By Joshua Stokes
(As of December 6, 2009) Revised to clarify requirement that insurance is guarenteed and must be issued regardless of pre-existing conditions
Gets to 96% coverage through the following:
- Employer mandate—requires employers to offer health insurance to their full-time workers or pay 8% of their payroll into the Exchange to subsidize premiums. Employers are required to enroll their workers in their lowest level plan unless the employee opts out or selects a higher plan.
- Employers with payroll under $500k don’t have to contribute anything to the Exchange.
- Employers with payroll between $500k and $585k pay 2%.
- Employers with payroll between $585k and $670k pay 4%.
- Employers with payroll between $670 and $750k pay 6%.
- Employers have 5 years from 1/1/13 to transition to Qualified Benefit Plans. They can offer grandfathered plans in existence on Jan. 1, 2013, but they can’t enroll anyone new in the plans (other than dependents) or change the premiums without prior approval of the Health Choices Commissioner.
- Individual mandate—requires individuals who are not provided health care through work or another government program to buy insurance through the Exchange. The penalty for failure to purchase is 2.5% of a portion of the taxpayer’s adjusted gross income.
- Expands Medicaid eligibility to individuals making up to 150% of the poverty line. Also increases reimbursement rates for Medicaid to Medicare levels by 2012 so that Medicaid recipients will get better access to doctors.
- Immediately establishes state-based high risk pools for people who have been denied insurance for pre-existing conditions, have been offered unaffordable insurance, have qualifying medical conditions, or have been uninsured for more than 6 months. These plans have premium and out-of-pocket limitations and are available until the Exchanges open.
- The Federal government will operate an Exchange on Jan. 1, 2013, which is simply a website that allows people to enter their location, their family status (single, married, single with kids, married with kids), and see what Qualified Benefit Plans are available in that area. For an example, look at https://www.mahealthconnector.org/portal/site/connector/
- Allows apples to apples comparisons to each plan in one place.
- Requires that participating plans be Qualified Health Benefits Plans that provide at least the minimum essential benefits packages, which include coverage for: hospitalization; outpatient care; emergency care; physician and other health professional services; medical equipment coverage; prescription drugs; rehabilitative and habilitative services; mental health and substance abuse disorder services; preventative care; maternity care; well-baby and well-child care; oral health, vision, hearing services, equipment and supplies for children under 21; and durable medical equipment, prosthetics, orthotics, and related supplies.
- The plans must meet the minimum coverage requirements under Federal law, plus any additional state regulation.
- Qualified plans limit the total out-of-pocket to a maximum of $5k per individual/$10k per family. Preventative care, well-child care, and well-baby care cannot have any cost sharing—they have to be covered 100% by the insurance company.
- The precise aspects of minimum coverage levels in Qualified Health Benefits Plans will be decided by Health Benefits Advisory Committee chaired by the Surgeon General. The Committee shall include 9 Presidential appointees of non-Federal employees, 9 U.S. Comptroller General appointees, and 8 Federal employee or officer appointed by the President.
- Provides four levels of plans that cover more of the out-of-pocket costs and offer more coverage in return for higher premiums.
- Includes a public option for voluntary enrollment instead of a private plan.
- The public option premiums have to be set high enough to cover the payouts for medical bills and administrative costs.
- The public option cannot be bailed out by the government for insolvency.
- The public option has to negotiate its reimbursements for coverage with providers just like private insurance companies. Its coverage rates are not tied to Medicare.
- Premiums may not vary between people enrolled in insurance for reasons other than age (with a maximum increase of twice the basic premium), number of family members enrolled, and limited variation for more expensive regions.
- Businesses with 25 or fewer employees can choose to put their employees in the Exchange instead of offering health insurance starting on Jan. 1, 2013. Businesses with 50 or fewer employees can do the same in 2014, and businesses with 100 or fewer can do the same in 2015. In addition, the Health Commissioner can begin allowing businesses with more than 100 employees to move into the Exchange starting in 2015.
- Allows states to create Health Care Choice Compacts to allow purchase of insurance across state lines starting in 2015. Also allows formation of non-profit, member-run insurance co-ops.
- Provides subsidies (called affordability credits) for individuals between 133% and 400% of the poverty line in a sliding scale amount such that exchange eligible individuals or families are required to contribute 1.5% of their income toward the premiums at the low end (133% of the Federal Poverty line) up to 12% of their income at the high end (400% of the Federal Poverty line). The out-of-pocket limits also range from $500 per individual/$1,000 per family at 133% of the poverty line to $5k per individual/$10k per family over 400% of the poverty line. People making over 400% of the poverty line will have to pay full price (projected to be $5,300 single/$15,000 for a family of four, on average, in 2016).
