“Fixing” the Health Reform Law or Sanding it Down?

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Reps. Steve King and Michele Bachmann are among those who are really, really, really hoping health reform will be defunded by Congress this year. They’re hoping against hope. The real threat to Democratic health care reform – aside from the court challenges mounted against it – isn’t wholesale defunding. (Democrats in the Senate and President Obama would likely block any spending bill that specifically prohibits funding the Affordable Care Act.)

The real threat to the ACA is the slow burn that sometimes follows passage of controversial legislation, during which the law’s sharp edges, designed to force real change, are sanded down via seemingly minor “tweaks” that when added together represent a shift from the original intent of the law. These tweaks happen often because the party that most supported the legislation – Democrats in the case of the ACA – wants to be seen as open to improvement, while the party of opposition – the GOP – wants to reduce the power of the law or reverse the provisions it found most objectionable. Let us count the ways that such changes are already happening.

First, the Administration has approved more than 700 waiver applications related to a major ACA insurance regulation – a ban on severely limited insurance benefit payouts – that impacts more than 2 million Americans. (Republicans have implied that the Administration has handed these waivers out only to unions as a quid pro quo, but this is untrue. Check out the list of mostly private companies that have received waivers so far.)

Issuing this many waivers doesn’t indicate the Administration has a great deal of confidence in the signature legislation it ushered into existence. What it signals instead is that a piece of the law was a mistake – that the ACA shouldn’t have placed a near-immediate ban on annual health insurance limits when so many Americans depended on plans that could never survive this rule. The waivers are temporary; the Administration says the “limited medical benefit plans” allowed to proliferate thanks to these waivers will dry up by 2014. But consumer advocates expected the law to eliminate this largely useless product from the insurance market right away. That was precisely the point, now undercut by a waiver bonanza that opens the door for voters to wonder: What other mistakes were made in the ACA?

Ignoring the so-called “doc fix” was one. The vexing “doc fix” problem, in which congressional action is constantly needed to prevent massive cuts in Medicare reimbursements to doctors, came up again shortly after passage of the ACA. To pay for the fix this time around, Republicans and Democrats agreed to raid ACA funding for subsidies that will help low- and middle-income Americans purchase private health insurance beginning in 2014. This particular one-year doc fix/subsidy deal amounted to about $20 billion. Since it worked so smoothly the first time, Republicans are hoping to reduce subsidy funding a second time to pay for another “fix,” eliminating a 1099 small business tax change called for the in the ACA. Some health policy experts say using the subsidy money for this other purpose will discourage Americans from applying for subsidies in the first place, thereby weakening health reform altogether.

The latest in this string of ACA “tweaks” is to the law’s “medical loss ratio” rule, which says that, beginning this year, insurers selling policies in the large group market will need to spend 85% of premium dollars on medical care, leaving 15% for administrative costs. The small group and individual market cap is 80%. States are lining up to apply for temporary waivers to that regulation – Maine already got one – but even more threatening to the thrust of the MLR rule is a proposal to exclude insurance agent commissions from the administrative category. Framers of the ACA always intended these commissions to fall into the administrative cost bucket – they are, after all, administrative in nature. One could hardly argue that a sales commission counts as medical treatment. The point of setting the MLR ratios was to encourage insurers to cut down on unnecessary administrative expenses that drive up premiums. Brokers and agents argue that their services are necessary and therefore shouldn’t part of the formula.

But the ACA was designed to make agents and brokers obsolete. Once health insurance exchanges go fully operational in 2014, consumers will – in theory – be able to compare, design, and price plans online. Plus, choice will be limited by new federal rules determining what must be included in every insurance policy. Who needs a broker when you have limited options and a website that aggregates and sorts your choices clearly and concisely?

And yet excluding commissions from the MLR ratio is being viewed not as a special interest cause, but as “a technical fix that remedies a messily drafted piece of the health reform law,” according to Politico:

“It’s an adjustment to a requirement that never should have been drafted this way in the first place,” said Jessica Waltman, vice president of the National Association of Health Underwriters. “It’s a small-business issue, and I think this Congress was elected to help the economy and save these small-business owners.”

Yet despite the similarities, the broker bill’s success is far from certain. While House Republicans regularly deride the health reform law, they have little to no political incentive to improve it. Any enhancements they make to the law will only undermine a key political platform for 2012: Health reform is a massive mistake that must be repealed.

So whether Republican leadership will move forward on the broker fix — a more technical, small-business-focused tweak — or attempt to skirt the improvement will be a key litmus test of what, if any, changes can follow the 1099 repeal in the 112th Congress.

According to Politico – and the sources it relied on for this article – the broker commission change would be an “improvement,” an “enhancement,” a “technical, small-business-focused tweak.”

As the limited medical benefit plan waivers, subsidy-funded doc fix, and 1099 funding proposal proved, making any change to the ACA seem like a helpful “tweak” is the key to getting the bipartisan support for enactment. They’re “fixing” the law, not sanding it down. Right?

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