After the Midterm Election, a Battle Royal

Opponents of health-care reform see opportunities to punch holes in the Patient Protection and Affordable Care Act

The economic impact of President Barack Obama's health-care overhaul continues to be debated, with Republicans such as new House Speaker John Boehner calling it a job killer. For lobbyists working on behalf of the health-care industry and employers, though, the law amounts to a full-employment act.

Insurers led by UnitedHealth Group (UNH) want to charge older patients more than the law allows. Drugstores led by CVS Caremark (CVS) want to roll back a prohibition against using tax-free savings accounts to buy over-the-counter medicines. Hospitals, doctors, and drugmakers led by Pfizer (PFE) are trying to dismantle a board created to recommend Medicare spending cuts. And the medical-device industry wants to scrap a new tax levied on their products.

November's midterm elections gave Republicans control of the House and energized opponents of health-care reform, who see opportunities to punch holes in the Patient Protection and Affordable Care Act—if not repeal it altogether. The shift in the balance of power has led to "an open lobby both Congress and the Administration for some flexibility," says Dan Mendelson, chief executive officer of Avalere Health, a Washington (D.C.) consulting firm.

The government has granted waivers to more than 220 companies and unions so they can offer skimpier health benefits than the law requires. Among those to win reprieves are the United Federation of Teachers and Darden Restaurants (DRI).

Now, businesses are turning to newly empowered congressional Republicans. While outright repeal of the law is a political impossibility for at least the next two years, Republicans can use votes and hearings to apply pressure and "affect the shape of regulations," says Mendelson.

Businesses are encouraged by signs the Administration is willing to delay some requirements of the law to prevent reductions in insurance coverage before new insurance marketplaces, or "exchanges," open in 2014. The government will consider requests from state insurance commissioners to temporarily adjust new rules requiring that health plans spend at least 80 percent of premium revenue on health services, says Jessica Santillo, a spokeswoman for the Health and Human Services Dept. Insurers like UnitedHealth have threatened to withdraw from some markets if the spending rules aren't eased. "It's not to the advantage of consumers if insurance markets collapse," says Timothy S. Jost, a professor of law at Washington and Lee University in Lexington, Va.

Another battle is brewing over the law's age-rating requirement, which would prohibit insurers from charging older people more than three times what they charge young adults. The provision doesn't take effect until 2014, yet the AARP already is preparing to defend it. Insurers would like the ratio increased to better reflect the risk of covering an older and sicker population. "We did hand-to-hand combat with the insurers all the way through health reform on this issue, so it's no surprise" it would be revived, says John Rother, senior vice-president for public policy at AARP.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, a Washington (D.C.) trade group, says the industry favors a 5-to-1 ratio. That formula would cut premiums for 18- to 24-year-olds by about 31 percent, according to data compiled by Bloomberg based on an analysis of claims and premiums by the consulting firm Oliver Wyman. Americans 60 and older, meanwhile, would see their premiums rise about 15 percent.

Without a change, young people may decide to forgo coverage and pay the government penalty. Zirkelbach says his group is now "educating folks" in Congress to lay groundwork for a change. The elections may have delivered a receptive audience.

The analyst's take: Bloomberg Government finds the U.S. has already spent $3.8 billion implementing the health-care law, and two of its major goals, cost savings and improved access, are in jeopardy. Industry groups are lining up to kill the law's few cost-saving provisions, including the Independent Payment Advisory Board. In addition, basic economics dictates that few young adults will buy coverage unless the penalty for not having insurance is increased or its cost is lowered.

Learn more about Bloomberg Government

Before it's here, it's on the Bloomberg Terminal. LEARN MORE