During this morning’s press conference, Senator-elect Scott Brown (R-MA) downplayed the importance of health care reform in yesterday’s special election and reiterated his support for leaving reform to the states. “While the health care bill was certainly an issue, the issues that were just referenced by your fellow journalists were issues that were in people’s minds,” Brown said. “You’re talking taxes and spending, terrorism and how we deal with those issues, the health care proposal, those are the more important things.”

Brown highlighted his support for Massachusetts’ 2006 health care reform bill and argued that his state may not benefit from the national effort:

We already have 98% of our people insured here. We know what we need to do to fix it, but to have the one-size-fits all plan that is being pushed nationally, it doesn’t work. So what I have suggested and what I’m hoping to suggest — because we’ve done it here, we have some experience I’ve voted for health care here so I care very deeply about it — is to let the states tell the federal government, ‘hey this is what we’d like to do. Can we work with you in a team effort, maybe you can incentivize us to do something better, model it like we have it or maybe come up with something better, so that we can learn.’

Watch it:

While Massachusetts adopted effective health care reforms, its success will not add up to a solution to the systemic problems plaguing American health care. As Brown himself points out, the lessons from one state tend to be just that—applicable to one but not the rest. State uninsured rates “vary from just under 8 percent to almost 25 percent and, generally, where those rates are the highest, the states have the least resources in terms of a tax base or population income levels to support funding for needed coverage expansions.” Balance budget requirements prevent many states from making meaningful long-term investments in reform and powerful health care industry lobbyists often stand in the way of reforms that could reduce industry profits.

In fact, just as Brown was suggesting “to let states tell the federal government” how they wish to reform the health care system, Kaiser News Service reported that budget woes were prompting states to cut back on existing health care programs:

- UTAH: “Utah’s Medicaid program isn’t providing enough oversight of its managed care plans, a problem that is costing the state as much as $19 million, according to a Legislative audit released Tuesday” (The Salt Lake Tribune, 1/19/2009)

- KENTUCKY: “Facing exploding growth in the government-run health insurance program for the poor and disabled, Gov. Steve Beshear’s proposed budget calls for spending an additional $782 million on Medicaid over the next two years.” However, Beshear is also calling for $108 million in cuts to the program over two years, and 2-percent nearly-across the board cuts to Cabinet for Health and Family Services programs (Lexington Herald-Leader, 1/20/2009)

- VERMONT: “Gov. Jim Douglas said Tuesday it would take $53 million in spending changes to human service programs affecting the elderly, children and the poor to close the gap between available revenues and expenditures next year” (The Burlington Free Press, 1/20/2009).

- NEW YORK: “Among the major provisions of [Gov. David] Paterson’s spending plan is a $1 billion reduction in state Medicaid spending. Paterson would achieve most of that savings by cutting Medicaid reimbursements to hospitals and nursing homes” (The (Elmira, N.Y.,) Star-Gazette, 1/19/2009).

States don’t have the economic, political or structural capacity to invest in something as big as health care reform and too many are already struggling to maintain their Medicaid programs in the face of enrollment increases. Political considerations, special interest influences and budgetary strains have doomed previous state-based health care reform efforts and exporting reform to the states is just another way of killing it.

While House Speaker Nancy Pelosi (D-CA) is insisting that Democrats “don’t (think) a state that already has health care should determine whether the rest of the country should,” several prominent Democrats are misinterpreting Senator-elect Scott Brown’s (R-MA) surprise victory in Massachusetts as a referendum on national health care reform and are urging Congressional leaders to slow down the process:

- Sen. Jim Webb (D-VA): “In many ways the campaign in Massachusetts became a referendum not only on health care reform…I believe it would only be fair and prudent that we suspend further votes on health care legislation until Senator-elect Brown is seated.”

- Sen. Evan Bayh (D-IN): “There’s going to be a tendency on the part of our people to be in denial about all this, [but] if you lose Massachusetts and that’s not a wake-up call, there’s no hope of waking up.” “Whenever you have just the furthest left elements of the Dem party attempting to impose their will on the rest of the country — that’s not going to work too well.”

- Rep. Barney Frank (D-MA): If Martha Coakley had won, I believe we could have worked out a reasonable compromise between the House and Senate health care bills…. But our respect for democratic procedures must rule out any effort to pass a health care bill as if the Massachusetts election had not happened.

- Rep. Anthony Weiner (D-NY): “It’s not the end of the world. Look, we can come back to healthcare.” “It wouldn’t be the worst thing in the world to step back and say, look, we’re going to pivot to do a jobs thing. We’re going to try to include some healthcare pieces in it.”

Public hostility towards health reform certainly helped propel Brown to victory, but as economist Austin Frakt explains, “[t]he real lesson seems to be less about policy and far more about politics.” After all, Brown doesn’t make a very convincing messenger for opposing the policy behind health reform. As a state senator, Brown voted for Massachusetts 2006′s reform law which, like the Senate and House bills, includes an individual health insurance mandate, insurance exchanges, government affordability credits and insurance regulations. As a result of the law, 98% of Massachusetts residents have health insurance and 79% want the law to continue. Unlike voters in more conservative states, Massachusetts residents don’t fear national reform because it would result in a government take over of health care — they’ve already benefited from the provisions in the Senate health care bill and they support them.

Brown’s campaign tapped into voter frustration with skyrocketing premiums (unlike the national bills, Massachusetts reform did not include cost containment) and the political sausage making process to cast the national reform as an unnecessary effort that could only increase costs for Massachusetts residents. “[W]hy do we need a one size fits all government approach we already did it?” Brown asked voters during a debate with Coakley. “[T]he Federal plan, taking a half trillion from Medicare, why would we go and subsidize the failure of other states – not only would we be paying for our plan, we’d be paying for everyone else – and look at the back door deals – I think people have lost confidence – and I think that we need to go back – I’d work on it,” he said. Brown localized the reform issue. He stripped it of its policy clothes and presented the effort as a hindrance to the state’s successful program. He promised to be the 41st vote against reform because Massachusetts had already passed its own health reform bill, arguing that the state shouldn’t pay for the national effort?

It’s unclear how many voters voted for Brown because of his opposition to the national health reform effort, but at least one poll suggests that enthusiasm for reform was greater than the movement against it. According to Rasmussen Reports election night poll, 63% of Coakley voters said health care was the most important issue in determining their vote, while 52% of Brown voters said it was their top issue.

Since national dissatisfaction with reform coincided with the Senate’s effort to water-down the bill, Democrats shouldn’t distill the legislation further or put it off altogether. “If the Democrats run for cover, if we become pale carbon copies of the opposition, we will lose–and deserve to lose,” Ted Kennedy once said. “The last thing this country needs is two Republican parties.”

