Leading wholesaler-distributors depend on NAW Institute for Distribution Excellence groundbreaking research studies because they help solve real-world business challenges.




Order copies of Facing the Forces of Change®: Navigating the Seas of Disruption for everyone on your team!


NAW News

Health Care Reform

Legislative Issue Update - January 2008

Value-Driven Health Care  [added January 2008]

Health insurance costs have for several years been the top concern of American employers. Double-digit increases in group health insurance costs earlier in this decade placed unsustainable burdens on the bottom lines of both larger and smaller employers, leading many employers to embrace strategies which shifted a greater share of their employees’ health care and insurance costs to the employees themselves. Not surprisingly, a growing number of workers, particularly younger and healthier workers, rejected the higher insurance costs and, as a consequence, the number of medically uninsured Americans has risen to 47 million persons. This condition contributes to higher medical costs for consumers of health care products and services, including insurance.

There is better news from the immediate past: recently the cost of group health insurance programs has grown at a much slower pace – down to 6.1% in 2005, 2006 and 2007, according to data compiled by Mercer Health & Benefits LLC. What’s changed? Many observers believe that consumers of health care products and services have become more discerning “shoppers” as their own economic responsibility for their health care has grown, particularly in the wake of the growing attractiveness to employers of lower-cost consumer-driven health plans.

The basic concept behind “consumerism” in health care is both simple and familiar: to bring market forces to bear in making health care choices.

Today, all the incentives move our health care “system” in precisely the opposite direction; i.e., health care products and services provided to a consumer (the patient) are largely paid for by a third party (insurance) that is itself heavily subsidized by a fourth party (the employer). In short, traditional forces at play in a competitive free marketplace are largely absent in the health care sector.

For a market-driven approach to work, injecting the greatest degree of efficiency into the system is critical, as is informational transparency; i.e., enabling consumers of health care to make value-based decisions rooted in reliable information about service quality and cost.

Also necessary for the success of “consumerism,” i.e, a more orthodox competitive marketplace in health care, is the leadership of the largest consumers. There is no larger consumer than the Federal Government through its various health programs such as Medicare, the Veterans Affairs health system, the Federal Employees Health Benefits Plan and others; and this led President George W. Bush last August to sign an Executive Order committing the Federal Government to the four “cornerstones” of “Value-Driven Health Care”:

• Interoperable health information technology.
• Quality of care reporting.
• Price transparency.
• Providing incentives for quality care at competitive prices.

Implementation of the Executive Order and outreach to the private sector to build on this initiative is being overseen by the Department of Health and Human Services under the leadership of HHS Secretary Michael O. Leavitt.

NAW has embraced the cornerstones in the President’s Executive Order as an essential step toward an efficient market-driven, rather than a bureaucracy-laden big-government directed health care system. NAW is working with the Department of Human Services and our colleagues in the Partnership for Value-Driven Health Care to encourage acceptance of the four cornerstones by employers nationwide.

Mental Health Parity [updated January 2008]

The employer community and health insurance industry have opposed bipartisan legislative efforts to expand the mental health parity requirements enacted in 1996 as part of the Health Insurance Portability and Accountability Act (HIPAA). (HIPAA outlaws discriminatory annual and lifetime dollar limits for mental health expenses.) That has changed as a result of the 2006 mid-term elections that gave majorities in both houses of Congress to the Democrats.

A compromise measure (S. 558, the “Mental Health Parity Act of 2007”), written by a bipartisan group of Senators led by Sen. Pete Domenici (R-NM) and the Chairman and Ranking Minority Member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, Sens. Edward Kennedy (D-MA) and Mike Enzi (R-WY) respectively, and endorsed by leading employer trade associations, NAW included, and several patient advocacy groups, passed the Senate in September 2007.

The House of Representatives is also active on this issue but its legislation has not evolved as has its Senate counterpart. In March, Rep. Patrick Kennedy (D-RI-1) introduced NAW-opposed H.R. 1424, the “Paul Wellstone Mental Health and Addiction Equity Act of 2007”. The bill currently has a bipartisan group of 273 cosponsors and has been reported by the Energy and Commerce, Ways and Means, and Education and Labor Committees.

Key differences between the Senate compromise and H.R. 1424 that render the House bill unacceptable are:

• The House bill’s broader benefit mandate;

• The House bill’s out-of-network coverage mandate;

• The House bill’s failure to adequately protect medical management of benefits; and

• Remedies.

A Senate-led end of session effort to move a compromise forward as part of the omnibus appropriations bill was rejected in the House at the staff level. Instead, another one-year extension of current law was adopted.

ERISA Preemption

The Employee Retirement Income Security Act (ERISA), enacted in 1974, includes a preemption provision (i.e., ERISA preempts virtually all state laws that “relate to any employee benefit plan”) that has facilitated employer-sponsored group health insurance plans. By enabling employers to operate uniform health insurance plans across state lines, employers and their employees enjoy the benefits of flexibility in plan design, and economies of scale that yield the lowest possible premium and administrative costs. Largely due to ERISA, today 160 million Americans receive health insurance coverage through employer-sponsored group plans.

Because the ranks of the medically uninsured have risen to more than 45 million Americans, and the difficulty the Federal government has experienced in responding to this crisis, states have been working on dealing with the problem within their own jurisdictions. The limiting effect of ERISA on these state initiatives has led some to advocate a weakening of ERISA preemption.

Legislation to facilitate this has been introduced in both houses of Congress; H.R. 506, the “Health Partnership Through Creative Federalism Act,” and S. 325, the “Health Partnership Act.” The major purpose of both bills is to provide grants and ERISA waivers to states to facilitate state initiatives approved by a Federal commission the Secretary of Health and Human Services is required to establish. The House Education and Labor Subcommittee on Health, Employment, Labor, and Pensions conducted a May 22 hearing on “Coordinating Federal and state initiatives to cover the uninsured” which included a discussion of ERISA preemption and the merits of H.R. 506. A more serious attack on ERISA preemption is expected to take shape in 2008 and 2009.

Given the realities of the nation’s current workplace-based health insurance delivery system, NAW supports ERISA preemption as providing its essential foundation and have joined with our colleagues in the National Coalition on Benefits (NCB) in its defense.