House narrowly OKs health-insurance plan

OLYMPIA — The state House on Saturday narrowly passed a bill to transform the way employees for small businesses buy — and keep — their health coverage.

But as the measure moves to the Senate, it faces a barrage of opposition from employers and the insurance industry. Even its main Republican backer in the house threatened to withdraw support unless changes are made to the bill.

Though scaled back significantly from an earlier proposal, the bill still calls for some of the most significant health reforms in more than a decade.

"There's something drastically wrong when middle-class people with a job — or two jobs — can't get affordable health care on the open market," said Rep. Eileen Cody, D-Seattle, chairwoman of the House Health Care Committee. "There is a market failure."

If the measure becomes law, Washington would be one of only a handful of states to create a public-private entity to design benefits, collect premiums and otherwise actively oversee health coverage for tens of thousands of residents.

Business lobby active

Cody pushed the legislation — House Bill 1569 — to a vote Saturday despite opposition from a swarm of business lobbyists.

Nearly a dozen groups — including the Association of Washington Business, the Building Industry Association of Washington, the Washington Restaurant Association and the Washington State Farm Bureau — last week sent a letter urging House members to reject the legislation.

"We are concerned about the turmoil, disruption and confusion the changes proposed by [HB 1569] could cause for small employers," the letter said.

The legislation is a compromise that was hammered out last month between Cody and Rep. Bill Hinkle of Cle Elum, the ranking Republican on the House Health Care Committee.

But Hinkle, who has been taking a lot of heat from business lobbyists and fellow Republicans, was one of just two Republicans to side with Cody in Saturday's 53-44 vote.

"I'm not sure how many Christmas cards I'm going to get from my friends this year," Hinkle said.

He said he probably won't continue to support the bill unless it is revised in the Senate.

It appears the outcry from business rattled lawmakers on both sides of the aisle, as nine Democrats voted against the measure.

Health-insurance pool

The legislation calls for setting up a new statewide health-insurance pool that would initially include some 300,000 people currently in the state's small-group market.

Starting in 2009, businesses with 50 or fewer employees would be required to purchase their health insurance through a newly created Washington Health Insurance Partnership (WHP), instead of directly from private health-insurance companies.

A 12-member board would oversee the partnership. All health plans now sold to small businesses could be offered through the pool. But the board would design and promote up to six different health-insurance plans that employees could choose from, ranging from a catastrophic plan to comprehensive coverage.

The bill calls for subsidizing coverage for people who make under 200 percent of the federal poverty level — about $20,000 a year for a single person.

Cody figures the pool could grow to as many as 500,000 people. She believes that will increase competition and reduce premiums. She also says the bill would give employees more choices and allow them to keep the same health plan when they move from job to job.

In their letter to House members, the business groups said there is no assurance the new partnership will reduce health-insurance costs for small employers.

They said they favor a more guarded approach proposed by Gov. Christine Gregoire, which was based on recommendations earlier this year from a bipartisan health-care task force.

That measure — Senate Bill 5930 — was approved unanimously Friday night by the Senate after Democrats agreed to tack on several provisions that small business backs, such as allowing insurers to offer bare-bones coverage free of most state-mandated benefits.

And instead of putting a new a public-private partnership in place, the governor's bill calls for studying the idea and coming back with a plan next year.

"When you're totally upending how people buy health insurance, you ought to make sure it's going to work first," said Carolyn Logue, lobbyist for the state chapter of the National Federation of Independent Business.

Cody shrugged off the opposition from business.

"I'm so used to that kind of opposition to any changes we try to make," said Cody, who has pushed several major health-care reforms during her six years as head of the Health Care Committee.

Cody this year had originally proposed a much more ambitious proposal modeled after a landmark health-insurance overhaul adopted last year in Massachusetts.

Her initial plan called for a much larger pool of about a million people, including state employees, public-school employees and people who get subsidized care through the state's Basic Health Plan. It also would have eventually made health insurance mandatory for all residents older than 18.

She agreed to put off decisions about expanding the new insurance program until after it is up and running.

Seattle Times reporter Kyung Song contributed to this story.

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com