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 94% coverage (31 million newly insured, 24 million still uninsured in 2019) through the following:
- Individual mandate. Requires individuals to have insurance meeting the minimum essential coverage through work, the individual market, or a government program (Medicare, Medicaid, the VA, etc.). The tax penalty for failure to purchase insurance is $750 per person, with a max of $2,250 per family. There are exemptions for people who cannot afford insurance, meaning that the contribution on an annual basis for the lowest plan exceeds 8% of the individual’s modified gross income. The penalties phase in from 2014-2016. (Sections 1501-02.)
- Expands Medicaid eligibility to individuals making up to 133% of the poverty line. (Section 2001.)
- Employer coverage. There is no overall requirement for employers to offer insurance, but there are penalties for insurers who do not offer insurance, or offer insurance with too little coverage, if their employees buy insurance in the Exchange and get subsidies for their premiums. (Sections 1511-13.)
- Employers with more than 200 full time employees that offer health insurance are required to enroll their workers in one of the plans they offer. Employees have the right to opt out for other coverage.
- If an employer with more than 50 full time employees does not offer minimum essential coverage health insurance to its workers, and if one or more of the employees qualifies for premium credits in the Exchanges, the employer must pay $62.50 per month ($750 per year) per full time employee. The fine is assessed for every month that one or more employees are receiving subsidies in the Exchange.
- If an employer with more than 50 full time employees does offer minimum essential coverage health insurance to their workers, but one or more of the employees qualifies for premium credits in the Exchanges, the employer must pay the lesser of (1) $250 per month ($3,000 per year) per employee receiving the credit, or (2) $62.50 per month ($750 per year) per the total number of employees. The fine is assessed for every month that one or more employees are receiving subsidies in the Exchange. An employee will qualify for subsidies in the Exchange if the employer required the employee to pay more than 9.8% of the employee’s income for the insurance or if the insurance covers less than 60% of the costs of the benefits in the insurance plan. (Section 1401.)
- Example: if the employer has 100 workers and 10 are receiving credits in the Exchange because the employee’s share of the premiums costs 15% of the annual wages of the employees, the employer must pay the lower of $2,500 (10 employees x $250) or $6,250 (100 employees x $62.50) for each month that the employees are receiving credits in the Exchange rather than getting insurance through work.
- Employers with fewer than 50 full time employees are exempted from any penalties for failing to provide health insurance to their workers.
- Employers with fewer than 25 employees who provide health insurance to their workers and who subsidize at least 50% of the premiums of their employees are eligible to receive a tax credit for a portion of the amounts the employer pays for the insurance. In 2011-13, the amount is 35% of the employer’s share. Beginning in 2014, the amount is 50% of the employer’s share. The tax credit is only available for 2 years starting in 2014.
- Employers with more than 50 employees who require waiting periods longer than 30 days to qualify for employer-based health insurance must pay $400 per employee subject to the waiting period if the waiting period is between 30-60 days, and $600 if the waiting period is over 60 days.
- Employers are required to inform their employees of the existence of the Exchange and that if the employer’s plan covers less than 60% of the medical costs to the individual, the individual may be eligible for premium subsidies in the Exchange (which should encourage most employers to bring their coverage up to code).
- Immediately allows the Secretary of HHS to establish national or state-based high risk pools for individuals who have been uninsured for the prior 6 months and have a pre-existing condition. These plans have premium and out-of-pocket limitations and are available until the Exchanges open in 2014. (Section 1101.)
- Requires each state to create an Exchange by January 1, 2014 in which individuals can buy Qualified Health Plans and another Exchange where small businesses can purchase Qualified Health Plans for their employees. A state may decide to merge the two Exchanges or keep them separate. States may allow large employers to join the Exchanges starting in 2017. The Federal government will provide grants to help the states set up the Exchanges but they have to be self-funding by 2015. (Section 1311.) For an example of an Exchange, look at https://www.mahealthconnector.org/portal/site/connector/
- Requires that plans offered in the Exchanges be Qualified Health Plans that provide at least the following categories of coverage equal to the typical employer based plan: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventative wellness services and chronic disease management; and pediatric services, including oral and vision care. (Section 1302.)
- Limits out-of-pocket costs for individual plans to the maximum out-of-pocket costs allowed by the IRS for a High Deductible Health Plan (currently nearly $6k for an individual, nearly $12k for a family). (Section 1302.) Limits out-of-pocket costs for plans offered in the small group market to $2k for individuals, $4k for families. (Section 1302.)