In December of last year, after Democrats agreed to drop the public option and the Medicare buy-in provision from the Senate health care bill, Sen. Joe Lieberman (I-CT) took to the Senate floor to “declare” his support for the legislation. “The fact is,” Lieberman explained, “31 million more Americans will be able to have health insurance as a result of this legislation.” “That is a giant step forward for our society.” Lieberman praised the “insurance market reforms in this bill” and emphasized his desire to “support” the final conference report.

But today, during an appearance on Fox New’s Your World with Neil Cavuto, Lieberman refused to defend this “giant step forward for our society.” Without explicitly criticizing the Senate legislation, Lieberman said that the close election polls in Massachusetts demonstrated that Americans are “skeptical about this health care bill” and “unhappy about what’s happening in Washington”:

I think we’re at a point where there’s not a single Republican who really will vote for this bill as it is now or as it was moving to be in the conference committee. So this is going to be a loud message from Massachusetts and whether it’s right or wrong, I was impressed again by one of the national polls I saw yesterday that said two things. One is, opposition to the health care reform is very large among independents, unregistered with the party voters. And you know, Massachusetts is thought of as a blue state, it generally does vote Democratic but almost 50 percent of the voters there are unaffiliated so they got the liberty to move back and forth and they’re moving obviously now.

Watch it:

Lieberman’s effort to align with “independents” and distance himself from “what’s happening in Washington” is highly disingenuous. After all, the Senator ignored the wishes of his constituents — who had approved a statewide public health insurance system with a public option in 2009 — and vowed to filibuster any reform bill that included a public plan or a Medicare buy-in for younger Americans. His refusal to compromise with Democrats stripped the Senate bill of its most popular provisions.

Today, Lieberman is paying the price for orchestrating much of “what’s happening in Washington.” According to a recent survey from Public Policy Polling, Lieberman has alienated Democrats, Republicans and independents and his approval rating stands at just 25 percent. Fifty-nine percent of Connecticut independents and 55 percent of Republicans oppose the senator. During his interview with Cavuto, Lieberman did not dismiss the possibility of switching parties if the GOP takes control of Congress after the midterm elections.

The White House and Congressional Democrats are “scrambling for a backup plan to rescue their health care legislation if Republicans win the special election in Massachusetts on Tuesday.” Publicly, Democrats are insisting that health care reform will move forward, but they acknowledge “that Tuesday’s results could force a tactical shift.”

“Certainly the dynamic will change depending on what happens in Massachusetts,” House Speaker Nancy Pelosi (D-CA) told reporters in California on Monday. “Just the question of how we would proceed. But it doesn’t mean we won’t have a health care bill,” Pelosi insisted. Below are four ways the Democrats can “proceed” if they stay committed to passing health reform this year:

1) House can pass the Senate bill: Democratic House members would be reluctant to support a health care bill that includes lower affordability standards and excise tax thresholds. “House members will not vote for the Senate bill. There’s no interest in that,” Rep. Bart Stupak (D-MI) predicted. Asked about the possibility of passing the Senate bill on Morning Joe, Rep. Anthony Weiner (D-NY) said “I think it’s going to be very hard to ask us in the House to take the Senate bill. Everyone acknowledges it was a worse bill. Everyone said the only reason we were passing the Senate bill is to move the ball forward.” This method would “avoid a scenario in which a new Senator Brown helps filibuster healthcare reform into oblivion” but it opens up the possibility that House Democrats in close elections may vote against the Senate measure.

2) House passes the Senate bill and reconciliation package of changes: Under this approach, “the House would take up the Senate bill only after the White House and congressional leaders struck a deal on key issues, such as taxes and the subsidies to purchase insurance. They would incorporate those changes into a separate budget reconciliation bill. The House would pass both the Senate bill and the reconciliation bill, possibly on the same day. The Senate would then take up the reconciliation bill, which would require only 51 votes for passage.”

3) Both chambers pass conference package before Brown is seated: House and Senate negotiators are close to reaching a final compromise on reform, and the added pressure of losing 60 votes could motivate Democrats to act quickly and pass the conference report before Brown is sworn in. This kind of maneuvering may prove politically unpopular and would require the support of wavering Democratic moderates like Sen. Blanche Lincoln (D-AR) and Mary Landrieu (D-LA). The Wall Street Journal reports that “Democratic leadership aides say they have ruled out pushing the health care bill through Congress before Massachusetts Republican Scott Brown is seated, in the event that he wins.”

4) Pass reform through reconciliation: Democrats had considered passing reform through reconciliation (which only requires 51 votes) earlier last year, but abandoned the effort after it became clear that a reconciliation process would have left reform at the mercy of a parliamentarian and resulted in what Baucus described as “Swiss cheese legislation.” If Democrats embrace this method, they would be abandoning the current bills and delaying reform even further.

Should Scott Brown win the election, Democrats will have to choose between passing an imperfect piece of legislation that would still lower health care costs and cover some 31 million uninsured Americans, or abandon the effort and watch health care costs and the number of uninsured Americans to skyrocket. Democrats should abide by their pledge to give lawmakers and the public up to 72 hours to review the final health care bill, but they should pursue all available avenues to pass reform in the coming months and ignore Republican claims that they’re rushing reform or undermining the Democratic process in Massachusetts.

After all, the health care reform debate has undergone a relatively transparent and open public debate. Both chambers passed reform through regular order and the public has enjoyed months of committee hearings and floor debate, despite Republican efforts to obstruct reform through arcane Congressional procedures. House Republicans shouted down Democrats as they tried to introduce the measure for debate, Republican Senators tried to prevent health care reform from reaching the Senate floor, forced the clerk to read thousands of pages of legislative language, and introduced a stream of message amendments designed to derail reform, not improve it. In fact, when they were in the majority, Republicans — who delayed sitting Al Franken after the 2008 election — pushed through major pieces of legislation without giving 24 hours for members to read over the bills, let alone 72. The GOP forced through the Medicare prescription drug benefit, President Bush’s second tax cut for the wealthy in 2003, and the USA Patriot Act of 2001. In 2005, the House Republican leadership used “martial law” to “rush the House to a vote on the spending cut reconciliation bill before Members (much less the press or the public) had a reasonable chance to examine the legislation and understand what it would do.”

In this case, the public has had every opportunity to examine the reform legislation and its disapproval of the current bills may be an indictment of the sausage making process and the 60-vote threshold in the Senate. Public discontent grew as the public debate dragged on, misinformation about the bills streamed in from conservative commentators, and Senate Democrats were forced to strip the bill of the public option and disregard the House bill’s tax on the wealthiest Americans — these provisions still enjoy widespread popular support.

The reform process has demonstrated that Americans want their lawmakers to do more reform, not less and wavering Democrats should recognize that a Senate like health care bill would lay an important foundation for strengthening the health care system over the long term. Ironically, the final health care bill now closely resembles the Massachusetts 2006 reform effort, which the overwhelming majority of Massachusetts residents and Scott Brown support. National health care reform could help Massachusetts control its skyrocketing health care costs and improve the Massachusetts effort in the years to come.

