URGENT BRIEFING S.1955 and the Preemption of State Mandated Benefit Statutes

1. URGENT BRIEFINGS.1955 and the Preemption of State Mandated Benefit Statutes For Presentation to: National Chiropractic Legislative Conference 2006

2. Prepared by: John Falardeau, ACA VP Government Relations Richard Miller, ACA Consultant/Lobbyist MARCH 2006

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

4. IMPACT: • It is estimated that as many as 68 million people are covered by some type of state mandated protection or benefit (not just chiropractic) • All of the above would lose state enacted protections

5. Background: • In the mid-1990’s the ACA helped lead a multi-year effort to enact a Patients Bill of Rights (PBR) to help address the negative impact of managed care • Eventually, various versions of PBR legislation (that would have amended ERISA) separately passed both the House and Senate

6. Background Continued: • Critical mass needed to enact PBR legislation peaks in the late 1990’s and then begins to fade • REASONS: 1) manage care companies begin cleaning up their act; 2) Strict HMO model loses appeal; 3) 2000 election of George W. Bush means any substantive PBR bill will be vetoed

7. Background Continued: • During debate over PBR legislation, the small business lobby seeks to advance the Association Health Plans(AHPs) concept • PBR fades as an issue – but small business lobby keeps AHP issue alive

8. What are AHPs…? • Association Health Plans are intended to function as a new mechanism (type of health plan) that would allow small businesses to more easily afford health insurance for their employees • The concept is to allow small businesses and trade associations to form and access health plans that would not be subject to state regulation – including so-called “costly” state mandated benefits

9. AHPs Continued: • IMPORTANT: ERISA’s preemption of state law would be extended to AHPs • IMPORTANT: Small businesses and associations would be allowed to join together to form SELF-INSURED plans not subject to state regulation

10. AHPs Continued: • AHPs emerge as a “Republican” concept in the 1990’s – pushed by the National Federation of Independent Business (NFIB), U.S. Chamber of Commerce, Realtors, and other small-business friendly groups • On several occasions over the past several years the Republican controlled House of Representatives has passed some form of AHP legislation (Most recently HR 525 – passes in 2005)

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

12. Additional Background on AHPs: • A “strange bedfellows” coalition develops in the late 1990’s to oppose AHPs and continues to function effectively today. ACA participates as an active member • The principal driving force behind the coalition is Blue Cross/Blue Shield

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

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

15. Significant Tactical Change Takes Place… • Senator Mike Enzi (R-WY), Chairman of the Senate Health, Education, Labor, and Pensions Committee (HELP) develops alternative proposal to AHPs and introduces S.1955 in November of 2005

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

17. S.1955 Continued: • General reaction to S.1955: Proposal is complicated, “over the top” and probably not workable as introduced • IMPORTANT: Despite extra features and baggage, core of Enzi Bill still depends on preemption of state mandates – and still allows for the establishment of SELF-INSURED plans

18. S.1955 Background Continued: • Enzi works behind closed doors to rework his proposal – and to respond to objections raised. Provider and consumer groups largely excluded from the table during this process. National Association of Insurance Commissioners (NAIC) consulted – mainly as technical advisors

19. S.1955 Continued: • By February 2006 revision process well underway, but still fluid -- with ENZI’s proposed changes to S.1955 remaining confidential. • Enzi’s proposed changes remain confidential, until shortly before a new version is unveiled prior to mark-up in the HELP Committee in early March 2006

20. S.1955 Continued: • Enzi’s new version of S.1955 (not available electronically as of the date this presentation was prepared) includes many changes from Nov. 2005 version • Proposal is scaled back and modified in such a way as to address many of the concerns raised by NAIC

21. S.1955 Continued: • IMPORTANT – Small businesses no longer allowed to form SELF-INSURED plans. All plans now must be FULLY INSURED. This change makes the proposal less objectionable to many elements within the insurance industry, including Blue Cross • IMPORTANT – Core of proposal would still wipe out state insurance mandates

22. S.1995 Background Continued: • Senate HELP Committee approves measure on party-line vote March 15, 2006. All Republicans vote “Yes”, all Democrats vote “No” • Democrats on the committee attempt numerous amendments during mark-up. They all fail.

