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Life Health > Health Insurance > Health Insurance

Reid Lugs Out Senate Health Bill

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The main Senate health bill — the 2,074-page Patient Protection and Affordable Care Act — has arrived.

Senate Democrats have posted a copy of the PPACA bill on their website.

The bill is formatted as H.R. 3590, “an amendment in the nature of a substitute,” and intended to be introduced by Senate Majority Leader Harry Reid, D-Nev., on behalf of him and Sens. Max Baucus, D-Mont.; Christopher Dodd, D-Conn.; and Tom Harkin, D-Iowa.

Reid and other Senate Democratic leaders have been working to create the PPACA bill by melding S. 1679, the health bill approved by the Senate Health, Education, Labor and Pensions Committee in July, with S. 1796, the bill approved by the Senate Finance Committee in October.

Effects On Commercial Health Coverage Market

Like the HELP bill and the Finance Committee bill, the PPACA bill would both require health insurers to sell coverage on a guaranteed issue, guaranteed renewable basis, without preexisting condition exclusions (Section 1201); prohibit carriers from rescinding policies that are already in force, except in some cases involving fraud (Section 1001); impose strict limits on insurers’ ability to use age or other demographic factors in setting rates (Section 1201); set up a “health insurance exchange” insurance distribution system (Sections 1301-1313); and offer tax breaks (Section 1401) and direct subsidies (Section 1402) to help people buy coverage.

Like the Senate Finance Committee bill, S. 1796, and unlike the HELP bill or the main House health bill, H.R. 3962, the PPACA bill would encourage the creation of nonprofit health insurance cooperatives (Section 1322).

Like the HELP bill, S. 1679, and H.R. 3962, the PPACA bill would encourage states to offer a public “community health insurance option” through the exchange system (Section 1323).

The PPACA bill would permit states to choose to opt out of offering a community health insurance option.

Health insurance agents could sell products distributed through the exchange system and participate in a health insurance “navigators” program that would be set up by the new exchange system. (Section 1311, subections (e) and (i))

Here is the text of Section 1311(e):

(e) ENROLLMENT THROUGH AGENTS OR BROKERS.–The Secretary shall establish procedures under which a State may allow agents or brokers–

(1) to enroll individuals in any qualified health plans in the individual or small group market as soon as the plan is offered through an Exchange in the State; and

(2) to assist individuals in applying for premium tax credits and cost-sharing reductions forplans sold through an Exchange.

Such procedures may include the establishment of rate schedules for broker commissions paid by health benefits plans offered through an exchange.

But Section 1322 would prohibit the people who serve on the federal co-op advisory board could not have ties to the health insurance industry, and a co-op would have to have conflict-of-interest rules to ward off insurance industry “involvement and interference.”

No Prison Time For Going Bare

America’s Health Insurance Plans, Washington, has argued that making health coverage available on a guaranteed issue, guaranteed renewable, mostly community-rated basis can be actuarially sound and reasonably affordable only if the government requires most people to have health coverage.

Republicans have responded to earlier proposed individual health ownership requirements by questioning whether they would be constitutional and chortling over the idea of Democrats exposing people to the possibility of going to prison over failures to own acceptable health coverage.

The PPACA bill “individual responsibility” section (Section 1501) includes a long preamble explaining why the drafters think an individual is constitutional and necessary. The section requires people to own “minimum essential” health coverage and to pay a $750-per-uninsured-individual penalty if they can afford coverage but fail to buy it.

Like other congressional health bills, the Reid bill also includes a number of individual health ownership requirement exemptions, including a hardship exemption provision.

Toward the end of the section, the drafters write that, “In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.”

Although the PPACA bill would eliminate the threat of going to prison for failing to buy health coverage or pay the associated penalities, “the penalties for individuals who do not obtained insurance are phased in more quickly” than in the Finance Committee bill, S. 1796, “and the exemptions from those penalties are less extensive,” according to the Congressional Budget Office analysis of the bill.

The PPACA bill employer health insurance requirement provisions (starting at Section 1511) would require employers to inform employees about health insurance options. It also would require an employer with more than 200 full-time workers pay a $750-per-employee penalty if it did not provide health coverage. An company with 50 or more employees would have to pay penalties if its full-time employees started buying government-subsidized coverage through the exchange system. (Section 1513)

Long Term Care Insurance

H.R. 3962 and the Senate HELP health bill, S. 1679, contain a Community Living Assistance Services and Supports Act provision. The provision, championed by the late Sen. Edward Kennedy, D-Mass., is supposed to create a voluntary, premium-funded long term care insurance program.

Private insurers have complained that earlier versions of the CLASS Act provision are clearly actuarially unsound, and Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, says the proposed program would probably be underfunded. He predicted that increasing rates enough to make the program pay for itself would lead to adverse selection, and that adverse selection would lead to a “death spiral,” with bad risks crowding out good risks.

