Despite efforts to torpedo health care reform last year, health insurers are now promising to work alongside federal and state regulators to implement the new reform law and hold off efforts by progressives to re-introduce the public option or single-payer proposals. Speaking at the CIAB’s 9th Annual Employee Benefits Leadership Forum last week, Mike Tuffin, executive VP of AHIP, implied that the industry was very happy with the final version of the bill:

“Health care reform is not over. This is the only the end of the beginning,” Mr. Tuffin said. “Whether we like it or not, the bill was passed. Now we must be reliable and effective implementation partners. We need to stay engaged. The single-payer and public-option supporters have not given up,” he warned.

Insurers have signed on to a 50-state campaign called Enroll America, organized by consumer advocate Ron Pollack of Families USA. The campaign will encourage Americans to comply with the individual health insurance mandate by January 1, 2014 by making it easy for those who already qualify for Medicaid or private insurance subsidies to sign up. “It will raise money to hire local staffs, which will push state governments to create user-friendly enrollment systems. The goal is to allow people to sign up when they see a doctor or apply for other benefits, with simple applications printed in multiple languages.” To be sure, insurers’ efforts to implement reform are guided by self-interest. The industry stands to make millions from the mandate and is already encouraging HHS to adopt fairly loose regulations of its businesses.

Regulators and politicians certainly shouldn’t fold to industry demands or abandon their efforts at securing progressive legislation, but one can’t deny the fact that in implementing reform, insurers can provide critical technical expertise or that their participation in enrollment efforts will only improve implementation. As Jon Kingsdale, the director of the Commonwealth Connector Authority, has observed, “Brow-beating various industries may be good partisan politics, but the Health Connector has worked diligently at creating solid, long-term working relationships.” Those same partnerships will be essential if the health implementation effort is to succeed.

Of course, if insurers are truly interested in dissuading Congress form adopting reforms like the public option or national rate review, they would stop imposing headline grabbing premium increases and paying outrageous CEO bonuses and salaries. Efforts to milk the old system for all its worth could build public (and Senate) support for tougher reforms.

Noting Maine’s success in denying a 18.9% premium increase to Anthem Blue Cross and Blue Shield of Maine last year, HHS announced today that it will be freeing up $51 million in grant dollars through the health care law to help states strengthen their premium review programs and prevent insurers from dramatically increasing insurance premiums.

“These funds are the first round of grants available to states through a new $250 million program to create and strengthen insurance rate review processes. These grants will help states strengthen their oversight capabilities and will allow states that do not currently review rates to establish a rate review program,” Jay Angoff, Director of the Office of Consumer Information and Insurance Oversight said in a conference call with reporters.

Angoff said that HHS would not be requiring states to adopt a strict prior review process with the authority to deny “unreasonable” increases, but explained that states will have to “show they would expand their existing authority”:

ANGOFF: To receive a grant, a state must submit a plan as to how it will use grant funds to either develop or enhance its process of reviewing or disapproving or modifying health insurance rate review requests. States that successfully apply will receive either a $1 million grant during this first grant cycle….in order to obtain a grant a state must submit a proposal explaining how it would either strengthen its existing rate review authority or obtain authority, which it doesn’t have. The solicitation asks for specific examples for the specific things states could ask for. They could use grant funds, for example, to hire more actuaries to enhance their IT capacity, or to improve their consumer protection standards, or to require more in the way of refiling justification. So the states really have a lot of leeway as to what they will propose in order to obtain these rate review grants.

Angoff said he “assumes most states will apply” for the grants, but stressed that the decision was left to each individual state. Currently, more than 30 states have some level of authority over insurance premiums and the new health care law tasks the federal government with advising states on how to establish premium review standards.

The federal government will not have direct authority to overturn so-called “unreasonable” increases, but the law does allow the Secretary of Health and Human Services to assist states in developing a plan for denying rate hikes or preventing insurers with “unreasonable” hikes from participating in the exchanges. Insurers will be required to submit “a justification for an unreasonable premium increase” to the state insurance commission authority, who then makes the appropriate recommendations “to the State Exchange about whether particular health insurance issuers should be excluded from participation in the Exchange based on a pattern or practice of excessive or unjustified premium increases.”

HHS is currently developing firm standards and definitions for what constitutes an “unreasonable” increase, which states will have to follow in the next round of grants. “The grants that will be available in fiscal year 2010 are only the first in a 5-year grant program. HHS will take applications for a second round of state grants beginning in FY 2011 after new regulations regarding rate review take affect,” Angoff said.

