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Will Industry Rebel Against the Health Care Overhaul?

By John Reichard, CQ HealthBeat Editor

November 19, 2009 -- One of the accomplishments of the White House in the current health overhaul debate has been keeping industry groups more or less at the bargaining table. One lure was the possibility that the Senate would embrace legislation that was more industry friendly, and that the Senate would get the upper hand in House-Senate negotiations on a final bill. But how are industry groups feeling now that the Senate bill has been unveiled?

The National Federation of Independent of Business issued a statement Monday hinting that it was verging on an all-out attack on Democratic health overhaul legislation. Fabled for defeating the Clinton health overhaul, NFIB has been much more conciliatory in tone in the latest debate. But now the gloves may be coming off.

"We oppose the Patient Protection and Affordable Care Act due to the amount of new taxes, the creation of new mandates, and the establishment of new entitlement programs," said NFIB Vice President Susan Eckerly. "There is no doubt all these burdens will be paid for on the backs of small business.

"The impact from these new taxes, a rich benefit package that is more costly than what they can afford today, a new government entitlement program, and a hard employer mandate equals disaster for small business," she added.

"We are disappointed that, after so many months of discussion, small business could be left with the status quo or something even worse," Eckerly continued. "Unless extreme measures are taken to reverse the course Congress is on, small business will have no choice but to hope for another chance at real reform down the road.

"Congress is running out of opportunities to prove to small business that they are serious about helping our nation's job creators. We are hopeful that a robust bipartisan debate will produce a bill that small businesses see as a solution and not another government burden," Eckerly said.

Insurers had nothing good to say about the bill. Karen Ignagni, president of America's Health Insurance Plans said in a news release that "this proposal encourages people to wait until they are sick to purchase coverage, which will significantly drive up costs for those who are currently insured. The legislation also imposes rating rules that will raise the cost of coverage for millions of young families in more than 40 states.

"The new health care taxes and fees will raise the cost of coverage for individuals, families, and employers," Ignagni added. "Health plans will be required to pay a $6.7 billion tax beginning next year for the next 10 years, in addition to 'stabilization' fees of $25 billion in 2014, 2015, and 2016. According to Fortune magazine's analysis of the companies listed under 'Insurance and Managed Care', earnings in 2008 totaled $8.61 billion with a profit margin of 2.2%—ranking the industry 35th on the Fortune list."

The "stabilization fees" are payments insurers would have to make under the proposal into state reinsurance funds to cover claims for high-risk individuals in the individual and small group markets. If they had to pay those claims, they'd get money back from the fund.

"This bill will also exacerbate the health care cost shift as health care providers offset reductions in public program reimbursements by charging more to families and employers who have private coverage," Ignagni continued. "The new government plan will cause even more cost-shifting and threaten the employer-based coverage with which Americans are overwhelmingly satisfied.

"The $117 billion in cuts to Medicare Advantage will threaten the choices that seniors have across the country and significantly reduce seniors' benefits in many major metropolitan areas.

"Congress is being forced to turn to these financing mechanisms because it has been unwilling to make a commitment to specific strategies and enforceable objectives that will bend the health care cost curve downward," Ignagni said.

Hospitals took their time responding to the bill. They have called for insurance coverage of 97 percent of legal residents below age 65; according to the Congressional Budget Office, the bill would cover 94 percent. Hospital lobbyists say they need that level of coverage to be able to offset the financial damage from Medicare cuts they've agreed to.

American Hospital Association spokeswoman Alicia Mitchell said Thursday afternoon that "we are still reviewing" the proposal.

The Senate proposal would, by CBO's reckoning, cover 31 million of the uninsured by 2019 while the House passed measure, HR 3962, would cover 36 million or 96 percent of legal residents below age 65.

Groups that don't like the Senate bill still have opportunities to modify it by persuading lawmakers to amend it on the Senate floor or in any House-Senate negotiations on a final overhaul package. But at each step of the legislative process that they don't get their way, the stakes get higher.

The drug industry, however, issued the kind of statement that the White House no doubt is happy to hear. Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice President Ken Johnson said that "while we are still reviewing the Senate bill, we remain committed to do our part to make comprehensive health care reform a reality this year.

"Compared to the House bill, which would have a chilling effect on medical progress in America, the Senate approach provides a much better blueprint for reform," Johnson added. "If we are going to cure cancer in our lifetime—as President Obama has challenged us to do—we believe any health reform package must support medical progress and innovation in America.

"What's critical now is that we remain focused on the important goal of helping pass a comprehensive health care reform bill that can get to the President's desk this year. We will continue to be a constructive partner to help meet this goal," Johnson said.

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