In August, Sen. Mike Johanns (R-NE) introduced a measure to repeal the 1099 reporting requirement in the Affordable Care Act — which requires small businesses to report any purchases over $600 to the IRS — and proposed paying for the $19 billion shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. The amendment attracted seven Democratic Senators but did not receive the necessary 60 votes to move forward. Now, as the Senate prepares to re-consider repeal on November 29th, Johanns has introduced a different set of pay-fors that he hopes will attract additional Democratic support:

“My latest effort to repeal this costly mandate should easily win the support of my colleagues,” said Johanns. [...]

Johanns’ amendment directs the Office of Management and Budget (OMB) to identify $39 billion in unspent and unobligated accounts to replace the revenue that might have been generated by the 1099 paperwork mandate. This represents only about five percent of the total funds in unspent and unobligated accounts and gives the Administration discretion to ensure these funds do not affect ongoing and necessary programs.

A spokesperson at Johanns’ office told me that the Senator is only interested in repealing the reporting mandate and is no longer interested in making waves with controversial pay-fors that take away money from the mandate or prevention. Since President Obama, Senate Finance Committee Chairman Max Baucus (D-MT), and House Speaker Nancy Pelosi (D-CA) have all come out in support of stripping the provision, Johanns sees renewed momentum on the issue and hopes to build a coalition around removing the 1099 requirement.

But it’s unclear if this pay-for will be any less controversial. First, if Senators are hesitant to vote for specific cuts because they may target their favorite programs, they would also be hesitant to delegate the task of finding cuts to another agency — out of fear that it would target their favorite programs.

Meanwhile, CAP’s Michel Linden doesn’t think that the pay-for would score as deficit neutral. “Unspent and Unobligated balances are not real money sitting in some account, they are actually ‘budget authority’ – the ability for an agency to draw down funds from the treasury to turn into actual outlays,” he told me. “While canceling unobligated balances might save a little bit, I’m pretty sure the vast majority just goes away if its not used which means that canceling it won’t save any money.”

He makes the following analogy:

A parent says to their teenager, “You can spend up to $100 on school supplies this year.” The child then spends only $80. Now if the parent has promised the child that they get to keep the difference, then canceling that promise would actually save money for the family. But if the parent hasn’t made that promise – if instead the understanding is that the teenager can spend up to $100 but if he or she comes in low, then any change is expected to be returned to Mom and Dad – then “taking back” that other $20 has no real meaning for the family’s bottom line.

The very fact that Johanns feels the only way he can repeal the 1099 is if he farms out the task of identifying pay-fors to a separate agency, however, only reiterates the difficulty of actually going through with the GOP pledge of eliminating the entire law or even going provision by provision.

Baucus — who has introduced his own 1099 repeal bill — has yet to identify any pay-fors. His office has not returned my inquiries into this matter.

This morning, the Department of Health and Human Services (HHS) announced that it will issue interim-final regulations requiring health insurers to spend 80 to 85 percent of premium dollars on delivering health care services, encouraging insurers to deliver care more efficiently and not raise premiums beyond the costs of health care services and quality improvement. Insurers that fail to meet the new standards — called the Medical Loss Ratio or MLR — will have to issue rebates to beneficiaries.

“In 2011, the new rules will protect up to 74.8 million insured Americans, and estimates indicate that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion,” the department says on its website. “Average rebates per person could total $164 in the individual market.” The interim final rule is based almost entirely on the recommendations of the National Association of Insurance Commissioners’ (NAIC) and is considered favorably by consumer advocates.

For instance, while the interim rule rebuffs the call of three powerful Democratic Committee chairmen to allow issuers to subtract only taxes that are specifically related to the Affordable Care Act before calculating their MLRs, it accepts the more consumer-friendly aggregation process that prevents insurers from masking the low MLRs of certain policies and does not consider services like anti-fraud and “utilization review” as “medical expenses.” (For more details click HERE or HERE.)

During a press conference announcing the new standards, administration officials and consumer advocates stressed the flexibility of the new regulations — particularly the one-year exemption for so-called mini-med plans. Employers who offer such plans to low-income, part-time workers like fast food restaurants and retailers have requested waivers from the agency, warning that they would have to stop offering coverage if required to abide by the MLR regulations. HHS officials argued that these rules will prevent that from happening:

SEBELIUS: The mini-meds have a different kind of formula and the decision that HHS in compliance of the rules suggested by the NAIC that we will collect data for the first year on mini-med plans and make a determination on the applicability of the MLR across the board.…And then applying a standard process to the mini-meds along with some substantial consumer notices along the way so they understand what they are not getting at this point is a fully comprehensive insurance plan

JAY ANGOFF: No one is going to lose their coverage, even if that coverage is not the best in some cases. No one is going to lose even that coverage because mini med carriers don’t report their data separately traditionally, we are requiring that data to be reported early and based on that data we will determine what happens in that first year.

Watch it:

Significantly, an across-the-board delay buys HHS a year of respite from any sudden coverage dumps by large employers like McDonald’s, responds to the GOP’s contention that the agency is arbitrarily granting waivers to certain applicants, and reiterates the administration’s message of regulatory flexibility.

During the press conference, NAIC consumer representative and Washington and Lee law professor Timothy Jost stressed that while the rule does not consider anti-fraud measurements as health care costs, it allows insurers to “offset funds that they spend on fraud recovery against money actually recovered,” meaning that if fraud efforts are successful, the insurers, will in fact get credit for it. He also argued that insurers will receive “full credit for money that they spend to improve patient outcomes, to prevent rehospitalizaitons, to encourage wellness and prevention, to prevent patient errors and protect patient safety and on quality related IT claims.” The rule “does provide appropriate treatment for different, smaller, and newer plans,” Jost said at the conference and explained that the Secretary would have the authority to adjust the MLR in certain states.