This morning, Fox & Friends host Gretchen Carlson asked former Governor Mitt Romney if voters in Massachusetts were turning against Martha Coakley because “people in Massachusetts have a already experienced universal health care, so to speak?” Romney responded by defending the Massachusetts reforms. “Massachusetts has shown that you can solve the problem without cutting Medicare, without the so-called public option, without the government stepping in and doing special deals with unions or senators from other states,” Romney said:

ROMNEY: Oh, I think health care has a lot to do with this and Massachusetts showed and Scott Brown by the way supported the health care system here in Massachusetts still does, as I do…Let me tell you, Obamacare would be a very raw deal for people with Massachusetts because we already have a system that’s working here. Ninety-eight percent of our people are insured and if we had a federal, government one-size-fits all plan, Obamacare if you will, people here in Massachusetts would have to pay more taxes, see their Medicare cut. They don’t want Obamacare. They’d rather have what we’ve got here.

Watch it:

Romney “has shown that you can solve the problem without cutting Medicare” because states don’t have the ability to cut into the federally-funded Medicare program or make “special deals” with senators from other states. In fact, Romney’s effort may have been less ambitious than Obama’s reforms — unlike the national bills, the Massachusetts law did not try to contain health care costs — but it’s not very different from “Obamacare.”

Both bills require Americans to purchase coverage and provide affordability credits to Americans who can’t afford insurance, create insurance exchanges, establish minimum creditable coverage standards for insurers (what Romney refers to as “one-size-fits all plan”) and require employers to contribute towards reform. Like the Massachusetts plan, the final health care bill will also lack a public health insurance option.

While Massachusetts residents may “rather have what we’ve got here,” they didn’t always support the state’s health care reforms — suggesting that support for national reform may follow the same trajectory. In September of 2006, five months after Romney signed reform into law, a majority of Massachusetts residents were discouraged by the sausage making process of reform and only 48% of residents supported the bill. By June 2008, support jumped to 69% and today 79% want the law to continue (although a majority are also pushing the government to adopt cost containment policies).

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Time’s Karen Tumulty is surprised by President Obama’s decision to lower the biologics’ 12-year exclusivity deal to 10 years. “My sources tell me that the first inkling the industry and its allies got to the contrary came in a private meeting in recent days,” Tumulty reports. “In that session, California Congresswoman Anna Eshoo–the lead supporter of the 12-year provision in the House–asked the President to affirm that he supported it. ‘As a matter of fact,’ Obama told her, ‘I don’t.’”

This may be the first time Obama became personally involved in the specifics of reform legislation, but he didn’t go far enough in lowering the price of biologic drugs or closing the loopholes in existing patent law. After all, the 10-year exclusivity agreement for brand-name biologic drugs — a new class of ‘wonder drugs’ that contain living organisms and are incredibly expensive — could postpone any real savings far into the future:

A 2008 analysis by former Clinton Administration official Robert Shapiro, who has consulted for both biologics companies and their would-be generic competitors, suggested that generic versions of the top 12 categories of biologics whose patents have expired or will expire soon could save Americans up to $108 billion in the first 10 years and as much as $378 billion over two decades. “It’s the low-hanging fruit,” says Mark Merritt, head of the Pharmaceutical Care Management Association, the trade organization for prescription-drug-benefit managers. “If you can’t get this right on cost control, what can you get right?”

Currently, there exists no expedited pathway for approving generic versions of brand name biologic drugs. “[A]ny prospective competitor to a brand-name product would have to go through the same lengthy and expensive approval process and clinical trials as the original manufacturer. As a result, there is very little economic incentive to develop a competitive version of a successful biologic.”

Health care experts believe that biologics could some day help treat everything from cancer to Parkinson’s disease and lawmakers are seeking ways to lower costs by increasing competition, while giving brand-name manufacturers the patent protection they need to continue researching and developing new medicines. In 1984, Congress tried to strike this balance with traditional drugs by passing the Hatch-Waxman Act. The bill, which at the time excluded the very small biologics industry, established a pathway for “generic drug firms to challenge weak branded drug patents” and introduce cheaper generic drugs into the market place. But in recent years, brand-name manufacturers have started exploiting a loophole in the law and paying “competitors to keep cheaper, generic versions off the market.” These so-called pay-to-delay schemes have cost consumers “an average of $3.5 billion a year in potential savings, according to a recent report by the Federal Trade Commission.” The federal government loses money “by being forced to pay billions for higher-priced medications needed by patients covered under government health insurance programs” and the Act stifles competition by granting a 180-day exclusivity period “to the first generic manufacturer attempting to market their generic,” detracting other companies from entering the market place.

Former anti-trust enforcer and CAP Senior Fellow David Balto describes the 180-day exclusivity period “for the first generic company to challenge a patent” as “the ticket to the generic market and only one person gets that ticket, the first one that challenges it.” “The generic company could enter the market and it will make a certain amount of money for that period of time, it will do really well. Then at the end of the six-month exclusivity period the prices quickly compete down to marginal costs,” Balto told the Wonk Room. “Ten years ago generic companies figured out that there is only so much money that generic firm can make by entering the market. But, if the branded firm shares its monopoly profits with the generic firm, then both of them profit and both of them are better off,” he said. “In the pharmaceutical industry lawyers actively work to find regulatory loopholes to go and delay the entry of generic drugs.”

If health care reform is to improve the affordability of prescription drugs, reformers must close the loopholes in the current law and create a new generic pathway to reduce the costs of the next generation of biologic drugs. To address the former, a coalition of consumer advocacy groups has written a letter to House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) asking them to declare pay-for-delay “per se illegal.” Rep. Bobby Rush (D-IL) included this language in the House bill, but there is no similar provision in the Senate bill. The letter also asks House and Senate negotiators to extend the 180-day exclusivity period to “subsequent successful challenges to patents.” “Expanding the exclusivity period is vitally important, since it removes the barrier to entry that has protected collusive settlements between brands and first filing generics,” the letter argues.

Limiting the exclusivity period for biological drugs would also increase competition and lower drug costs. A recent Federal Trade Commission report comparing “potential entry and competition by FOBs with entry and competition by small-molecule pharmaceuticals,” concluded that “competition by FOBs is unlikely to be similar to branded-generic drug competition [partly] because” of the substantial costs associated with obtaining FDA approval and “the lack of automatic substitution between an FOB drug and a pioneer biologic drug.” The report concluded that “the 12- to 14-year regulatory exclusivity period is too long to promote innovation by these firms, particularly since they likely will retain substantial market share after FOB entry” and recommended against establishing an exclusivity period.