As it returns to work today, the Senate will take up the tax extenders bill passed by the House before the Memorial day recess. Democratic leaders divided the House bill into two parts, after members couldn’t agree on how much of the new spending would be paid for, and stripped provisions extending a 65 percent COBRA subsidy for people laid off after May 31 and a six-month extension of the increase in the federal government’s contribution (called FMAP) to the Medicaid program. The $116 billion bill included a package of tax extenders and a short-term patch to the sustainable growth rate (SGR) formula:

– $39.5 billion extension of unemployment benefits through November (not offset), $53 billion in tax extensions, a new summer jobs program and $1.15 billion in payments to black farmers who suffered discrimination. (offset)

– $23 billion and includes a 19-month “doc fix” that delays a cut in Medicare reimbursements to doctors. Doctors will receive a 2.2% raise for the rest of 2010, retroactive to June 1, followed by another 1% raise in 2011. But in 2012, physicians are scheduled to receive a 33% cut

Democrats in the Senate will need to attract one Republican vote to pass the measure, but remain uncertain about the size of the senate measure. “One group of Democratic senators, including Kent Conrad (D-ND) and Ben Nelson (D-NE), is expected to seek changes that would further reduce the bill’s effect on the deficit, perhaps by cutting certain benefits. Other Democrats might hinder progress by seeking alterations to certain tax provisions in the bill,” CQ reports.

An array of interest groups are pressuring Congress to act swiftly. The American Medical Association, which is warning that another pay cut would cause doctors to drop Medicaid patients, has launched “a new, multimillion dollar nationwide advertising campaign urging Americans to contact their senators” and ask Congress to pass a permanent fix to the SGR formula. But since a permanent solution would cost north of $200 billion, the organization will likely have to settle for a temporary patch and live to fight another day. Meanwhile, Families USA is arguing that if Congress doesn’t include provisions extending the COBRA subsidy and FMAP expansion in the extenders package, many lower income Americans will drop their doctors.

Without the COBRA subsidy, Families USA estimates that “unemployed workers nationally will have to spend, on average, 84.3 percent of their monthly unemployment insurance checks on COBRA premiums to keep their families covered.” States will react to the reduction in Medicaid federal dollars by cutting the program and swelling the ranks of the uninsured, the group predicts. “This outcome is ironic for at least two reasons,” Families USA writes. First, eliminating the COBRA subsidy would increase the number of uninsured in the interim period between now and 2014, undermining the intention of the new health care law. “Second, the relevant help that was initially offered through ARRA will come to an end even though the unemployment rate today exceeds the rate when ARRA was first adopted in February 2009.”

In short, eliminating additional health care spending may save money in the short term, but could very well increase health care costs by 2014, if the government has to subsidize coverage for a larger (and possibly sicker) uninsured population. It’s also worth pointing out that it makes little sense to cut health care benefits for the unemployed during a period of high unemployment rates and as a growing number of discouraged job seekers are leaving the labor market.

The COBRA measure cost $8 billion, while the FMAP increase totaled $24 billion.

Throughout the health care debate, the President repeated the oft-cited claim that ‘if you like the coverage you have, you can keep it,’ while conservatives insisted that the new health care law would undermine employer-based coverage and force everyone to purchase insurance in the new state-based exchanges. The Congressional Budget Office (CBO) assumed that the truth was somewhere in the middle and predicted that “the number of people obtaining coverage through their employer would be about 3 million lower in 2019 under the legislation.” The Center of Medicare and Medicaid Services estimated that just 1.4 million would move out of employer coverage.

On Friday, speaking at an investor conference in New York, UnitedHealth CEO Stephen Hemsley and CIGNA CEO David Cordani sided with Obama and said that a relatively small number of companies would push their employees into the exchanges:

“We don’t expect, nor would anyone else who’s modeling this actually expect, that kind of migration” into the exchanges, Mr. Hemsley said. Businesses “have thought about the fact that they can manage their costs more effectively.”

CIGNA Corp. CEO David Cordani, in a separate presentation at the same Sanford C. Bernstein & Co. conference, said it is unclear how companies will respond to the health care law. Some may decide it is cheaper to let people buy on their own through the purchasing exchanges, he said.

The online marketplaces open in 2014. Employers will spend the next three to five years weighing options, Mr. Cordani said.

“Will there be a de minimis effect” on the large-employer market for insurance? “We don’t think so,” Mr. Cordani said.

The CBO speculated that a somewhat complex interaction of factors will lead to a small net reduction in employer coverage. Approximately 6 to 7 million more Americans would demand coverage from their employer, 8 to 9 million people would lose coverage and enter the exchanges and 1 to 2 million would leave their employer-based coverage for the exchanges.

Health care policy wonks have speculated for years about why employers prefer to offer insurance and have argued that moving Americans out of employer based coverage and into some kind of regulated insurance plan would result in a more efficient system. The health care law takes small steps in that direction, but if the insurers are to be believed, the employer system may be around for far longer than many expected.