa.) to oppose health care reform legislation to comply with a pledge not to support tax increases that the organization presented to the two during their most recent campaigns, The Hill reports. Grover Norquist, president of ATR, said, “If they vote for this bill as … written it violates the pledge” (Bolton, The Hill, 11/28).
• Coca-Cola, PepsiCo and other soft drink manufacturers increased their lobbying efforts in 2009 due to concern over proposals to establish an excise tax on sugary drinks to help fund health care reform legislation, The Hill reports. According to the Center for Responsive Politics, the American Beverage Association spent $8.7 million on lobbying in the first three quarters of this year, compared with $668,000 last year. Pepsi spent $4.2 million in the first three quarters, up from $1.2 million in all of last year, and Coke spent $4.6 million in the first three quarters of 2009, compared with $2.5 million in all of 2008 (Young, The Hill, 11/26).
• Critics of a proposed 5% tax on cosmetic surgery in the Senate’s health bill say it unfairly targets women, who make up the bulk of customers, the Times reports. Surgeons also are concerned that the tax would encourage medical tourism to places such as Thailand, where they say surgeries are less costly but likely less safe than in the U.S. (McKinley, New York Times, 11/30).

Poll

• A USA Today/Gallup poll released on Monday found that 49% of respondents would urge their lawmakers to vote against the health reform bill, compared with 44% who would urge them to support it, the Boston Globe‘s “Political Intelligence” reports. The poll also found that since October support for reform has declined by six percentage points among Democrats, eight percentage points among independents and 12 percentage points among Republicans (Rhee, “Political Intelligence,” Boston Globe, 11/30).

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