During House Energy and Commerce Committee’s mark-up of the health care bill, Rep. Henry Waxman (D-CA) “had pushed to shield biologics for no more than five years — the same amount of time that traditional pharmaceuticals get under the Hatch-Waxman law,” but Rep. Anna Eshoo (D-CA)’s 12-year shield prevailed. Obama had originally suggested a 7-year exclusivity provision as a possible compromise, but has now, as Tumulty reports, increased that number to 10.

PhRMA, the lobbying arm of the pharmaceutical industry, is mobilizing against the reduction and threatening to withdraw its support for health care reform. “Mr. Waxman is pushing hard, with the support of the President, to drop our 12-year FOB period down,” PhRMA CEO Billy Touzin wrote in an email to his board. “We are all letting everyone we know hear that we could not support the bill if this happens. Please activate immediately all of your contacts.”

Since discovering the federal poverty guidelines, conservative lawmakers and commentators have accused the Democrat-sponsored health care bill — which pegs affordability credits to the federal poverty standards and offers higher credits to unmarried individuals — of discriminating against married couples. “[J]amming this sort of complex legislation through Congress in the dark of night means that we are just learning about some of its more damaging provisions,” House Minority Leader John Boehner said in a statement, “including a new ‘marriage penalty’ that will cost couples that wed thousands of dollars in higher health insurance costs.”

At least two separate articles in the Wall Street Journal echoed the charge. “That’s an incentive for dual-income couples to skip the marriage ceremony altogether and continue to file as singles. For cohabitators, the savings could amount to thousands of dollars a year,” Stephen Moore argued yesterday:

Take two low-wage workers who are considering marriage. In 2016, if each has an income $11,800, they would each have to pay $248 as singles for government-approved health insurance. Married, their joint income climbs to $23,600 and they would have to pay $1,109 — a ding of more than $600 annually.

The affordability credits in the health care bills are not designed to discourage marriages (if anything progressives have been fighting to extend that right to millions of gay and lesbian Americans). Rather, the policy follows a long standing precedent which treats married people as a unit and views individuals as separate parties filing separate tax returns. This makes even more sense in the context of health care reform and affordability standards.

Unmarried individuals have fewer resources (lower incomes, more money spent on basic necessities) than married families and have a harder time obtaining and paying for health insurance coverage. In fact, since the majority of the uninsured are not married and marrying lowers uninsurance rates, providing more subsidies to individuals is a better way of targeting affordability credits to those who need them most. The following table relies on Census data from 2009:

	Married	Living Single
Uninsured	13,680,000 (36% of the uninsured)	24,665,000 (64% of the uninsured)
Insured	90,135,000 (60% of the insured)	60,705,000 (40% of the insured)

Ironically, the Republican health care plan introduced in the House, did not provide married or unmarried Americans with any affordable health care options or significantly lower health care costs. Conservatives have consistently voted against the affordability credits in the Senate and House health care bills and complained that reform was too expensive. Of course, if they now want to spend more money subsidizing married Americans, their recommendation may attract bipartisan support.

As part of the GOP’s all-out-effort to repeal health care reform, the Club For Growth is asking lawmakers and candidates in the 2010 elections to “pledge to the people of my district/state to sponsor and support legislation to repeal any federal health care takeover passed in 2010, and replace it with real reforms that lower health care costs without growing government.” At least 17 lawmakers and 36 candidates have signed onto the repeal, including Florida “Tea Party” candidate Marco Rubio. “The proposed government takeover of health care being rammed through Congress runs contrary to the principles of limited government that have made Americans the freest and most prosperous people ever,” Rubio said:

As a U.S. senator, I will sponsor and support legislation to repeal any federal health care takeover passed in 2010, and replace it with real reforms that lower health care costs without growing government. This is not just about simply opposing and repealing the Obama-Reid-Pelosi agenda. This is about putting America back on a limited government track. This will require opposing new spending binges, but also turning back some of the mistakes made by President Obama and this Congress, including the pending health care bill.”

Unfortunately, Rubio’s arguments against reform are as specious as his “constitutionality” claims. The Congressional Budget Office has concluded that reform would result in “no significant change” in the federal government’s commitment to health care, and constitutional scholars from across the country argue that the Commerce Clause “permits Congress to regulate commerce, or actions that directly affect economic activity,” such as requiring Americans to purchase health insurance coverage.

The GOP’s health care industry-funded constitutional push is designed to attract campaign cash and get-out-the vote, but should their efforts succeed, the “pledging lawmakers” would be undermining the interests of their constituents. After all, the CBO has estimated that reform would insure as many as 31 million Americans and lower premiums for subsidized Americans in the exchange. A back-of-the envelope analysis conducted by ThinkProgress reveals that on average, the constituencies of the lawmakers and candidates who have signed the Club For Growth’s repeal pledge, have experienced higher than average premium increases, rates of uninsurance and annual percent growth in health care expenditures and insurance market concentration. More than 20 percent of Floridians, for instance, went without health insurance coverage in 2008 — five percent more than the national average — and costs increased by 7.1%:

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The White House has agreed to exempt collective bargaining agreements from the Cadillac tax until January 1, 2018 and increase the threshold of the plans affected by the tax.

Beginning on January 1, 2013, a family plan that costs more than $24,000 and an individual policy valued at $8,900 will now be subject to the 40% excise tax, labor leaders said during a conference call outlining the new compromise. The new provisions would reduce the estimated revenue from the excise tax by $60 billion, forcing lawmakers to make-up for the lost revenue by increasing the payroll tax (which would still hit union members) or applying it to investment income.

AFL-CIO President Richard Tumka laid out the other compromise provisions:

- The threshold can also be adjusted further in three ways: if between 2010-2013, inflation increases higher than expected, if plans have a high number of older workers, women, high risk individuals and qualified retirees.

- Beginning in 2015, dental and vision benefits will be excluded from the cost of the plan.

- Collective bargaining agreements would be able to go into the exchange beginning in 2017.

Critics will interpret the temporary exemption as a special interest carve out for a vital political constituency, but it makes perfect policy sense. Unlike non-union labor negotiations which can be re-negotiated annually, collective bargaining agreements tie unions down for multiple years. The temporary exemption allows them to get out of the way of a moving train. After all, collective bargaining agreements are not the same as raise negotiations for non-union employees. While the latter operates under the implicit assumption that a certain percentage of compensation is dedicated for health benefits and is exempt from taxation, a union collective bargaining agreement enters into an explicit trade off between taxable and nontaxable compensation.

Typically, a union negotiates a certain dollar agreement from the employer for total compensation as well as how that will be divided between wages and benefits. The employer could agree to compensate its workers $30 per hour and the union would decide to allocate $20 to wages and $10 to health care. Or, it may choose to spend $15 on wages and $15 on health care. Whatever the case, the unions weighs the benefits of receiving tax deductible health benefits with the immediacy of higher wages and agrees to abide by the agreement for several years.