- Specifies four levels of coverage: Bronze, which covers 60% of the costs of the benefits under the plan; Silver, 70%; Gold, 80%, and Platinum, 90%. (The House bill’s lowest level is roughly equivalent to the Silver plan.) Also allows for a catastrophic coverage plan for people under 30 who cannot afford the minimum plan. (Section 1302.)
- Premiums may vary between individuals only for age (maximum of 3:1 increase from the basic premium); family size; region; and tobacco use (maximum of 1.5:1 increase). (Section 1201, creating Section 2704 of the Public Health Service Act.)
- Requires health insurance companies offering individual policies in the Exchange to treat customers in the individual market to be in one, single risk pool. (Section 1312.) People covered by an insurance company offering plans in the small group market must treat the individuals covered in plans offered in the Exchange and outside the Exchange to be members of one, single risk pool. (Section 1312.) This reform spreads the risk over more people so that premiums do not go up sharply if an individual gets sick.
- The Exchanges have marketing requirements, uniform enrollment forms (to reduce administrative costs), uniform ways of presenting information about the plans to consumers, and other regulations to reduce administrative costs and make it easier for consumers to compare plans. Insurers offering Qualified Health Plans in the Exchanges must justify to the Exchange any premium increases before they are made and must advertise the increases before they are made. The insurers in the Exchange must develop strategies to lower costs through market-based activities such as plans to improve health outcomes through better chronic disease management, better patient safety, reduced medical errors, and other similar programs. (Section 1311.)
- The Secretary of HHS may allow multi-state or regional Exchanges. A state operating an Exchange may operate sub-exchanges for regions in the state. (Section 1311.)
- Requires Members of Congress and their staffers to get their insurance in an Exchange. (Section 1312.)
- The Exchanges are only open to citizens and legal residents. (Section 1312.)
- Creates a public option (called the “Community Health Insurance Option”) that States may opt out of being offered in their Exchanges. The premiums must be sufficient to cover the administrative and medical costs of the insurance. The Secretary of HHS must negotiate the rates of reimbursement with providers—they are not tied to Medicare rates. (Section 1323.) [As of the date of this writing, this was still in the plan, but it may change due to amendment.]
- Insurers may still offer plans outside the Exchanges.
- Provides subsidies (called “premium tax credits”) for individuals between 133% and 400% of the poverty line in sliding scale amounts. Exchange eligible individuals or families are required to contribute 2.8% of their income toward the premiums at the low end (133% of the Federal Poverty line) and up to 9.8% of their income at the high end (300-400% of the Federal Poverty line). (Section 1401.) According to the CBO, the Federal Poverty Line is projected to be $11,800 for a single person and $24,000 for a family of four in 2016.
- Provides subsidies for the out-of-pocket limits, which range from $1,983 per individual/$3,967 per family at 133% of the poverty line to $3,897 per individual/$7,973k per family between 300-400% of the poverty line.
- People making over 400% of the poverty line will have to pay full price for coverage. (Section 1402.) According to the CBO, the average individual plan is projected to be $5,800 single/$15,200 for a family of four in 2016 under the Senate bill, which is a little higher than the projections under the House bill.
- Individuals are eligible to receive subsidies in the Exchanges if (1) they do not get insurance through their employer or a government program (Medicare/Medicaid/VA), or (2) the employee’s share of the plan premiums cost more than 9.8% of the employee’s household income or the plan does not cover at least 60% of the medical costs covered by the plan. (Section 1401.)
- The subsidies are based on the Silver level plan.
General Insurance Regulations
- As of January 1, 2014, 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. (Section 1201, creating Sections 2701-02, and 2703 of the Public Health Service Act.)
- Prevents lifetime or annual caps on individual and group plans, and prevents rescission of insurance contracts except for an intentional misrepresentation to the insurer by the insured. (Section 1001, creating Sections 2711-12 of the Public Health Service Act.)
- Individual and small group market plans offered in the Exchange or outside of it must have the essential health benefits package of a Qualified Health Plan. (Section 1201, creating Section 2707 of the Public Health Service Act.)
- Requires that individual and group plans must cover preventative care at 100%. (Section 1001, creating Sections 2713 of the Public Health Service Act.)
- Children can be covered under their parents’ plans until the age of 26. (Section 1001, creating Section 2714 of the Public Health Service Act, effective 6 months after passage)
- Requires insurers to use standardized definitions and format for explanations of benefits to allow easier comparison by consumers. (Section 1001, creating Section 2715 of the Public Health Service Act.)
