The Federal Budget Resolution: Currently, Congress is working to create a budget resolution for fiscal year 2007. The budget resolution is a non-binding budget blueprint with instructions to committees on spending targets. The Senate passed a budget resolution in March. The Senate’s version of the 2007 budget resolution does not include many of the President’s requests such as expanding tax incentives for the purchase of high deductible health plans and it does not include cuts to Medicare or Medicaid.
The House adjourned for the Easter recess without reaching an agreement on a budget resolution. The debate is largely between House fiscal conservatives who prefer spending cuts and moderate Republicans, with support from the Democrats, who oppose cuts. The moderates, who were vital for the passage of the Deficit Reduction Act last year, do not appear to support further spending decreases.
Potential Congressional Action on Small Group Market Reforms: The rising cost of insurance and eroding private insurance, especially within the small group market, has sparked a number of legislative proposals in the Senate. Two proposals, S.1955 and S.637, offer competing visions of the appropriate policy action to aid small business and create affordable insurance products in the small group market.
Senate Bill 1955 (Health Insurance Marketplace Modernization and Affordability Act of 2006), co-sponsored by Senators Enzi (R-WY) and Nelson (D-NE), seeks to break the impasse in the Senate on Association Health Plans (AHPs) but the scope of the legislation moves well beyond AHPs. The Senate Committee on Health, Education, Labor, and Pensions voted to approve S.1955 by a vote of 11-9. The full Senate has yet to consider this bill.
S.1955 includes a number of provisions; however, one that may greatly impact the states as insurance market regulators is the provision that creates National Interim Model Rating Rules that would apply to small group insurance markets in all states. The 1993 National Association of Insurance Commissioners (NAIC) model legislation guided S.1955 and would supersede state laws in the small group market. The 1993 model allows for unlimited premium variation based on age, gender, geography, family composition, group size, and wellness program participation. Within business classes, carriers can vary premium plus or minus 25 percent based on claims experience. The rating provisions of this bill would put it at odds with many long standing state insurance market reforms. The bill would also effectively exempt these new products from all state benefit mandates unless the benefit is mandated by 45 states.
Senate Bill 637 (Small Employers Health Benefits Program Act of 2005) would allow small businesses with 100 or fewer employees to purchase health insurance through the Federal Employees Health Benefit Plan (FEHBP). The FEHBP, administered by the Office of Personal Management (OPM), would contract with private insurance carriers to offer products to these small groups. Carriers would community rate and adjust premiums based on age, family status, and geographic location. The bill would also establish a reinsurance pool for carriers and refundable tax credits for small businesses who meet certain guidelines.