Without an exemption period, the excise tax would change the rules midstream. Non-union workers with expensive health care benefits could change their compensation package in anticipation of the new tax, but unions with health policies of above $24,000 would pay higher taxes until their contract expires. The temporary exemption still accomplishes the goals of the excise tax — pushing people into lower cost health care plans — but gives unions more time to change their behavior and switch to cheaper policies.

Still, some progressives are not amused. Over at FireDogLake, Michael Whitney argues that “if unions take this ‘deal,’ if the labor movement decides to fold and exempt themselves from the excise tax, they fulfill one of the worst of stereotypes of labor unions: blind self interest. By abandoning the nonunion middle class and protecting only their own, the labor movement is throwing any hope of future relevancy out the window.” On the call, Trumka argued that “we were able to do something that will help everyone out there.” “We’ve increased the threshold for everybody. The age and the gender adjusts for everybody taking out vision and dental out of threshold is for everybody,” he argued.

The New York Times’ Adam Nagourney is reporting that Majority Leader Harry Reid (D-NV) felt that Sen. Joe Lieberman (I-CT) had “double crossed him” after he publicly rejected the Medicare buy-in compromise on CBS’s Face the Nation. “Reid had spoken with Lieberman two days earlier, and one of Lieberman’s top aides participated in the Saturday-afternoon conference call that Reid orchestrates for Democratic senators who will be appearing on the Sunday talk shows. ‘He double-crossed me,’ Reid said stiffly, associates later recounted. ‘Let’s not do what he wants. Let the bill just go down.’”

Lieberman disputes Reid’s characterization and has taken the “extraordinary step of providing a copy of a private letter written from Lieberman to Reid on Dec. 10, three days before the CBS appearance.” In his letter, Lieberman “voices objections to the deal, but stops short of explicitly saying he would vote against it”:

“Regarding the ‘Medicare buy-in’ proposal, the more I learn about it, the less I like it…There are also concerns about what impact this Medicare buy-in idea would have on Medicare solvency and Medicare premiums,” he added. “I have a feeling I will not be the only member of our Caucus who will not want to see this Medicare buy-in proposal adopted.”

Lieberman pretended to consider the proposal publicly, but it’s unlikely that he ever did. “I’ll take a look at [the Medicare by-in],” he told reporters on December 8th, shortly after Reid had announced that Democrats had reached an agreement to scrap the opt-out public option and replace it with a national exchange of nonprofits and a Medicare buy-in for Americans between 55 and 64 years of age. “I don’t know how anybody can decide [on the Medicare buy-in] until you see the actual language of these compromise proposals,” Lieberman told Fox News.

But during his December 13th appearance on Face the Nation — in which he insisted that “you got to take out the Medicare buy-in” — Lieberman admitted that he wasn’t familiar with the proposal. “I don’t know exactly what’s in it, from what I hear I certainly would have a hard time voting for it because it has some of the same infirmities that the public option did,” he said.

Regardless of what Reid thought Lieberman had agreed to, however, Lieberman rejected the proposal before the Congressional Budget Office analyzed it or lawmakers finalized it. As a result, he was arguing against a straw man, apparently unaware that Democrats had already agreed to protect traditional Medicare premiums by placing the new population into a separate risk pool, for instance. Lieberman didn’t attend the original negotiations or seriously consider the proposal he once enthusiastically embraced. Instead, he spewed his cost-shift/Medicare bankruptcy nonsense to avoid real discussions. He wasn’t interested in compromise.

Today, Reid issued a statement today, softening his criticism. “Senator Lieberman and I have a very open and honest working relationship. On issues ranging from foreign policy to health care, even when we disagree, he has always been straight forward [sic] with me,” Reid said.

“Should someone in Idaho or Nevada have significantly different health care coverage from someone in Massachusetts,” Reed Abelson asks in today’s New York Times. “That, essentially, is one of the biggest questions Congress will be wrestling with” as it tries to reconcile the House bill’s national exchange with the Senate bill’s state-based approach.

The Senate health bill would exacerbate the regional differences in health coverage by requiring all 50 state legislatures to pass separate legislation establishing 50 new health insurance exchanges. “The same state officials who now oversee the insurance market with varying degrees of intensity” would also be responsible for regulating the new insurance marketplaces.

Meet Florida’s State Sen. Don Gaetz. Under the Senate bill, Gaetz and other state lawmakers across the country would help implement the new exchange and regulate insurers. On Monday, Gaetz pledged to “resist making other changes required to implement the reforms.” “We are not trying to figure out how to lay down with this,” Gaetz told a crowd of state legislators. “I think we are going to look for ways to roll back provisions in this bill and try to get more state choice and more flexibility and more local business control of health care options.” Gaetz predicted that in 2010, candidates opposed to the federal reform would win election, setting off a protracted fight. After the bill is signed into law, “the fight just moves to a different venue,” Gaetz said. “And by the way, I welcome the fight.”

A number of Republican gubernatorial candidates have already announced their desire to repeal reform. Attorney General Bill McCollum, who is running for governor in Florida signaled that “he would challenge the legality of any federal legislation that forces individuals to buy coverage.” Yesterday, South Carolina Attorney General Henry McMaster, also running for governor in his state, appeared in Washington to rally support for his campaign to challenge the constitutionality of reform. More than 14 states have already announced that they would put the question of repealing reform on the ballot and top Republicans have pledged to run the 2010 Congressional elections on rolling back the measure.

For reform to work, lawmakers who have pledged to “roll back provisions” of reform should not be responsible for implementing it. House and Senate negotiators must adopt the House bill’s more centralized approach or develop a compromise that establishes a national exchange but allows states a certain level of flexibility. States should be able to respond to local needs and conditions without dragging their feet on insurer oversight and regulation. After all, reform’s success or failure will be determined by the implementation process. And if the final health care bill outsources these tasks to Don Gaetz, this whole effort was for naught.

Early reports suggested that the ping-pong conference could produce a final health care bill before the President delivered the State of the Union address and many insiders suggested that the House should simply pass the Senate health care bill and be done with it. Even Obama seemed to assume that “the House will simply go along with the Senate bill out of political necessity.”

But now, House negotiators are suggesting that the Senate’s excise tax, state-based exchanges, poor affordability standards and preservation of insurers’ anti-trust exemption may not have enough votes to pass the House. After all, the House can only afford to lose two Democratic votes to still pass the bill:

- Ways and Means Chairman Charlie Rangel (D-NY): “Normally you’re just dealing with the Senate and they talk about 60 votes and you listen to them and cave in, but this is entirely different,” he said. “I’m telling you that never has 218 been so important to me in the House.”

- Rep. Anthony Weiner (D-NY): “We keep hearing them squeal like pigs in the Senate that they had a tough time getting to 60,” Weiner said. “Well, it wasn’t particularly a picnic for us to get to 218. Generally speaking, the Senate kabuki dance has lost its magic on those of us in the House.”

