URGENT BRIEFINGS.1955 and the

Preemption of State Mandated Benefit Statutes

For Presentation to:For Presentation to:

National Chiropractic National Chiropractic Legislative Conference 2006Legislative Conference 2006

Prepared by:

John Falardeau, John Falardeau, ACA VP Government RelationsACA VP Government Relations

Richard Miller,Richard Miller, ACA Consultant/LobbyistACA Consultant/Lobbyist

MARCH 2006MARCH 2006

CORE CONCERN:

Proposed federal legislation (S.1955) Proposed federal legislation (S.1955) would abolish state enacted would abolish state enacted consumer and provider protections – consumer and provider protections – including including ALLALL state insurance state insurance equality, any-willing-provider, and equality, any-willing-provider, and chiropractic specific mandates chiropractic specific mandates relating to small group and relating to small group and individual health insurance marketsindividual health insurance markets

IMPACT:

It is estimated that as many as 68 It is estimated that as many as 68 million people are covered by million people are covered by some type of state mandated some type of state mandated protection or benefit protection or benefit (not just (not just chiropractic)chiropractic)

All of the above would lose state All of the above would lose state enacted protectionsenacted protections

Background:

In the mid-1990’s the ACA helped lead a In the mid-1990’s the ACA helped lead a multi-year effort to enact a Patients Bill multi-year effort to enact a Patients Bill of Rights (PBR) to help address the of Rights (PBR) to help address the negative impact of managed carenegative impact of managed care

Eventually, various versions of PBR Eventually, various versions of PBR legislation legislation (that would have amended (that would have amended ERISA)ERISA) separately passed both the separately passed both the House and SenateHouse and Senate

Background Continued:

Critical mass needed to enact PBR Critical mass needed to enact PBR legislation peaks in the late 1990’s and legislation peaks in the late 1990’s and then begins to fadethen begins to fade

REASONS: 1) manage care companies REASONS: 1) manage care companies begin cleaning up their act; 2) Strict begin cleaning up their act; 2) Strict HMO model loses appeal; 3) 2000 HMO model loses appeal; 3) 2000 election of George W. Bush means any election of George W. Bush means any substantive PBR bill will be vetoed substantive PBR bill will be vetoed

Background Continued:

During debate over PBR legislation, During debate over PBR legislation, the small business lobby seeks to the small business lobby seeks to advance the advance the Association Health Association Health PlansPlans (AHPs)(AHPs) concept concept

PBR fades as an issue – but small PBR fades as an issue – but small business lobby keeps AHP issue business lobby keeps AHP issue alivealive

What are AHPs…? Association Health Plans are intended to Association Health Plans are intended to

function as a new mechanism function as a new mechanism (type of (type of health plan)health plan) that would allow small that would allow small businesses to more easily afford health businesses to more easily afford health insurance for their employeesinsurance for their employees

The concept is to allow small businesses The concept is to allow small businesses and trade associations to form and access and trade associations to form and access health plans that would not be subject to health plans that would not be subject to state regulation – including so-called state regulation – including so-called “costly” state mandated benefits“costly” state mandated benefits

AHPs Continued:

IMPORTANT: ERISA’s preemption of IMPORTANT: ERISA’s preemption of state law would be extended to AHPsstate law would be extended to AHPs

IMPORTANT: Small businesses and IMPORTANT: Small businesses and associations would be allowed to join associations would be allowed to join together to form together to form SELF-INSUREDSELF-INSURED plans plans not subject to state regulationnot subject to state regulation

AHPs Continued: AHPs emerge as a “Republican” concept in AHPs emerge as a “Republican” concept in

the 1990’s – pushed by the National the 1990’s – pushed by the National Federation of Independent Business Federation of Independent Business (NFIB),(NFIB), U.S. Chamber of Commerce, Realtors, and U.S. Chamber of Commerce, Realtors, and other small-business friendly groupsother small-business friendly groups

On several occasions over the past several On several occasions over the past several years the Republican controlled House of years the Republican controlled House of Representatives has passed some form of Representatives has passed some form of AHP legislation AHP legislation (Most recently HR 525 – (Most recently HR 525 – passes in 2005)passes in 2005)

AHPs Continued:

Although proponents are easily Although proponents are easily able to repeatedly pass AHP able to repeatedly pass AHP legislation in the Republican legislation in the Republican controlled House – the issue controlled House – the issue (for (for nearly 10 years)nearly 10 years) never gains never gains traction in the U.S. Senatetraction in the U.S. Senate

Additional Background on AHPs: A “strange bedfellows” coalition A “strange bedfellows” coalition

develops in the late 1990’s to develops in the late 1990’s to oppose AHPs and continues to oppose AHPs and continues to function effectively today. function effectively today. ACA ACA participates as an active memberparticipates as an active member

