Health Care Reform
Legislative Issue Update - June 2008
ERISA Preemption [updated June 2008]
The Employee Retirement Income Security Act (ERISA), enacted in 1974, includes a preemption provision 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 plans.
Because the number of the medically uninsured has risen to approximately 47 million Americans, and the difficulty the Federal government has experienced in responding to this crisis, states have been attempting to deal with the problem within their own jurisdictions. The limiting effect of ERISA on the state initiatives has led some to advocate a weakening of ERISA preemption.
Hearings have been held in both houses of Congress that have touched on this topic; however, a more serious attack on ERISA preemption is expected to take shape next year.
Given the realities and strengths 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.
Mental Health Parity [updated June 2008]
The employer community and health insurance industry have traditionally 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). That 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, “Mental Health Parity Act”), written by a bipartisan group of Senators led by Sens. Pete Domenici (R-NM), Ted Kennedy (D-MA) and Mike Enzi (R-WY), and endorsed by leading employer trade associations (including NAW) and several patient advocacy groups, passed the Senate unanimously last September.
The House bill (H.R. 1424, “Paul Wellstone Mental Health and Addiction Equity Act”), sponsored by Rep. Patrick Kennedy (D-RI) and Jim Ramstad (R-MN), was passed by the House by a 268 – 148 vote last March despite the opposition of employer and insurance groups.
Key differences between the Senate compromise and H.R. 1424 that render the House bill unacceptable include:
- 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.
Senate – House negotiations at the staff level have been underway for weeks and offers and counter-offers have been exchanged. Progress toward a bicameral agreement has been made, but a final legislative work product remains elusive.
Value-Driven Health Care [updated June 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: the cost of group health insurance programs has grown at a slower pace – down to 6.1% in 2005,2006 and 2007, according to data complied by Mercer Health & Benefits LLC. NAW’s 2008 Health Benefits Survey reveals that while annual premium increases in wholesale distribution remain in double digits (10% on average) they have moderated somewhat. 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-costs 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 to sign an Executive Order committing the Federal Government to the four “cornerstones” of “Value-Drive 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 has been 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 HHS and our colleagues in the Partnership for Value-Driven Health Care to encourage acceptance of the four cornerstones by employers nationwide.