- Rep. Pete Defazio (D-OR): “They only got two votes to spare in the House. I think this will be a tougher negotiation than they think.”

- Rep. Emmanuel Cleaver (D-MO): “In spite of the fact that the news media is proclaiming this bill approved, I’m not in a position, based on everybody I’ve spoken with to agree with them. …I think what comes out may be disapproved and then in 30 days, when they bring something else forth — because we’ve never been this close before — but it may take a ‘no’ vote in order to get people back on board.”

- Rep. Rosa DeLauro (D-CT): “This is no walk in the park. This is bare-knuckled policy and politics to get this done.”

A “senior House Democrat” told Roll Call that “no progress has been made this week on any of the key sticking points in the House and Senate bills, despite steady meetings with union leaders and the White House.” “There’s no agreement. No deal on anything. Nothing,” the lawmaker said. In fact, during Tuesday Democratic Caucus, only one Democratic House member voiced support for the excise tax and one expressed a willingness to consider it. The House is not backing down — at least not publicly. In brief comments to reporters on Tuesday night, Speaker Pelosi (D-CA) called a national exchange “essential to having a workable plan.” “How that is refined remains to be seen,” she said.

Fortunately, the administration has reportedly embraced the idea of increasing the threshold on the excise tax, improving the affordability measures and establishing a national health insurance exchange. But securing a national exchange and revoking insurers’ anti-trust exemption (something Sen. Ben Nelson (D-NE) said he opposes) would require some serious presidential arm twisting and more time. Obama has failed to lobby for popular progressive initiatives in the past and has “forcefully communicated” his desire to pass a final health care reform bill in time for the State of the Union address. Whether or not he decides to seriously fight for these issues now, may determine the fate of health care reform. As Rep. Earl Blumenauer (D-OR) told The Hill’s Jeffrey Young, “I’m sorry if getting it right delays the State of the Union.”

Last September, ThinkProgress reported that despite its public support for health care reform, the insurance industry was engaged in a “duplicitous” campaign to undermine the effort. Now the National Journal has confirmed that from September to December 2009, “six of the nation’s biggest health insurers began quietly pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress.” The companies used America’s Health Insurance Plans — the lobbying arm of the insurance industry — “as a conduit to avoid a repeat of the political flack that hit the insurance industry after it famously ran its multi-million dollar ‘Harry and Louise’ ads to help kill health care reforms during the Clinton administration”:

That money, between $10 million and $20 million, came from Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and Wellpoint, according to two health care lobbyists familiar with the transactions. The companies are all members of the powerful trade group America’s Health Insurance Plans. The funds were solicited by AHIP and funneled to the U.S. Chamber of Commerce to help underwrite tens of millions of dollars of television ads by two business coalitions set up and subsidized by the chamber. Each insurer kicked in at least $1 million and some gave multi-million dollar donations.

Watch a compilation of some of these ads:

The industry’s covert ad campaign isn’t the industry’s only means of wasting millions of premium dollars on sabotaging reform. As former health insurance executive Wendell Potter told ThinkProgress, insurers are using a variety of front groups to advance a hidden attack campaign. The industry regularly feeds talking points to right-wing media like Rush Limbaugh and Fox News, mobilizes anti-reform “grassroots” groups and coordinates with conservative think-tanks to produce academic-appearing reports to advance their cause.

The insurance industry has also funded state efforts to challenge the constitutionality of health reform. Insurers have “spent heavily on political contributions” in the 14 states seeking to ratify constitutional amendments that would repeal all or parts of the new measure and contributed thousands of dollars to the attorneys generals seeking to disqualify reform. Earlier this month, Lee Fang reported that Blue Cross Blue Shield Association “played a pivotal role in crafting this anti-health reform states’ rights initiative.”

National Journal’s report should be the last nail in the coffin of AHIP’s public charm campaign. Throughout the health care debate, AHIP President and CEO Karen Ignagni repeatedly reassured the public that insurers were committed to health care reform and even produced a plan for reforming the system. “We understand that we have to earn a seat at the table,” Ignagni told Obama during the White House Health Summit in March 2009. “You have our commitment to play, to contribute, and to help pass health care reform this year,” she promised.

Even after the industry sponsored several reports criticizing reform legislation, AHIP always reiterated the insurance industry’s “commitment” to reforming the health system. “We don’t want to let Americans down. It’s very important. We promised that we are committed to this. Our industry is for-square behind it, but we have an obligation to explain how to make that happen,” Ignagni told Congress in October, as her industry was donating millions of dollars to defeat reform. In fact, insurers have long been dues-paying members of the Chamber. AETNA has given $100,000 to the Chamber, while Unitedhealth Group payed at least $20,000.

This afternoon, Health Care for America Now (HCAN) hosted a press call outlining some of the remaining loopholes in federal health care reform legislation. Rep. John Garamendi (D-CA), health expert Karen Pollitz, former Blue Cross chief medical officer and former state regulator Michael McGarvey, and Wendell Potter urged lawmakers to include a national health care exchange in the final health care reform bill.

“The state governments vary in their ability to enforce and the influence of the insurance industry varies throughout the states and even in states that have a strong regulatory framework like California, you can wind up with a commissioner that has no interest in protecting consumers but rather protecting the industry.” “You need a broad based exchange because many states would never be able to do because they’re just plane small to begin with,” Garamendi explained.

The experts stressed that state based exchanges could not guarantee insurer compliance with the new regulations but also warned against various ways insurers could use the weak regulatory language in health care reform to game the system and avoid covering the sickest and most expensive applicants.

Listen to a compilation:

1. Employer wellness exception: The House and Senate health care bills allow insurers to provide incentives tied to voluntary “wellness programs.” “Current regulations allow group plans to offer rewards up to 20 percent of premium rates for employees who meet certain health goals.” The Senate bill would permit insurers to vary premiums by 30% and officials at the Health and Human Services Department could bump that variation up to 50%.” “Now instead of being able to charge people more because they’re sick, insurers will be able to charge them more because they’re not well [and not able to participate in the wellness initiatives.] And instead of calling those people victims of discrimination, we’ll say it’s their fault,” Pollitz said on the call.

2. Employer plans exempt from some regulations: Under the Senate bill, large employers can’t discriminate against pre-existing conditions or impose life time or annual limits on coverage. But since insurers in the large group market are not required to provide essential benefits packages, they could associate certain treatments with very high deductibles and cost sharing.

3. Insurers will seek to do business in weak state exchanges: “If this is done on a state-by-state basis, you can be sure that there will be a race to the bottom in a sense, by insurance companies seeking to do as much business as possible in the weakly regulated states,” McGarvey said. Garamendi recalled cases in California where “we spent a lot of money chasing after companies that were illegally operating in California but where licensed in other states and frankly were selling just absolute junk.”

