Republicans to Take on Health Law's Taxes, Rules


Health insurers' stocks are already seeing a bounce from Republican promises to go after Obama's healthcare overhaul

(Bloomberg)— Congressional Republicans pledged to repeal the health-care overhaul President Barack Obama signed into law in March. Once they consolidate power, the strategy will more likely resemble death by a thousand cuts. House and Senate Republicans already have written at least 30 bills to roll back provisions in the law.

The success of some efforts would mean WellPoint Inc. and competing health insurers may escape regulations to set their patient-care spending, while Boston Scientific Corp. and other medical-device makers dodge $20 billion in tax increases in the next decade. With networks projecting that Republicans have won the seats needed for control of the House, the party also plans to target budgets of agencies implementing the health-care law.

"You can literally open the bill and point your finger to a page and say, 'Here's something we should go after,'" said Representative Michael C. Burgess of Texas, a Republican on the House Energy and Commerce health subcommittee. "It's all bad." The party's drive will force Democrats to vote on whether to defend unpopular parts of the law, said Tom Scully, the former chief of the Medicare program under President George W. Bush. Democratic control of the Senate and Obama's veto pen assures there won't be an outright repeal of the law or big changes, he said.

Democrat Losses

Bloomberg's Managed Health Services stock index slid less than 1 percent at 10:08 a.m. as WellPoint declined 4 cents, or less than 1 percent, to $55.72 in New York Stock Exchange composite trading. The Standard & Poor's 500 Pharmaceutical Index gained 50 cents, or less than 1 percent. The S&P Biotechnology Index lost $1.33, or less than 1 percent.

"This outcome seems to be positive for the group in general," Les Funtleyder, a health-care portfolio manager for Miller Tabak & Co. in New York, said in a note to clients. Health insurers have the most to gain, while biotechnology and pharmaceutical companies are less likely to see positive effects from the political contests, he said. Republicans gained at least 60 House seats yesterday across the U.S. They picked up six in the Senate, winning in Illinois, Indiana, Arkansas, Pennsylvania, North Dakota and Wisconsin. They won't get the 10-seat gain needed to control the Senate as races in Alaska and Washington are yet to be decided, and the Denver Post projected Democrats will hold the seat in Colorado.

'Political Battle'

"Very little will happen in the next two years, but it will be a big political battle," said Scully, senior counsel at the law office of Alston and Bird LLP of Washington. Aetna Inc. Chief Executive Officer Ron Williams said today that the Hartford, Connecticut-based company "would welcome a renewed willingness to discuss market-based solutions" to improving the health-care system and controlling medical costs, without specifically commenting on the election.

Most of the action may be in the courts, where 21 states are challenging the law's requirement that all Americans buy health insurance. Successful challenges could accomplish what Republican lawmakers can't, by eliminating an important component of the overhaul. If congressional Republicans strike some requirements of the law, health-care groups may pressure Congress to make other changes and set off a domino effect, said John Fortier, a congressional scholar at the American Enterprise Institute. "It's not that the entire thing unravels if one piece fails, but the rationale for some of the things and the reason for some of the deals fails and potentially, some of the support."

Changes From House

Efforts to change the law will originate in the House, where Republicans will decide which bills go to the floor and can hold oversight hearings on how the law is evolving. Democrats still control the Senate's agenda. It will take a two- thirds majority of both chambers to override any Obama veto. Congressional Republicans can "embarrass" Democrats with votes on the health overhaul, including during debate over a fiscal 2012 budget plan early in the next session, said Senator Orrin Hatch of Utah. Hatch in January will become top Republican on the Finance Committee. House Republican leaders will begin with a January vote to repeal and replace it with a scaled-back measure patterned after legislation by Republican Leader John Boehner of Ohio, said John Murray, a spokesman for House Republican Whip Eric Cantor of Virginia.

Boehner's Alternative

The approach by Boehner — who is expected to become speaker — would expand coverage to 3 million Americans by 2019 without requiring Americans to have insurance. It would let businesses pool resources to buy coverage and allow insurance purchases across state lines. Boehner's proposal would leave about 52 million people without insurance, meaning the proportion of Americans with coverage would remain unchanged in 2019 at 83 percent, according to the Congressional Budget Office. The health law would expand coverage to a projected 32 million Americans who currently lack insurance, largely through an expansion of the federal-state Medicaid program and new online health-purchasing exchanges.

The overhaul is projected to cost $938 billion over 10 years while resulting in a reduction in the annual budget deficit by slowing the growth in spending on health care, according to CBO. Its more contentious elements include a first-ever mandate that most Americans obtain health coverage — the provision being challenged in court, largely by Republican state attorneys general — and new taxes on the wealthy and on high-end insurance plans.

Coverage Mandate

Health insurers say the mandate requiring all Americans to have coverage is a necessity because otherwise people will only buy insurance when they get sick. The industry says removing the mandate would jeopardize consumer protections in the law, such as a requirement that insurers accept people with preexisting conditions. Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's Washington trade group, declined to discuss how a Republican victory would affect the mandate. Republicans don't necessarily oppose regulations on excluding people with pre-existing conditions, or other protections that have won support in polls. Their push to undo the individual mandate may make it harder to realize these rules, by burdening insurers with the new requirements without bringing in healthy new customers.

'Delay and Dismantle'

In the event Boehner's proposal gets stopped in the Senate, Republicans will embark on an approach they call "delay and dismantle" that targets individual provisions in the law, said Murray. Some of the proposals may result in lower payments to health-care providers and states. Republicans said they want to go after a requirement in the law mandating that businesses of all sizes report to the IRS any expenditures exceeding $600.

The Senate on Sept. 14 narrowly failed to repeal the provision after seven Democratic senators joined all of the chamber's Republicans. Burgess, a doctor first elected to Congress in 2002, has legislation requiring congressional and executive branch aides to get their health coverage from the insurance exchanges. Representative Brian Bilbray of California wants to repeal $20 billion in taxes in a decade on medical device makers including Minneapolis, Minnesota-based Medtronic Inc. and Boston Scientific.

Medical Devices

Representative Charles Boustany, a Louisiana Republican, has a bill that would force Congress to reconsider the "CLASS Act," a long-term disability insurance program, and end it should it require more funding than it generates from premiums. Other legislation would deny agencies funds they need to implement the law. Bills introduced by Fred Upton, the Michigan representative who may head the Energy and Commerce Committee next year, and Virginia's J. Randy Forbes would bar the Internal Revenue Service from hiring workers to review incomes that would help determine which Americans qualify for subsidies.

Congress should revoke a rule requiring insurers to spend at least 80 percent of the premiums they take in on patient care, Boustany and Burgess say. The measure will force some insurers to pull out of markets where they don't meet the threshold, insurers and Republican lawmakers say. "That will potentially be very disruptive to insurance coverage," Boustany said.

Bipartisan Support

Some Senate Democrats will apply pressure on their leaders for changes, Hatch predicted. He's seeking bipartisan support for legislation that would scrap the individual mandate and a requirement that most employers provide coverage to workers. "We've got to have two, three, four, five Democrats who will work with us on this bill, because they've been getting killed at home," Hatch said in an interview. The Republican strategy may negatively affect segments of the health-care industry. The expansion of coverage to 32 million newly insured people may deliver more than $500 billion in added revenue for insurers, hospitals and other providers from 2014 to 2019, according to CBO projections.


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