Benefits Column

Health Reform Taking Shape

Health Reform Taking Shape | Human Resource Executive Online The administration and Congress are working at a feverish pace to craft a new health system -- work that may be completed before the August recess. The possibilities are complex and varied, but the mission may be gearing up for a successful conclusion.

Monday, June 8, 2009
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President Barack Obama and Congress are moving to warp speed, like the Starship Enterprise, as they seek to reform the U.S. health system. 

The president is becoming as pragmatic as Capt. Kirk as he seeks to co-opt and/or defeat any who get in the way of his quest to create a new health system for the nation. He has now expressed flexibility on individual mandates, employer mandates, changing the tax treatment of employer-provided health benefits and much more, as he seeks to inspire Congress to define a new peace plan for the health galaxy in the weeks ahead. 

Democratic Sens. Max Baucus of Montana, chairman of the Finance Committee, and Ted Kennedy of Massachusetts, chairman of the Health, Education, Labor and Pensions Committee, have joined Republican Sens. and respective ranking committee members, Chuck Grassley of Iowa, and Mike Enzi of Wyoming, in reaffirming their commitment to first create comprehensive bipartisan committee bills, and then one merged bill, in the weeks immediately ahead. 

All have joined the president in saying that it can be done, in spite of the need to find between $1.2 trillion and $1.5 trillion to pay for it over the next 10 years. 

Financing is the part of the puzzle that is at the front of the line as the president and Congress say that whatever is done must be "paid for." 

Interest groups that have worked to protect employer-paid health premiums from taxation, either individual income or payroll taxes, and have in the past defined this as a make-or-break issue, are largely silent on the issue today. 

Proposals set forth by the Senate Finance Committee include the elimination of flexible-spending accounts and health-savings accounts as possible ways to raise revenue, along with limits on the basic premium tax exclusion. 

They have been careful to say that they have not yet taken a position on any of the proposals, but they will have to do so in the very near future. Depending upon what is changed, revenue projected to be gained over the 10 years goes from zero to well over a trillion dollars. 

The reform design issues that are the most contentious are:

* Should there be a public plan, and if so, how should it be designed and who should be eligible? 

Should any employer be able to opt to send workers to the public plan? Or should it be limited to small employers? Should all workers be able to choose to go to the public plan regardless of what their employer desires? Should the plan "pay low" in order to keep premiums down and in order to "drive the market?" Or should premiums be set at an average of the market so as to not displace private insurers? 

* Should there be individual and/or employer mandates? Massachusetts has both; should national reform? What types of subsidies would be needed in order to make insurance affordable for low-income individuals and families, and who should provide the funds?

* Should there be either one national or several regional or individual state-insurance "connectors" or "exchanges" to allow access to insurance options that meet the guidelines set by the reform?

* Should there be a regulatory structure that manages the system with authority more similar to the Federal Reserve -- which has tremendous discretion -- rather than the Centers for Medicare and Medicaid Services -- which has very limited discretion, with Congress deeply involved in price-setting and the rules?

Unlike the debate of the Clinton years, most interests seem focused on trying to avoid having "the perfect become the enemy of the good." 

Leading that drive is Obama, who has stated his willingness to accept health-system and taxation changes that he said were totally unacceptable during his campaign -- if that is what it takes to get a bill to his desk for signing. 

This, alone, makes it appear inevitable that a health-reform bill will be signed at the White House before 2009 passes. The question in the air is whether it will be limited health reform or comprehensive reform. 

As a participant and speaker at a recent health-reform conference sponsored by Congressional Quarterly, and having been involved in health-reform discussions since 1975, a "new tone" was very evident in this bold quest to allow Americans to live long and prosper. 

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Former Sen. Tom Daschle of South Dakota placed the chance of comprehensive reform at 50/50, but his overall comments during that conference implied a much higher probability if the president pushes hard. 

Speakers from Consumers Union, the American Medical Association, Families USA, AARP, UnitedHealth Group and other interests highlighted the necessity of reforming what they all agreed was an "unsustainable" health non-system. 

Yet, several messages came through that could either mean less -- rather than more -- comprehensive reform. 

First, individuals do not yet understand what is being proposed, because the reform proposal does not yet exist. How will they react when they do? 

If reform is passed in a hurry without public understanding, could repeal be the next stage? 

Second, individuals are driven mainly by the fear of losing the health coverage they have. Limited insurance-market reforms could ensure access without underwriting and ensure that it could not be cancelled. 

How will the public react to tax changes that drive up their insured costs in order to subsidize the uninsured? 

Third, movement is now being driven by an "aura of inevitability." Should that "aura" fade, as it did in the Clinton years, will Congress react with a more limited reform bill? 

Should that happen, and the currently insured become "secure" in their ability to get and keep coverage, will public support for "universal coverage" go away?

Most of the provisions of any reform, as well as the questions above, are of direct importance to every worker, and to every HR executive. 

Should reform be enacted this year, even with delayed effective dates, the administrative and communications challenges faced by HR executives and staff will be daunting. It will pay to watch Congress closely between now and its August recess for the initial phaser blast, and to begin pulling together a team to monitor and plan how your firm will implement the reforms once enacted.

A bill may be on the president's desk by Thanksgiving. Will it be something to celebrate or a turkey?


Dallas Salisbury, an expert on economic-security issues, is president and CEO of the nonpartisan Employee Benefit Research Institute in Washington. The views expressed, however, are his own and should not be attributed to EBRI or others.

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