House Targets Insurers With Antitrust Challenge, Public Option

By Kristin Jensen and James Rowley
Bloomberg News
October 22, 2009

Oct. 22 (Bloomberg) -- The House prepared to attack health insurers on two fronts, with Democrats seeking to pass the strongest form of a U.S. government-run insurance plan and a panel voting to strip the industry's antitrust exemption.

The House Judiciary Committee yesterday voted 20-9 to approve legislation that would ban insurers from engaging in price fixing, bid-rigging and market allocation. The measure may be added to broader health-care overhaul legislation.

At the same time, Democratic leaders said they can win passage for a government program to compete with private insurers and drive down prices, one of the most contentious issues dividing Democrats and Republicans.

"We have the votes to pass a robust public option," said Connecticut Representative John Larson, chairman of the House Democratic Caucus. A Congressional Budget Office estimate that the House measure would cut the deficit over 20 years "has placed us in a good spot with the caucus," he said.

Democratic leaders in the Senate had a tougher time yesterday, when they lost a bid to stave off Medicare-payment cuts to doctors because Republicans and even some Democrats objected to the $247 billion cost. Democrats have been courting the doctors to support the revamp of the medical system.

Lawmakers are considering the biggest changes to U.S. health care since the creation of Medicare in 1965. The legislation, President Barack Obama's top domestic priority, attempts to curb health-care costs while covering tens of millions of uninsured Americans.

Showdown With Senate

The proposal to create a public option is dividing House and Senate Democrats. While the idea has met resistance in the Senate, House Speaker Nancy Pelosi has insisted on keeping it in her version, setting up a clash between the two chambers later when they must reconcile their legislation.

Under one House plan, the public option would peg rates to 5 percent above those paid by Medicare, the government program for the elderly.

An alternative plan would negotiate rates, as private insurers do. A group of fiscally conservative Democrats known as Blue Dogs supports that idea, saying it would provide fairer competition for insurers such as Indianapolis-based WellPoint Inc.

Preliminary Congressional Budget Office estimates show that the legislation with a public option pegged to Medicare rates would cost $871 billion over 10 years, while a bill requiring negotiated reimbursements would be $895 billion, a House leadership aide said on condition of anonymity.

To raise money, House Democratic leaders are considering an annual fee for medical-device manufacturers that would bring in $20 billion over 10 years, the aide said.

No Bad Choices

"We have a couple of good options," Pelosi said in a Bloomberg Television interview yesterday. "I don't think we have a bad option in the mix."

Pelosi and Senate Majority Leader Harry Reid are blending versions passed by three House committees and two Senate panels. In all the measures, Americans would be required to buy insurance, helped by purchasing exchanges and government aid. Insurers would face new rules and have to accept all clients.

While House Democrats are nearing agreement, lawmakers in the Senate are debating other issues. Chief among them are whether to require that employers cover workers, and how to pay for legislation that will cost more than $800 billion over 10 years, as well as the public option.

Senator Ben Nelson, a Nebraska Democrat, said he met with Reid on Oct. 20 and pushed him to drop a "robust public option." He and Maine Senator Olympia Snowe, the only Republican to support any measure so far, talked with Reid again yesterday about the employer requirement.

"There are a number of our colleagues who have concerns about the employer mandate," Nelson said.

Biggest Hits

Insurers have taken some of the biggest hits in the debate. The industry opposes the public option, and America's Health Insurance Plans, a Washington trade group, said action on the antitrust exemption isn't needed and might create "increased regulatory and legal uncertainty."

Democratic Senator Charles Schumer of New York called the antitrust exemption "an accident of American history" dating to a time when state-based companies asserted they weren't engaged in interstate commerce. "It's a different universe today," he told reporters.

Insurers also face a possible tax on profits and scaled- back penalties for Americans who don't buy coverage, potentially cutting into the pool of new clients.

The Standard & Poor's index of 13 managed-care companies has dropped 14 percent in the last month, led by Hartford, Connecticut-based Aetna Inc.

Paying Doctors

Senate Democrats yesterday also failed to come through for two critical constituencies, doctors and seniors, when they lost a bid to avert the Medicare-payment cuts to doctors. Democrats fell 13 votes short of the 60 needed to bring legislation to the floor.

The American Medical Association blasted the vote. "Permanent repeal of the Medicare physician payment formula is essential to comprehensive health-system reform," said the group's president, James Rohack.

Reid said he will revisit the issue after the Senate passes the broader health-care legislation.

"We are going to make sure that Medicare patients have the ability to go to the doctor," Reid told reporters. The health-care legislation has a one-year fix, he said.

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