The principal driving force behind The principal driving force behind the coalition is Blue Cross/Blue the coalition is Blue Cross/Blue ShieldShield

Additional AHP Background: Blue Cross/Blue Shield spends millions to block Blue Cross/Blue Shield spends millions to block

advancement of AHPsadvancement of AHPs

WHY…? Blue Cross tends to dominate existing WHY…? Blue Cross tends to dominate existing small group insurance marketplace. AHPs small group insurance marketplace. AHPs represent a competitive threat – as they would represent a competitive threat – as they would function as function as SELF-INSUREDSELF-INSURED plans that escape plans that escape state regulation. The Blues plans would remain state regulation. The Blues plans would remain under state regulation, including “costly” under state regulation, including “costly” mandates, and would have a competitive mandates, and would have a competitive disadvantage. Impact on risk pool also a factor disadvantage. Impact on risk pool also a factor of concern for Blue Cross.of concern for Blue Cross.

Additional AHP Background: Major tactic of anti-AHP coalition in the Major tactic of anti-AHP coalition in the

past: 1) work to limit number of House past: 1) work to limit number of House Democrats that support the bill, while fully Democrats that support the bill, while fully realizing AHP's can’t be blocked in the realizing AHP's can’t be blocked in the Republican controlled House; 2) Limit Republican controlled House; 2) Limit support for the concept in the Senate – support for the concept in the Senate – depending largely on the opposition of depending largely on the opposition of Senate Democrats and select Senate Senate Democrats and select Senate Republicans; 3) Maintain opposition to the Republicans; 3) Maintain opposition to the concept by the National Association of concept by the National Association of Insurance Commissioners and othersInsurance Commissioners and others

Significant Tactical Change Takes Place…

Senator Mike Enzi Senator Mike Enzi (R-WY),(R-WY), Chairman of the Senate Health, Chairman of the Senate Health, Education, Labor, and Pensions Education, Labor, and Pensions Committee Committee (HELP) (HELP) develops develops alternative proposal to AHPsalternative proposal to AHPs and and introduces S.1955 in November of introduces S.1955 in November of 20052005

S.1955 Background:

Proposal differs from AHPs in some Proposal differs from AHPs in some ways. Overall, is more ambitious ways. Overall, is more ambitious than AHP proposals as it intends to than AHP proposals as it intends to also overhaul state insurance also overhaul state insurance regulation via the development of regulation via the development of federal “harmonized” standards federal “harmonized” standards relating to ratings issues, etc. relating to ratings issues, etc. (Title (Title III of S.1955, as originally III of S.1955, as originally introduced)introduced)

S.1955 Continued:

General reaction to S.1955: Proposal is General reaction to S.1955: Proposal is complicated, “over the top” and complicated, “over the top” and probably not workable as introducedprobably not workable as introduced

IMPORTANT: Despite extra features and IMPORTANT: Despite extra features and baggage, baggage, core of Enzi Bill still depends core of Enzi Bill still depends on preemption of state mandates – and on preemption of state mandates – and still allows for the establishment of still allows for the establishment of SELF-INSURED plansSELF-INSURED plans

S.1955 Background Continued: Enzi works behind closed doors to Enzi works behind closed doors to

rework his proposal – and to respond rework his proposal – and to respond to objections raised. Provider and to objections raised. Provider and consumer groups largely excluded consumer groups largely excluded from the table during this process. from the table during this process. National Association of Insurance National Association of Insurance Commissioners Commissioners (NAIC)(NAIC) consulted – consulted – mainly as technical advisors mainly as technical advisors

S.1955 Continued:

By February 2006 revision process well By February 2006 revision process well underway, but still fluid -- with ENZI’s underway, but still fluid -- with ENZI’s proposed changes to S.1955 remaining proposed changes to S.1955 remaining confidential.confidential.

Enzi’s proposed changes remain Enzi’s proposed changes remain confidential, until shortly before a new confidential, until shortly before a new version is unveiled prior to mark-up in version is unveiled prior to mark-up in the HELP Committee in early March 2006the HELP Committee in early March 2006

S.1955 Continued:

Enzi’s new version of S.1955 Enzi’s new version of S.1955 (not (not available electronically as of the date available electronically as of the date this presentation was prepared)this presentation was prepared) includes many changes from Nov. 2005 includes many changes from Nov. 2005 versionversion

Proposal is scaled back and modified in Proposal is scaled back and modified in such a way as to address many of the such a way as to address many of the concerns raised by NAICconcerns raised by NAIC

S.1955 Continued:

IMPORTANT – Small businesses no longer IMPORTANT – Small businesses no longer allowed to form SELF-INSURED plans. All allowed to form SELF-INSURED plans. All plans now must be FULLY INSURED. This plans now must be FULLY INSURED. This change makes the proposal less change makes the proposal less objectionable to many elements within the objectionable to many elements within the insurance industry, including Blue Crossinsurance industry, including Blue Cross

IMPORTANT – Core of proposal would still IMPORTANT – Core of proposal would still wipe out state insurance mandateswipe out state insurance mandates

S.1995 Background Continued:

Senate HELP Committee approves Senate HELP Committee approves measure on party-line vote March measure on party-line vote March 15, 2006. All Republicans vote 15, 2006. All Republicans vote “Yes”, all Democrats vote “No”“Yes”, all Democrats vote “No”

Democrats on the committee Democrats on the committee attempt numerous amendments attempt numerous amendments during mark-up. They all fail. during mark-up. They all fail.