“It’s very important in health reform and for pooling and for consumer protection, for all of the rules to work together and to be air tight. As soon as you sort of leave an opening, the tendency to exploit that opening for purposes of discriminating and not paying claims is going to be used,” Pollitz said, suggesting that House and Senate negotiators have one final opportunity to close the loopholes as they merge the two bills. In fact, Democrats would be foolish to ignore it. Reform that allows insurers to circumvent the new regulations and push Americans into bankruptcy would not only severely disadvantage the American public, but it would also create serious political consequences. The effort will lose its constituency and rob the party of its crowning domestic achievement. And if Democrats don’t address these known problems in the final bill, they may be too overrun by the unforeseen consequences of the legislation and the implementation process to address them after reform is enacted.

It’s also worth nothing that the public may be fed up with the reform process, but it could very well support a tougher crack-down on insurers. A recent CBS poll found that 43% of Americans don’t think reform goes far enough in regulating health insurance companies.

The Wall Street Journal is reporting that “House and Senate negotiators are considering applying for the first time the Medicare payroll tax to investment income as part of a compromise to pay for a health overhaul.” Medicare taxes are now assessed only on wages and self- employment income and some progressives have long argued that forcing “people living off investments to contribute taxes to the health care system” could be a good way of raising money for health care reform. As Steve Wamhoff, legislative director of Citizens for Tax Justice put it, “If the only income Paris Hilton gets is capital gains, stock dividends, interest and other types of investment income, currently she is completely exempt from the one big tax we have right now that is dedicated to health care.” “We’re saying that probably doesn’t make sense.” The argument is simple: individuals who earn a higher share of their income from investments should pay their fair share. If the Medicare payroll tax applies to all wage income – why shouldn’t it also apply to non-wage income?

The Senate Finance Committee considered the proposal over the summer, and Majority Leader Reid (D-NV) came close to including it in the merged Senate bill. My colleague Pat Garofalo explanis why:

The Medicare payroll tax is the “one important tax we already have that is dedicated to funding health care, but it completely exempts wealthy investors whose income takes the form of capital gains, stock dividends, and interest.”… According to an analysis by Citizens for Tax Justice, if this change occurred, “most Americans would either see no tax increase at all or would see a tax increase of less than $100 a year.” More than 64 percent of the increase would be paid by the richest one percent of Americans, and more than 80 percent would be paid by the richest five percent. And for the tax to not unfairly hit moderate income seniors who live off of investment, some sort of senior exemption would need to be included.

Extending the payroll tax to dividends and other income from investments could “raise $111 billion over 10 years,” but “it remains unclear whether investment income under a final House-Senate deal would pay the same freight as wages, 2.35% in the Senate-passed bill, or whether it would be subject to a lower rate, such as the 1.45% in [Sen. Debbie] Stabenow’s initial proposal.” The Senate health care bill already raises “the worker contribution to 2.35% for individuals making more than $200,000 a year and couples making more than $250,000 a year.”

The new tax would allow negotiators to raise the threshold on the excise tax, an important priority for organized labor, and please House members looking for a ‘get’ in the final legislation.

On Friday, during a town hall in Houghton, Michigan Rep. Bart Stupak (D-MI) refused to commit to voting against a health care bill that did not include the House bill’s abortion language. “I will work with Democratic leadership, hopefully we’ll get this issue worked” Stupak began, as the audience broke out in laughter at his nonresponse.

After repeatedly pledging to vote against any bill that did not include very severe restrictions on abortion, Stupak emphasized at the town hall that he does not make outright commitments or pledges and explained that if the final legislation did not meet his requirements, he would review the entire bill before deciding how he would vote:

If this public funding for abortion, if we change current policy, I will read the bill, make sure if that is the last issue, I probably will not vote for it. But I am not going to — we’re still negotiating. You do not play all your cards at the poker table while you are negotiating…. I would be hard-pressed to vote for something that has public funding for abortion…Let’s read the legislation and see what it says.

Watch it:

It’s unlikely that the final health care bill would not provide federal funding for abortion that goes beyond the Hyde restrictions. The original Capps Amendment in the House bill and the abortion compromise in the Senate legislation both segregate public and private funds, and only allow private premiums to be used for abortion coverage. The Senate bill would require the applicant to write a separate check to pay for abortion services.

Stupak claimed that he had rounded up 10 or 12 other Representatives (he had previously said he had 10-20 commitments) to vote against a final bill that does effectively ban coverage for most abortions from all public and private health plans in the exchange. “I really feel, because there is such a strong sentiment in the U.S. Congress to get health care worked out, it may not be the end of January, it might be the end of February and I don’t see anything magic between January 28th, having it done by then or February 28th,” he said. “I think in the final analysis it will get resolved. I hope it does, but if it doesn’t…maybe you do have to defeat it. Doesn’t prevent you 30 days later from bringing back a bill addressing the objections of members and why the voted against it.” “There is time to do it…I think we get a health care bill eventually.”

To comply with the individual mandate and avoid paying a penalty, the Senate health care bill requires individuals to purchase coverage with an actuarial value of at least 60% — a Bronze level plan. Under such a policy, an applicant’s premiums would approximately cover 60% of the health care expenses for an average population; the remaining 40% would be paid by the individual through higher cost sharing.

But the Senate bill deems the rather high-deductible policy somewhat inadequate and pegs its affordability credits to the costs of the Silver plan, leading the Congressional Budget Office (CBO) to focus its premium estimates on Silver policies (with an actuarial value of 70%). Today, the CBO released its premium estimates for the Bronze plan in 2016 (excluding affordability credits). Under the Senate bill, Americans who want to avoid paying the penalty or purchase the cheapest policy would pay, on average, approximately $1,000 less that under current law:

Price Of Insurance In Individual Market WITHOUT Reform (2016)	Price of Bronze Plan (2016)	Effect On Premiums
$5,500 Individuals, $13,100 Families	$4,500 – $5,000 Individuals, $12,000 – $12,500 Families	Individuals and families could save up to $1,000 on average.

The numbers come with several caveats. The budget office assumed “that the average age, family characteristics, and other factors associated with health care costs of enrollees in Bronze plans would be similar to those of enrollees in Silver plans” and calculated “national averages” that are not necessary representative of “premiums for specific individuals“; those “would differ on the basis of their age, average spending on health care in their area of the country, and the specific plan they chose.”

A 60% actuarial value policy is also rather skimpy (a typical small business usually provides a plan with an actuarial value of 85%). As the budget office explains, the “lower actuarial value would reduce premiums for Bronze plans directly, because the policy would pay for a smaller share of enrollees’ costs for covered services, and indirectly, because enrollees would use slightly fewer or less-expensive services when faced with the higher cost-sharing requirements included in Bronze plans.” Individuals would also face much higher deductibles and co payments. Still, the reformed Bronze policy would have to cover the “essential benefits” specified in the legislation and would likely be more comprehensive than policies available in the existing nongroup marketplace. The affordability credits and out-of-pocket spending caps included in the final reform legislation would also lower costs for Americans between 133%-400% of the federal poverty line.

