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AHIP to Push for Two-Year Delay of Premium Tax in New Budget Talks

By John Reichard, CQ HealthBeat Editor

October 17, 2013 -- The head of the nation's largest health insurance lobby recently said that she'll push lawmakers to include a two-year implementation delay of the new health law insurance tax in the budget agreement that they must negotiate by Dec. 13 under the measure Congress passed to reopen the federal government and suspend the debt ceiling limit.

Part of the industry fees charged under the health law to pay for wider health coverage, the taxes would start in 2016 rather than 2014, said Karen Ignagni, president of America's Health Insurance Plans.

Ignagni spoke to an industry conference in suburban Virginia and to reporters afterward.

Ignagni said the fees are driving up premium charges to individuals, small businesses and enrollees in Medicare Advantage, the private plan part of Medicare. Delaying them by two years would require offsets totaling $15 billion in order to avoid adding to deficit spending, she said.

Ignagni also addressed other issues, predicting that problems with the federal exchange would be fixed well before the Jan. 1 start of expanded coverage under the health law (PL 111-148, PL 111-152). She also called for a new focus on the prices of health care services and products that involves addressing the "dangerous" impact of hospital consolidation.

"The country cannot walk away from this anymore," she said.

A nearly successful campaign by the medical device industry to get out from under fees they must pay under the health law has energized attempts by other industry lobbies to lessen fees and payment cuts. The Federation of American Hospitals recently called for relief from health law cuts as a matter of parity if lawmakers were going to eliminate the $29 billion in fees device makers must pay over 10 years.

The scramble to lessen health law burdens raises questions about whether financing of the health law that keeps it budget neutral is beginning to unravel. The latest tactic is to press for delays rather than outright elimination of the fees. Given the kick-the-can-down-the-road propensities of lawmakers, delays have a way of turning into the same thing.

However, some lawmakers and lobbies are calling for offsets to keep changes in health law financing from adding to deficit spending.

"We have a number of ideas about pay-fors," Ignagni said. "We'll be talking about that as we talk to members of Congress."

As an example, she said "we are very excited about the Department of Health and Human Services (HHS) reports that premiums now are coming in less than what Congressional Budget Office (CBO) projected. There are implicit savings in there."

A recent Health and Human Services analysis found that premiums health plans are charging on the new insurance exchanges are lower than the amounts the CBO assumed in calculating the impact of the health law on federal spending.

Lower Premiums Lower Health Law Cost

To the extent the premiums are lower, that suggests some reduction in the price tag of the law. Plans have already locked in their 2014 rates. Since insurers are selling elimination of the health law taxes as a way to lower premiums, how would that work in 2014 with the rates already settled?

"The plans would give credits to consumers and to employers," Ignagni said. "This would be a way for people on both sides of the aisle to provide some additional benefit to individuals purchasing health insurance coverage, small businesses purchasing coverage, or governors and states and Medicaid Advantage."

Under the law that resolved the budget impasse, Sen. Patty Murray, D-Wash., and Rep. Paul D. Ryan, R-Wisc., the chairs of the budget committees in their respective chambers, must negotiate a budget accord by Dec. 13. "We don't know the scale and scope of that," Ignagni said. But she noted that lawmakers are preoccupied with the cost of insurance premiums. "More and more members of Congress are focusing on this issue and asking for solutions and to the extent we can point to things that impede affordability and solve that problem that would be a very good thing," she said.

The insurance tax adds 2.3 percent to premium changes in 2014, said Ignagni, or $300 per family. Over time the taxes increase so they will add 5 percent to premium charges, she said.

She also called for addressing costs in other ways.

"I think that what the exchanges are going to do is to shine a bright light on the issue of cost containment, and the need for the nation to go back to that issue of cost containment, " she said.

The focus so far has been on the premiums charged in exchanges but premiums are based on the underlying cost of hospital care, pharmaceuticals and other services and products, she said. "And that's where we need to now take the discussion. Why are we paying so much more in this country compared to other countries for every part of our health system? We need to get to the prices."

Current pricing "is going to be very difficult to sustain" with the U.S. trying to compete in a global economy, she added. "If prices come down, then premiums come down."

That means addressing what Ignagni called "dangerous" hospital consolidation. "I say dangerous because it affects the prices that are being charged and it makes it very difficult to negotiate affordable premiums."

Workforce issues also must be addressed in wrestling down costs, she said, adding that there is a shortage of doctors. So she's calling for a mobilization of nurses, physician assistants and others to provide primary care and coordinate treatment.

Ignagni also cautioned her audience of industry representatives that "there will be pressure to turn back the clock on the new payment arrangements that are improving care and showing results. And we're going to be dealing with that at the federal level and we're going to be dealing with that at the state level, and we're going to be partnering with you to again shine a spotlight on that."

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