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Senate upset forces rethink on reforms

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Senate upset forces rethink on reforms

WASHINGTON—Republican Scott Brown's victory last week in the election to represent Massachusetts in the U.S. Senate has halted Democrats' drive to pass sweeping health insurance reform.

The state senator came from behind in polls to win the U.S. Senate seat that Sen. Edward Kennedy held for 47 years until the Democrat's death last August.

In one day, Massachusetts voters ended serious chances of congressional Democrats and the Obama administration passing sweeping health reforms without any support from Republicans. Proposed reforms would extend coverage to millions of U.S. residents and penalize employers that do not provide coverage.

Bowing to the new political reality, President Barack Obama last week signaled that he would be receptive to a scaled-back reform bill.

“I would advise that we try to move quickly to coalesce around those elements in the package that people agree on,” President Obama said in a television interview.

Later, Robert Gibbs, President's Obama press secretary, said the best course of action would be to put the reform effort on hold, at least temporarily. This is a dramatic change in direction, as the White House had pushed for quick passage.

“The president believes it is the exact right thing to do by giving this some time, by letting the dust settle, if you will, and looking for the best path forward,” Mr. Gibbs said in a news briefing.

Senate Majority Leader Harry Reid, D-Nev., who previously pressed for fast action, last week told a news conference, “We're not going to rush into anything. We will wait until the new senator arrives.”

Until Sen. Brown's election, Senate Democrats held 60 certain votes—58 Democrats and two independents who typically side with Democrats—for health care reform legislation crafted by party leaders. Sixty votes were enough to stop a certain Republican filibuster of a final bill, which still was being negotiated, to bridge differences between measures passed by the House and Senate.

But with Mr. Brown's election, Republicans will have 41 members in the Senate, enough to successfully mount a filibuster of the package.

The demise of President's Obama signature domestic issue is widely recognized.

“People know there is no chance” of the passage of a comprehensive bill, said Gretchen Young, vp-health policy with the ERISA Industry Committee in Washington.

While some congressional Democrats last week discussed another way to act on health care reform legislation given Sen. Brown's election, House Speaker Nancy Pelosi, D-Calif., ruled out that idea.

Under that approach, the House would have passed the reform bill approved in late December by the Senate. Then, certain changes—such as a liberalization of an excise tax on the most costly health insurance plans—that House Democrats wanted made to the Senate bill would have been put in a budget reconciliation bill. Budget bills require only a simple majority for passage, on which the House and Senate then would act.

But Speaker Pelosi said there was little appetite in the House for that approach. “I don't think it's possible to pass the Senate bill. I don't see the votes for it at this time,” she said at a news briefing.

Instead, observers say, the most likely course of action will be for top congressional Democrats and Republicans to work together on a vastly slimmed-down reform bill. Elements of that bill could include reform of the personal lines market and requiring health plans to extend coverage to employees' adult children up to age 26 or 27. Many states have passed such measures in recent years, but those state laws—because of federal pre-emption provision in the Employee Retirement Income Security Act—apply only to plans offered by insurers, not self-insured employers.

“Slimmed-down bills are a real possibility,” said Paul Dennett, senior-vp health care reform with the American Benefits Council in Washington.

Yet another possibility is that states, where interest in health care reform waned during the past couple years as the likelihood of federal action grew, could become more active again.

Congress could aid state efforts if, for example, it approved legislation giving such state reform measures waivers from the ERISA provision that pre-empts state and local laws and rules that relate to employee benefit plans.

Such a proliferation of varying state laws “would be a disaster” for employers that operate in different states and would have to comply with a hodgepodge of requirements, said Neil Trautwein, vp and employee benefits counsel with the National Retail Federation in Washington.