NEWS RELEASE

November 19, 2009
PR-09/40
For additional information:
Jason Hammersla
202-289-6700

Council comments on Senate health care reform bill

Merged bill still needs significant improvement to garner employer support

WASHINGTON, D.C. — “The Senate health care reform measure offered today by Majority Leader Harry Reid (D-NV) addresses several important concerns of employers, but significant improvements will still be necessary to protect and preserve the employer-provided coverage now enjoyed by 160 million Americans,” said James A. Klein, president of the American Benefits Council.

“The Senate bill avoids some of the onerous provisions of the House of Representatives measure, the Affordable Health Care for America Act (H.R. 3962),” Klein said, “but unfortunately, it includes several others that are very problematic.” Among the constructive features:

• Employer flexibility: “Unlike the House bill, with its rigid benefit mandates, the Senate bill generally allows employers to tailor their benefits to the needs of their workforce,” Klein said.
• ERISA preemption: “The Senate bill preserves the long-standing federal regulatory framework that keeps employer-sponsored benefits equitable and affordable for all workers, regardless of geographic location, and unlike the House bill, does not expose employer-sponsored coverage in an insurance exchange to costly state law remedies.” Klein said.
• Wellness incentives: “Unlike the House bill, the Senate bill permits employers to offer stronger incentives to individuals who participate in wellness and chronic disease management programs, which will lower costs in the long run,” Klein said.
• Avoidance of far-reaching provisions that would threaten to destabilize employer coverage: “The Senate bill avoids other provisions — such as the House-inspired retiree health plan restrictions and Senator Ron Wyden’s (D-OR) so-called ‘free choice’ amendment — which would have significant unintended consequences for employer plan sponsorship. Such provisions would likely compel many employers to exit the system rather than absorb steep cost increases or pass them along to their employees,” Klein said.

“We commend Senate leaders for their responsiveness to these employer concerns. However, there remain a number of areas in which the measure requires urgent improvement,” Klein said, identifying several outstanding issues:

• The public plan: “Despite requirements that the public plan would have to negotiate payment rates with health care providers, there is little evidence or confidence that such a policy would be sustained. Like Medicare and Medicaid, the public plan would ultimately be forced to pay health providers well below market rates, resulting in significant cost shifts to employers and employees,” Klein said.
• The “Cadillac” plan tax: “Despite increased thresholds for the imposition of this new tax, large numbers of public and private employer plans are certain to exceed the new tax thresholds, simply because health care costs are increasing at many times the rate of typical inflation. If left to stand, this tax will eventually force employer plan sponsors to make significant benefit changes to avoid additional taxation,” Klein said.
• The retiree drug tax: “Taxation of the subsidy for Medicare-eligible retirees’ prescription drug coverage will not only compel employers to curtail these programs, it will ultimately hurt seniors and push additional costs to the already-overwhelmed Medicare program,” Klein said.
• An annual tax on insurers and third-party administrators: “The Senate bill imposes an annual tax on insurers on the premiums they collect and their earnings for administering self-insured employer plans, and these taxes are clearly going to be passed long to employers and employees resulting in higher costs,” Klein said.
• Long-term care programs: “The Council supports efforts to provide adequate lifetime care for the elderly and disabled, but the Senate bill’s establishment of a new public long-term care insurance program will confer burdensome administrative responsibilities on employers and establish a large new funding obligation if premiums for these new benefits are not sufficient,” Klein said.
• Lack of liability reform: “Despite lawmakers’ repeated intention to ‘bend the cost curve,’ the Senate measure includes no meaningful medical liability reform, which nearly everyone acknowledges would reduce costs,” Klein said.

“The Council is prepared to support health care reform if it is done right — on a bipartisan basis, with consideration for the economic challenges facing employer health plan sponsors,” Klein said. “The introduction of a new Senate bill is an important step in that process, but much more work will be needed to improve the bill during a full and open floor debate in the weeks ahead before companies can support this measure.”

For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at 202-289-6700 (office) or (202) 253-5458 (cell).

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council’s members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.