23. S.1955 Bottom Line: • The Bill is SO BAD that it must be prevented from passing the Senate • The Bill is SO BADthat it probably can’t be fixed(made palatable) by amendment. It must be defeated…!!!

24. Defeating S.1955: Possible scenarios to defeat the bill: • Create so much opposition the Republican leadership is deterred from bringing the bill to the floor (threat of filibuster and/or embarrassment of likely defeat) • Democrats object (filibuster) “motion to proceed” to consider of S.1955. The measure is “blocked” before it ever comes to the floor

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

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

27. A Main Danger: • Not enough Democrats dig in their heels in opposition to the bill… • In an election year, some of the Democrats may be satisfied with merely forcing Republicans to vote against popular amendments – and whether the final bill passes or not becomes less important to them than scoring points against Republicans

28. Are there viable alternatives to S.1955? • AHP legislation identical to House AHP legislation a possibility, but probably less viable than S.1955 in the Senate, and just as bad for us • Main Democrat alternative is Durbin-Lincoln Bill (S.637) – but because it is a “Democrat” alternative, it probably isn’t viable in a Republican controlled Senate. There is problems with it as well, in terms of preemption. Durbin-Lincoln creates a plan for small businesses that would be based on FEHBP benefit package.

29. What if the Senate passes S.1955…? • Measure could go to “conference” with previously passed House AHP bill. Bill would get worse, not better • House could take up Senate passed bill and pass it unchanged, bypassing conference process. Based on prior vote for AHPs in the House, S.1955 would probably pass without difficulty

30. What about a Presidential Veto…? • A non-starter. Simply not an option. Bush is committed to enacting insurance relief measures for small businesses.

31. ACA Activities to date: • Active (multi-year) participant in coalition opposed to AHP concept • Alert Bulletins in opposition to House AHP plan • Urged coalition to oppose S.1955 – both original and updated versions • Direct lobbying of key Senate offices on issue – coordinated with coalition

32. ACA Activities continued: • Targeted bulletins to BOG, HOD (Alts), ACC, states prior to March mark-up • Background materials to ACA website and leadership • Initiated “Emergency” conference call with state associations to issue warning • Priority focus at NCLC – BOG, HOD and participants • Issued two Alert Bulletins to ACA database (electronic) post Senate mark-up

33. Current ACA Action Plan: • ACA to help fund enhanced communications capability for COCSA • Profession-wide Alert Bulletin (early April) ACA TODAY (60,000 pieces), calls with state associations to track Hill activities and state progress • Regular series of conference calls with ACA Delegates to monitor state level progress

34. ACA Action Plan Continued: • Continued coordination of targeted Hill activities with coalition • Database for ranking Senate members (pro or con, leaning for or against) • Regularly updated talking points, sample letters, etc. via ACA website • Circulation of updated drafts of “patient” letters/petitions • Feedback form for NCLC participants • Coalition panel at NCLC • Proposed authorization of ACA Reserve Funds for enhanced activities

35. Major Tasks for campaign: • State Associations must generate substantial grassroots pressure on respective Senators to get them to commit to vote “No” on S.1955 – to the point of “filibuster” if necessary • Ensuring “champion(s)” who will commit to a filibuster • Good intelligence collection, situational analysis and rapid response • Ultimate defeat of bill for this session

36. Suggested State Activities include: • Activate friendly contacts in state legislatures to vocally oppose the bill • Where chiropractic profession has good relations with insurance commissioners, governors and AGs -- activate them as well to become vocal opponents of S.1955 • Not all states are the same – states tailor campaign to fit individual state situation/capabilities • State cooperation with coalition counterparts

37. Timing Issues: • When will S.1955 likely come before the Senate? Could be anytime between now and the presumed end of this Session of Congress (October 2006) -- Could come soon

38. Concluding Advice: The most important thing state associations can do is to generate massive grassroots pressure on the Senate – and to continue to apply the pressure until advised otherwise by the ACA. [End]