Health Care Reform Update

Volume 1 Issue 1
October ~ 2009

The Health Care Reform Update is a publication intended to provide objective information on the health care reform debate in Washington DC.  Many businesses report health care as their second highest expense and it is the fastest growing expense. With all the headlines, discussions, and town hall meetings, we know that it is difficult to separate fact from fiction.  From time to time we will send articles to help you maintain a knowledgeable position on the topic.  We believe in building relationships with our clients; solving their problems, exchanging information, ideas and resources with them and providing them with value-added services. This is our way to share great information with you and it is our mission to continue to improve upon these philosophies. Enjoy this issue of the Health Care Reform Update and thank you for reading it. It was our pleasure putting it together for you.

Putting It Together- Key Elements of House and Senate Health Care Bills

Senate Finance Committee Passes Bill: On Tuesday, after months of negotiations, the Senate Finance Committee passed its $829 billion health care reform package with a 14-9 vote.  One Republican, Sen. Olympia Snowe (R-ME) voted with Democrats on the committee.  The proposal would expand coverage to 20 million uninsured Americans while reducing deficits by $81 billion over 10 years.  The bill includes insurance market reforms, an individual mandate to purchase coverage that appears reduced when compared with prior versions, an expansion of Medicaid, a cut in future Medicare spending, new fees and taxes on employers, and billions in new fees on health insurance and other sectors of the health care industry.  The bill also includes seed funding for state cooperative plans and subsidies for other state coverage programs. 

Shortly after the vote, labor unions and large business organizations requested changes to the Finance Committee bill primarily because it omitted a public option.  The swift feedback from interest groups underscores the difficult road ahead for Senate Majority Leader Harry Reid (D-NV), who will work to merge the Finance Committee bill with the Senate Health, Education, Labor and Pensions (HELP) bill passed last summer.  Unions and lawmakers such as Senators Chuck Schumer (D-NY) and Jay Rockefeller (D-WV) have criticized the legislation for not including a public option.  At the same time, insurance companies, medical device makers and others in the health care industry are voicing strong concerns about the increased premium costs of the proposed legislation. 

Legislators Look to Reconcile Health Care Measures: House leaders indicated that negotiators have trimmed costs for its proposed health care reform bill to President Barack Obama’s goal of $900 billion, down from $1.2 trillion.  Aides said the final bill will include slightly lower subsidies for copayments and deductibles for people who buy coverage through the new insurance exchanges.  A provision preventing doctors who see Medicare patients from having their fees cut was excluded, while a surcharge tax on incomes of individuals ($500,000 or more) and families ($1 million or more) was included.  House members will consider including more low income families in Medicaid instead of the insurance exchange market, and adopting tax increases featured in the Senate Finance Committee bill, including a profit tax on health insurers.  They have, however, rejected the tax on “Cadillac” plans.   

Insurance Industry Study Indicates Higher Costs: On Sunday, the insurance industry trade association, America’s Health Insurance Plans, released a study indicating that the proposed Finance Committee legislation would raise the price of a typical policy.  The study, completed by PricewaterhouseCoopers, projected that family premiums could be $4,000 higher and individual premiums could be $1,500 higher in 2019.  The report details that a weak individual mandate - measures preventing insurers from barring people with pre-existing conditions, taxes on high-cost health care plans and new taxes on some health care industry sectors will rapidly raise costs.     

On Wednesday, another study conducted by Oliver Wyman, Inc. and sponsored by the Blue Cross Blue Shield Association indicated that the proposed legislation would raise premiums 50% for individual and 19% for small group policies.  Premium increases would likely be a result of a weak individual insurance mandate over the next five years. 

 Senate Finance Committee Bill

1. Would cover 94% of eligible Americans at a cost of $829 billion over 10 years
2. Most people would be required to have insurance or pay a fine up to $1,500 per family or $750 per individual
3. Employers that have more than 50 employees and don’t offer coverage must pay up to $400 per employee if the employees get federal subsidies
4. Those with incomes up to 133% - 400% of poverty level could get subsidies on a sliding scale
5. IRS would tax insurers offering plans valued at more than $21,000 per family or $8,000 per individual, along with imposing new taxes on health industries including drug and device makers
6. No government-run plan; sets up nonprofit cooperatives backed by government start up funds

1. Would cover 97% of eligible Americans at a cost of $1,182 trillion over 10 years
2. Most individuals would be required to have insurance or pay a penalty of 2.5% of adjusted gross income up to the cost of the average national premium
3. All but the smallest employers would be required to offer coverage or pay a penalty of 2% of payroll, up to 8% for firms with a payroll above $750,000
4. Sliding scale subsidies for those making up to 400% of poverty level (or $88,000 for a family of four)
5. IRS would levy a 5.4% surtax on incomes above $500,000 per individual or $1 million per married couple
6. A new public health option would be created to compete with private insurers.  The plan would be paid with revenue from premiums 

Cost is likely to stay around $900 billion over 10 years – the target set by President Obama

1. Senator Olympia Snowe and others aim to make insurance more affordable for those mandated to buy it
2. Businesses seek to keep Senate Finance language, which has the lightest mandate
3. Core provisions (subsidies for lower-income people and expansion of Medicaid) are likely to remain in the final bill
4. Many Democrats oppose taxing high-value plans
5. Liberals are expected to fight to get a public option in the final bill

Following the Senate Finance Committee vote, health care reform legislation negotiations will continue behind closed doors.  Sen. Reid will merge the Senate Finance and the HELP Committee bills.  He has indicated that the full Senate will begin debating the merged legislation the week of October 26. 

House leaders are expected to vote the first week of November.