The PPACA bill includes a CLASS Act provision (Sections 8001-8002) that calls for the Health and Human Services secretary to develop at least three “actuarially sound benefit plans as alternatives for consideration.” The HHS secretary must set premiums based on an actuarial analysis of the 75-year costs of the program, to ensure solvency throughout the 75-year period, according to the bill text.

Revenue Provisions

S. 1796, the Finance Committee bill, would impose a 40% “Cadillac plan” excise tax on relatively expensive health benefits packages.

H.R. 3962 would impose a tax surcharge on individuals — including small business owners who use individual tax forms to pay business taxes — who earn more than $500,000 per year and couples that earn more than $1 million per year.

The PPACA bill revenue provisions are in Title IX.

The 40% Cadillac plan excise tax in the PPACA bill would be inflation-adjusted. Initially, the tax would kick in for an individual with a health benefits package valued at $8,500 or higher and a family with a health benefits package valued at $23,000 or higher. (Section 9001)

The PPACA bill also would:

– Increase the percentage of income that taxpayers would have to spend on medical expenses in order to itemize medical expenses. Today, the minimum percentage is 7.5%. If the Reid bill were implemented as written, the minimum for individuals under age 65 would increase to 10%. (Section 9013)

– Impose a 0.5% “hospital insurance tax” on wages over $200,000 for an individual and over $250,000 for a couple. (Section 9015)

– Impose an annual fee on health insurers. (Section 9010)

– Imposed a fixed, $2,500 annual cap on an individual’s flexible spending account contributions. (Section 9005) S. 1796 also would impose a fixed FSA contribution cap; H.R. 3962 would adjust the cap for inflation.

Other Provisions

The PPACA bill includes many programs that are intended to improve health care quality, hold down cost increases, and support current health care workers and workers who are trying to enter the health care field.

The bill includes Medicare Advantage reimbursement cut provisions, which involve a “competitive benchmarking program,” starting at Section 3201.

Section 3210 would require Medicare supplement plans — which simply fill in gaps in traditional Medicare coverage, rather than serving as an entire alternative health plans, as Medicare Advantage plans do — to force participants to submit to “nominal cost sharing to encourage the use of appropriate physicians’ services” under the traditional Medicare program’s Medicare Part B physician services plan. The U.S. Health and Human Services secretary would develop the Medigap plan cost-sharing requirements together with the National Association of Insurance Commissioners, Kansas City, Mo.

Projected Effect On The Number Of Uninsured People

The CBO estimates in its analysis of the PPACA bill that the bill would reduce the number of uninsured U.S. residents to 24 million by 2019, from 54 million if current laws prevail.

About 8 million of the people who would be uninsured in 2019 would be unauthorized immigrants, the CBO says.

The share of legal, nonelderly residents with health coverage would increase to 94%, from 83% today.

The number of people with employer-sponsored coverage would increase to 157 million, from 150 million today, and the number with private individual coverage would drop to 24 million, from 27 million people today, the CBO predicts.

Budget Impact Analyses

Many lawmakers have said they would vote for a health bill only if they had assurances that the bill would cut the federal budget deficit, or at least not increase the deficit.

The CBO estimates that implementing the PPACA bill as written would reduce the federal budget deficit by $130 billion from 2010 to 2019, with subsidies, small employer tax credits and Medicaid and State Children’s Health Insurance Program funding increases costing $848 billion from 2010 to 2019, other provisions reducing actual outlays to $356 billion, and revenue provisions raising $486 billion.

Like other health bill, the PPACA bill depends partly on reducing Medicare physician reimbursement rates to cut costs, and, in the past, Congress has never been able to make those kinds of cuts stick, CBO Director Douglas Elmendorf writes in a summary of the CBO’s findings.

The Joint Committee on Taxation, another congressional body, has posted a table showing what JCT analysts estimate to be the effects of the PPACA bill’s revenue provisions.

The JCT analysts predict, for example, that the PPACA bill’s “Cadillac plan” excise tax provision would raise a total of about $140 billion from 2013 to 2019, and that capping health flexible spending arrangement contributions at $2,500 per year would save $14.6 billion from 2011 to 2019.

Imposing an annual fee on health insurance providers would raise about $60 billion from 2010 to 2019, and requiring that taxpayers spend at least 10% of taxable income on medical expenses before they can itemize would raise about $15 billion from 2013 to 2019, the analysts estimate.

The PPACA provisions as a whole could raise a total of about $372 billion from 2010 to 2019, the JCT analysts conclude.


For more information about the gestation of the Senate health bill, please see the following articles:

An earlier version of this story gave an incorrect description of how the Reid bill handles the CLASS Act.


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