S.1955 Bottom Line:

The Bill is The Bill is SO BADSO BAD that it must be that it must be prevented from passing the Senateprevented from passing the Senate

The Bill is The Bill is SO BADSO BAD that it probably that it probably can’t be fixedcan’t be fixed (made palatable)(made palatable) by by amendment. amendment. It must be It must be defeateddefeated…!!!…!!!

Defeating S.1955:

Possible scenarios to defeat the bill:Possible scenarios to defeat the bill:

1)1) Create so much opposition the Republican Create so much opposition the Republican leadership is deterred from bringing the leadership is deterred from bringing the bill to the floor bill to the floor (threat of filibuster and/or (threat of filibuster and/or embarrassment of likely defeat)embarrassment of likely defeat)

2)2) Democrats objectDemocrats object (filibuster) “ (filibuster) “motion to motion to proceed” to consider of S.1955. The proceed” to consider of S.1955. The measure is “blocked” before it ever comes measure is “blocked” before it ever comes to the floorto the floor

Defeating S.1955: Possible defeat scenarios continued:Possible defeat scenarios continued:

3) Democrats allow S.1955 to go to the floor for debate. 3) Democrats allow S.1955 to go to the floor for debate. However, they file numerous amendments to the However, they file numerous amendments to the measure measure (some dealing with Medicare and other (some dealing with Medicare and other extraneous health issues).extraneous health issues). Debate on these Debate on these amendments is time consuming and bogs down the amendments is time consuming and bogs down the Senate. Senate Majority Leader Frist files a Cloture Senate. Senate Majority Leader Frist files a Cloture Motion attempting to cut-off further debate. 60 votes Motion attempting to cut-off further debate. 60 votes are required to invoke cloture – 41 votes prevent are required to invoke cloture – 41 votes prevent imposition of cloture. Democrats muster and imposition of cloture. Democrats muster and maintain 41 votes to continue debate on the bill. As maintain 41 votes to continue debate on the bill. As the Senate is now bogged down considering endless the Senate is now bogged down considering endless amendments, Frist is forced to “pull” the bill off the amendments, Frist is forced to “pull” the bill off the floor. The bill is effectively “killed” via the floor. The bill is effectively “killed” via the amendment process. amendment process.

Which of the three will be the most likely scenario…?

Can’t say for sure at this time – but Can’t say for sure at this time – but we believe the most likely scenario we believe the most likely scenario to defeat the bill is #3: to defeat the bill is #3: Democrats Democrats allow the bill to come to the floor allow the bill to come to the floor but try to kill it by offering an but try to kill it by offering an endless series of amendments – endless series of amendments – most of which prove embarrassing most of which prove embarrassing for Republicans to vote againstfor Republicans to vote against……

A Main Danger:

Not enough Democrats dig in their heels in Not enough Democrats dig in their heels in opposition to the bill…opposition to the bill…

In an election year, some of the Democrats In an election year, some of the Democrats may be satisfied with merely forcing may be satisfied with merely forcing Republicans to vote against popular Republicans to vote against popular amendments – and whether the final bill amendments – and whether the final bill passes or not becomes less important to passes or not becomes less important to them than scoring points against them than scoring points against RepublicansRepublicans

Are there viable alternatives to S.1955?

AHP legislation identical to House AHP legislation AHP legislation identical to House AHP legislation a possibility, but probably less viable than a possibility, but probably less viable than S.1955 in the Senate, and just as bad for usS.1955 in the Senate, and just as bad for us

Main Democrat alternative is Durbin-Lincoln Bill Main Democrat alternative is Durbin-Lincoln Bill (S.637) – (S.637) – but because it is a “Democrat” but because it is a “Democrat” alternative, it probably isn’t viable in a alternative, it probably isn’t viable in a Republican controlled Senate. There is problems Republican controlled Senate. There is problems with it as well, in terms of preemption. Durbin-with it as well, in terms of preemption. Durbin-Lincoln creates a plan for small businesses that Lincoln creates a plan for small businesses that would be based on FEHBP benefit package.would be based on FEHBP benefit package.