- Example: The Federal Poverty Line (“FPL”) is projected to be $11,800 for a single person and $24,000 for a family of four in 2016. The CBO projects that a person making $26,500 in 2016 (225% of the FPL) would pay a premium of about $1,900 (after getting a subsidy of 64%) and with a maximum out-of-pocket cap of around $2,000. A family making $54,000 would likely pay about $3,870 in premiums and with a maximum out-of-pocket cap of around $4,000.
- Must show proof of citizenship or legal residency to receive subsidies.
General Insurance Regulations
- As of January 1, 2013, requires insurers in the individual and group markets to accept every person and employer who applies for a policy regardless of whether they have pre-existing conditions, and guarantees renewability of insurance regardless of health status.
- Requires that group health plan insurers have medical loss ratios of at least 85% (meaning the payout for medical coverage has to be at least 85% of each dollar they take in). The Secretary of HHS will determine how to consistently determine medical loss ratios so as to take into account the effect on smaller plans, new plans, and different types of plans. The Secretary will also determine what exceptions shall apply to ensure adequate participation by insurers and competition in the market. (effective immediately)
- Children can be covered under the plans until the age of 27. (effective immediately)
- Individuals eligible for COBRA can continue on COBRA until the Exchanges are established. (effective immediately)
- Only allows for insurers to cancel a policy based on clear and convincing evidence of fraud in procuring the policy. (effective immediately)
- Eliminates the antitrust exemption for insurance. (effective immediately)
- Requires the HHS Secretary to begin promulgating standards for financial and administrative transactions to reduce administrative inefficiencies, including electronic records and transactions. (effective immediately)
- Medicare Advantage (Medicare administered by private insurance companies) reimbursements are reduced to the reimbursement rates for regular Medicare by 2013 (Medicare Advantage plans cost on average 14% more than regular Medicare).
- Requires the HHS Secretary to negotiate for discounted drug prices under Medicare Plan D. (effective immediately for drugs prices starting on 1/1/11)
- Prevents agreements between brand name and generic drug manufacturers from delaying or limiting competition from generic drugs. (effective immediately)
- Reduces waste, fraud, and abuse in Medicare, Medicaid, and other public programs by requiring providers to establish anti-fraud compliance programs and increasing screening for participating providers. (implemented over time)
- Makes a number of Medicare reforms to encourage better and lower cost preventative care. (implemented over time)
- Includes grants to employers to operate wellness programs for their employees, including tobacco cessation, weight reduction, and other health issues.
- Other provisions for similar programs Medicare, Medicaid, and other public programs.
- Allows for Exchange-participating plans, including the public option, to cover of abortion in cases or rape or incest, or where the life of the mother is in danger even if those plans are purchased with affordability credits (already allowed under Federal law for to be covered by Federal funds).
- Precludes the use of affordability credits to purchase a plan that covers any abortions other than those described above.
- Allows individuals to buy supplemental coverage to cover abortions in addition to what is listed above, or purchase Qualified Benefit Plans offered in the Exchange so long as they are paid for solely with non-Federal funds.
- Requires that if an insurer offers a plan in the Exchange that covers elective abortions (such that it can’t be bought with affordability credits), the insurer must offer an identical plan without the abortion coverage, which can be purchased with affordability credits.
Funding and Costs
- Adds 5.4% increase on marginal tax rates on incomes over $500k (individual) and $1 million (couples) in 2011. The CBO estimates that this tax will raise $560 billion over 10 years.
- Reduces spending of approximately $426 billion, partly from changes associated with required spending reductions for Medicare Advantage and partly through the elimination of waste and fraud from public programs.
- Raises approximately $167 billion in fees from non-participating employers and individuals. Increased revenue of $13 billion from certain provisions affecting Medicare, Medicaid, and other programs.
- Total cost of $1.052 trillion over 10 years, with a net cost of $891 billion (reduced by the fines from employers and individuals). Projected to reduce the deficit over 10 years by $109 billion.
Sources and Additional Information
- For the full text of the bill, see H.R. 3962 at http://thomas.loc.gov
- For a more detailed summary of the bill and comparisons to other bills, see Kaiser Family Foundation Summary: http://www.kff.org/healthreform/sidebyside.cfm
- For cost and subsidy information, see the Congressional Budget Office Analyses: http://cbo.gov/ftpdocs/106xx/doc10688/hr3962Rangel.pdf
- For general information about health care reform, see Ezra Klein’s blog on the Washington Post: http://voices.washingtonpost.com/ezra-klein/health_reform/