- Requires insurers to report the amounts of the premiums they spend on clinical services, improving health care quality, and other non-claim related costs. Customers in the group market get a rebate if the amount of non-claim costs is more than 20%. Customers in the individual market get a rebate if the amount spent on non-claim costs is greater than 25%. (Section 1001, creating Section 2718 of the Public Health Service Act.)
- Requires review and justification of unreasonable increases in premiums prior to implementation. (Section 1003, creating Section 2794 of the Public Health Service Act.)
- Allows States to create Health Care Choice Compacts where Qualified Health Plans can be sold across state lines beginning in 2016. (Section 1333.)
- Requires the Secretary of HHS to create a program to start member-run, nonprofit insurance co-ops. The setup money must begin to be disbursed in 2013. (Section 1322.)
- Reduces the cost of health insurance administration by:
- Creating a single set of operating rules for determining eligibility and claims status;
- Promulgating standards for electronic payments; and
- Other standardized administrative processes like enrolling in a plan, authorizing referrals to other doctors, etc. Insurance companies have to comply or face a fine of up to $1 per insured. (Section 1104.)
- Reduces Medicare Advantage (Medicare administered by private insurance companies) reimbursements to the weighted average of the bids in the area (Medicare Advantage plans cost the government, on average, 14% more than regular Medicare). Includes compensation bonuses for companies that provide insurance more efficiently. (Sections 3201-3210.)
- Creates a 15 member Independent Medicare Advisory Board to create recommendations for Congress on how to reduce the rate of growth of Medicare spending without rationing care, changing eligibility, increasing revenues, or increasing cost sharing by Medicare beneficiaries. (Sections 3403.)
- Increases funding for mechanisms to fight waste, fraud, and abuse in Medicaid and Medicare. (Various sections.)
- Creates a Medicare and Medicaid Innovation Center to test and evaluate payment structures to reduce cost and preserve or improve quality. (Section 3021.) Also creates a national Medicare pilot program to develop various payment bundling strategies to determine if they lower cost without reducing quality of coverage. (Section 3023.)
- There are a host of other Medicare and Medicaid reforms designed to lower costs without reducing quality and improving health care coverage, including linking payments to better health outcomes. (See generally, Sections 3001-3511.)
- Includes requirements that insurers begin implementing wellness and health promotion activities, including tobacco cessation, weight reduction, and other health issues. (Section 1001, which includes a new section 2717 in the Public Health Service Act.)
- Other provisions for similar programs Medicare, Medicaid, and other public programs, including modernizing disease prevention, increasing access to health care clinics, and encouraging preventative care. (Sections 4001-4402.)
- Increases the supply and improves the training of health care professionals. (Sections 5001-5701.)
- Allows for Exchange-participating insurance plans to cover abortion (1) in cases of rape or incest, or where the life of the mother is in danger, and (2) elective abortions. The Exchange must have at least one plan that covers elective abortions and one plan that does not. (Section 1303.)
- Allows premium tax credits to be used to cover abortions in cases of rape or incest, or where the life of the mother is in danger (already allowed under Federal law for to be covered by Federal funds). (Section 1303.)
- Any payments for elective abortions have to be made from the premiums paid by the insureds, not the premium tax credits. The amount of money necessary to cover the elective abortions for the plan has to be segregated by the insurer from any premium tax credits. (Section 1303.)
- Precludes discrimination of insurers for either performing or refusing to perform abortions. (Section 1303.) [The above provisions are currently the subject of potential amendment and may change after the date of this writing to reflect the Stupak Amendment to the House bill.]
Funding and Costs
- Adds a 40% tax on “Cadillac” plans, which are health insurance plans that cost more than $8,500 per individual or $23,000 per family per year (Section 9001). This tax is estimated to raise $149 billion over the first ten years and more over the second ten years. (This is also a cost cutting provision as it will encourage people to choose lower cost, more managed care plans that have shown to reduce the growth of health care costs.)
- Reduces spending of approximately $491 billion, partly from changes associated with required spending reductions for Medicare Advantage and partly through the elimination of waste and fraud from public programs. Other provisions cause a net reduction in spending of $100 billion.
- Raises approximately $238 billion through other sources, including fees on medical device manufacturers (Section 9009), changes in tax treatment for certain expenditures in Health Savings Accounts (Section 9003), and other mechanisms.
- Total cost of $848 billion over 10 years. Projected to reduce the deficit over 10 years by $130 billion.
Sources and Additional Information
- For a full text of the bill, see H.R. 3590 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://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.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/