New health proposal is industry's favorite so far

[September 17, 2009]  WASHINGTON (AP) -- The latest health overhaul plan circulating on Capitol Hill gives health insurers, drugmakers and large employers reasons to heave sighs of relief, sparing them the higher costs and more burdensome rules included in other Democratic-written alternatives.

Industry players that have already struck bargains with President Barack Obama's administration and leading Democrats to help pay for revamping the health system saw most of those deals left intact -- and in some cases sweetened -- in the $856 billion proposal unveiled Wednesday by Sen. Max Baucus, D-Mont., the Finance Committee chairman.

You won't hear any of them cheering publicly about what they would get out of the measure, because many are still hoping for a better deal before Congress takes final action on revamping the health care system. But don't expect to hear them coming out in opposition, since they know Baucus' plan is the lesser of many evils being considered.

Take the health insurance industry.

It would score a new, taxpayer-subsidized customer base of millions who don't currently have insurance, thanks to a mandate that everyone purchase coverage -- backed up by steep penalties on people who don't. And it wouldn't have to compete with the government to cover people, unlike in the four other health overhaul plans approved this year by Democratic-dominated congressional committees.

Nor would the nonprofit so-called "co-ops" designed to provide consumers with an alternative to private health insurance pose any real threat to their business, according to a nonpartisan analysis released Wednesday. The Congressional Budget Office said those plans "seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments."

Insurers would also take a smaller hit to the payments they get for offering private plans under Medicare -- some $110 to $120 billion, estimated one industry source, compared with the $175 billion that Obama initially proposed this year.

In exchange, insurers had already agreed to stop denying coverage to people with serious health conditions and help cover the cost of the transition to the new system. They're still fighting hard against two other aspects of the measure that would slice into their potential profits: a new 35 percent excise tax on high-cost plans and $60 billion in fees, both of which insurers warn would be passed on to consumers.

"We have some significant concerns, particularly the new taxes that are going to make health insurance less affordable," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans. He rejected the notion put forth by many liberal and labor groups that the measure amounts to a gift to private insurers, arguing that the companies are covering more than one-quarter of its pricetag, a level disproportionate with the industry's share of health care costs.

But health insurance stocks jumped Wednesday at the news of Baucus' public option-free measure. And privately, industry lobbyists acknowledged that the plan is far more to their liking than any of the other measures currently under discussion, and expressed confidence that it would improve further as senators and Obama's team continued to haggle over its details as it approaches a Senate vote.

Meanwhile progressives called the measure an industry giveaway -- "like a dream come true" for insurers, said Justin Ruben of MoveOn.org -- and labor leaders said Baucus had compromised too much and produced a bill that would force people to buy health coverage they couldn't afford.

"We think the plan the way it is structured incentivizes employers to offer bare-bones plans," said Chuck Loveless, the legislative director of the American Federation of State County and Municipal Employees. As for the co-ops, he said they were "designed to fail, and it's a great boondoggle for the insurance companies. We don't think it's going to increase competition or bring down costs."

Big employers would dodge what many of them considered the most costly bullet among Democrats' health care proposals -- a mandate to offer health insurance -- although they would have to pay a modest fee if the government ended up subsidizing employees' coverage.

The Business Roundtable, which represents corporate executives, cheered Baucus' proposal in a statement from Eastman Kodak CEO Antonio M. Perez that called it "bold" and "a step in the right direction."

Drugmakers who had previously cut a deal with Obama and Baucus to kick in $80 billion to help pay for the overhaul would see that agreement preserved, while rival proposals in the House that would force them to cover more drug costs for elderly people would cost them considerably more, as much as $140 billion.

The Pharmaceutical Research and Manufacturers of America, which plans to spend tens of millions on an ad campaign promoting a health overhaul, stayed relatively quiet, issuing only a brief statement that said it was reviewing Baucus' plan.

Ken Johnson, PhRMA's spokesman, said the industry would "continue to be a constructive partner" in the effort to enact health reforms.

Some businesses would see increased costs under Baucus' plan, and they were pushing hard to avoid them. Medical device makers would have to pay fees amounting to $40 billion while clinical laboratories would pay $7.5 billion.

[Associated Press; By JULIE HIRSCHFELD DAVIS]

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