Last week, I suggested that progressives could salvage the vestiges of the national public health insurance option by including a provision in the final health care bill that provides start-up funds to states that choose to create state-based public options. But adding the provision may not be as easy as it seems. The Center for Policy Analysis reminds me that “Some state and local governments that have attempted to expand health care coverage have been successfully challenged in court under the terms of the Employee Retirement Income Security Act of 1974 (ERISA)” and if the health care bill does not grant an “ERISA waiver” to states that chose to establish a public option, they may find themselves in court.

Congress enacted ERISA in 1974 to allow companies operating across state lines to offer uniform benefit packages. ERISA preempts states from enacting legislation if it is “related to” employee benefit plans. It reserves that right to the federal government. Section 514 of ERISA states that Title V (Administration and Enforcement) and Title IV (Fiduciary Responsibility) of ERISA “shall supersede any and all State laws insofar as they may… relate to any employee benefit plan.”

Hawaii successfully won a preemption battle in 1983 that allowed the state to enact an employer mandate, but single-payer advocates have also challenged the clause. During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.

It’s unclear if progressives have the votes to pass the state-based public option in the Senate, but if they do, they should include the ERISA waiver to ensure its viability.

“In the absence of government-sponsored health coverage, liberals now want negotiators to waive the anti-trust exemptions for insurance companies –another sticking point for Nelson,” Politico reports. “Oregon Rep. Peter DeFazio told his fellow Democrats on Thursday that it needs to be in the final package to keep insurance companies accountable.”

Progressives have argued that a public option would restore competition to concentrated markets, curtail abusive industry practices and lower health care costs — and they believe they can accomplish the same goals by removing the insurance industry’s anti-trust exemption. But anti-trust experts disagree. They argue that simply eliminating the exemption is not enough; lawmakers must strengthen enforcement mechanisms if they wish to hold insurers accountable.

“At some point in time, the anti-trust exemption probably served as some type of an obstacle and inhibited the federal anti trust agencies from going in and blocking some of the mergers that have led to such a concentrated market,” former anti-trust enforcer David Balto explained in an interview with the Wonk Room. “At this point, there is really no need from the industry’s perspective, for an anti trust exemption. This anti trust exemption permits them to coordinate activities which would be considered collusion in other industries. When you are a monopolist, there is no need to collude.” Today, one in six “metropolitan areas in a 2008 study of more than 300 U.S. markets is [are already] dominated by a single health insurer that controls at least 70% of consumers enrolled in health maintenance organizations or preferred provider organizations.”

Removing the exemption would allow anti-trust enforcers to begin preventing anti-competitive activities and enforcing the new regulations of reform, but lawmakers need to buttress the capabilities of the Department of Justice and Federal Trade Commission if they wish to prevent insurers from entering into collusive arrangements that would undermine any new competition, Balto argues. He proposes several ways to jump start enforcement:

1. Marshal competition and consumer protection enforcement resources to focus on insurers’ anticompetitive, egregious, and deceptive conduct.

2. Create a vigorous health insurance consumer protection enforcement program.

3. Reinvigorate enforcement against anticompetitive conduct.

In light of the compromises progressives have made to advance health care reform, simply removing the anti-trust exemption is too little too late. If progressives want to achieve some of the goals of the public plan — and hold insurers to account — they better give their exemption demands some teeth.

As lawmakers work to reconcile the House and Senate health care bills, health insurance exchanges — regulated online stores for insurance — have become a central sticking point for negotiators trying to iron out the differences in the two health bills and produce a single unified bill before the State of the Union address in early February. In addition to fighting for higher affordability standards and excise tax thresholds, House leaders are reportedly urging their Senate counterparts to establish a national federal exchange that combines the individual and small group markets into one insurance pool and a single exchange.

The House legislation establishes a Health Choices Administration (HCA) that “would have primary responsibility for administering the regulatory and subsidy programs established under the bill.” Conversely, the Senate bill “maintains separate insurance pools for individual and small group, and separate individual and small group Exchanges in each state.” The Senate legislation does allow states to merge the small and individual group markets and create their own basic plan for residents with incomes from 133 to 200% of the federal poverty level.

On Friday, during an event sponsored by the Alliance for Health Reform, Washington & Lee University Professor Timothy Jost urged Democratic negotiators to abandon the Senate’s exchange provisions and adopt the House bill’s more centralized approach. Jost laid out the differences in the two approaches and concluded that a single national exchange would eliminate inefficiencies, reduce insurers’ (and states’) ability to game the system and ensure greater government oversight of the new market place.

Watch a compilation:

House Bill	Senate Bill
National exchanges. States (like Massachusetts) can opt-opt out and create their own exchanges.	State-based exchanges. States would have to pass a law establishing the exchange and would be responsible for running it. If a state fails to establish an exchange by January 2014, the federal government could build it.
A single national exchange would create a larger risk pool that could lead to lower costs and greater administrative efficiencies.	All 50 exchanges would operate independently. States would receive seed money to establish their exchanges but they would have to fund and maintain the operation using their own funds and would presumably raise that money from a tax on insurers.
Uniform implementation, states would not lag behind.	States facing budget problems or political interfighitng would be slow to implement the exchange or effectively regulate the insurance product they sell.
To eliminate adverse selection and prevent insurers from attracting the healthiest applicants outside of the exchange, all nongroup policies have to be sold inside the national exchange.	The nongroup market can exist outside of the exchanges. Insurers that participate in the exchange would be required to market the Silver and Gold tier plans in the exchanges but would be exempt from marketing the Bronze plan within the exchange. Insurers could therefore market the lower-cost/high deductible Bronze plan outside of the exchange or stay out of the exchanges altogether and attract healthier people into the non-exchange nongroup market.
The exchange can negotiate premiums, administrative costs with insurers, selecting only the most prudent of policies.	The exchanges can take an insurers’ premium history into account. Some discretion for the exchanges to negotiate with plans around premiums.

Jost also expressed concern that a state-based model would allow conservative states — particularly those that are interested in exempting themselves from reform — to drag their feet on implementing an exchange and hamper the success of the effort.

Jon Kingsdale, Executive Director of the Massachusetts Commonwealth Health Insurance Connector Authority, argued in favor of the Senate provision. Kingsdale emphasized that the exchanges would be primarily responsible for selling insurance coverage to the uninsured and explained that local exchanges could better address the unique needs of a particular region. Kingsdale also criticized the reform legislation for requiring small businesses or individuals participating in the exchange to send their payments to the specific insurers rather than the exchange itself. Kingsdale predicted that this would create a insurmountable administrative burden for small businesses and could keep them out of the exchange.