What if the Senate passes S.1955…? Measure could go to “conference” Measure could go to “conference”

with previously passed House AHP with previously passed House AHP bill. Bill would get worse, not betterbill. Bill would get worse, not better

House could take up Senate passed House could take up Senate passed bill and pass it unchanged, bypassing bill and pass it unchanged, bypassing conference process. Based on prior conference process. Based on prior vote for AHPs in the House, S.1955 vote for AHPs in the House, S.1955 would probably pass without difficultywould probably pass without difficulty

What about a Presidential Veto…?

A non-starter. Simply not an A non-starter. Simply not an option. Bush is committed to option. Bush is committed to enacting insurance relief measures enacting insurance relief measures for small businesses.for small businesses.

ACA Activities to date:

Active (multi-year) participant in Active (multi-year) participant in coalition opposed to AHP conceptcoalition opposed to AHP concept

Alert Bulletins in opposition to Alert Bulletins in opposition to House AHP planHouse AHP plan

Urged coalition to oppose S.1955 – Urged coalition to oppose S.1955 – both original and updated versionsboth original and updated versions

Direct lobbying of key Senate offices Direct lobbying of key Senate offices on issue – coordinated with coalitionon issue – coordinated with coalition

ACA Activities continued: Targeted bulletins to BOG, HOD (Alts), ACC, Targeted bulletins to BOG, HOD (Alts), ACC,

states prior to March mark-upstates prior to March mark-up Background materials to ACA website and Background materials to ACA website and

leadershipleadership Initiated “Emergency” conference call with Initiated “Emergency” conference call with

state associations to issue warningstate associations to issue warning Priority focus at NCLC – BOG, HOD and Priority focus at NCLC – BOG, HOD and

participantsparticipants Issued two Alert Bulletins to ACA database Issued two Alert Bulletins to ACA database

(electronic) post Senate mark-up(electronic) post Senate mark-up

Current ACA Action Plan:

ACA to help fund enhanced ACA to help fund enhanced communications capability for COCSAcommunications capability for COCSA

Profession-wide Alert Bulletin (early Profession-wide Alert Bulletin (early April) ACA TODAY (60,000 pieces), calls April) ACA TODAY (60,000 pieces), calls with state associations to track Hill with state associations to track Hill activities and state progressactivities and state progress

Regular series of conference calls with Regular series of conference calls with ACA Delegates to monitor state level ACA Delegates to monitor state level progressprogress

ACA Action Plan Continued: Continued coordination of targeted Hill activities Continued coordination of targeted Hill activities

with coalitionwith coalition Database for ranking Senate members (pro or Database for ranking Senate members (pro or

con, leaning for or against)con, leaning for or against) Regularly updated talking points, sample letters, Regularly updated talking points, sample letters,

etc. via ACA websiteetc. via ACA website Circulation of updated drafts of “patient” Circulation of updated drafts of “patient”

letters/petitionsletters/petitions Feedback form for NCLC participantsFeedback form for NCLC participants Coalition panel at NCLCCoalition panel at NCLC Proposed authorization of ACA Reserve Funds for Proposed authorization of ACA Reserve Funds for

enhanced activitiesenhanced activities

Major Tasks for campaign:

State Associations must generate State Associations must generate substantial grassroots pressure on substantial grassroots pressure on respective Senators to get them to respective Senators to get them to commit to vote “No” on S.1955 – to the commit to vote “No” on S.1955 – to the point of “filibuster” if necessarypoint of “filibuster” if necessary

Ensuring “champion(s)” who will Ensuring “champion(s)” who will commit to a filibustercommit to a filibuster

Good intelligence collection, situational Good intelligence collection, situational analysis and rapid responseanalysis and rapid response

Ultimate defeat of bill for this sessionUltimate defeat of bill for this session

Suggested State Activities include: Activate friendly contacts in state Activate friendly contacts in state

legislatures to vocally oppose the billlegislatures to vocally oppose the bill Where chiropractic profession has good Where chiropractic profession has good

relations with insurance commissioners, relations with insurance commissioners, governors and AGs -- activate them as well governors and AGs -- activate them as well to become vocal opponents of S.1955to become vocal opponents of S.1955

Not all states are the same – states tailor Not all states are the same – states tailor campaign to fit individual state campaign to fit individual state situation/capabilitiessituation/capabilities

State cooperation with coalition State cooperation with coalition counterpartscounterparts

Timing Issues:

When will S.1955 likely come When will S.1955 likely come before the Senate?before the Senate?

Could be anytime between now Could be anytime between now and the presumed end of this and the presumed end of this Session of Congress (October Session of Congress (October 2006) -- Could come soon2006) -- Could come soon

Concluding Advice:

The most important thing state The most important thing state associations can do is to generate associations can do is to generate massive grassroots pressure on massive grassroots pressure on the Senate – and to continue to the Senate – and to continue to apply the pressure until advised apply the pressure until advised otherwise by the ACA. otherwise by the ACA.

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