The Health Insurance Reform Finish Line:

Co-authored by Carrie Gilbert

Over the last several weeks, we have looked at the different proposals coming through Congress to achieve comprehensive health insurance reform. Congress is now modifying two versions – one in each – the House and the Senate. We have come quite a long way since the beginning of this series, however before health reform is signed into law, there are several more important steps. The Senate has officially begun debate. In order, to take a final vote and pass health reform, they will need 60 votes to end debate on the floor. Then they need a simple majority to pass it out of the Senate. Once each house has a passed a version, it will go to conference committee so that the differences can be resolved and a final bill written.   Your Senators and Representatives will need to hear from you every step of the way. Reassure those that support health reform that they are doing the right thing and let the fence-sitters and naysayers know that as their constituent you would like to see them support health reform. Here is the number to call 1-800-828-0498 to let your representatives know how you feel. 

Here is our final installment of the homestretch series: The Finish Line.  We wrap up the previous issues we have looked at and offer insight into unresolved issues.   

Children’s coverage:

House bill
H.R. 3692 would ultimately dissolve the Children’s Health Insurance Program (CHIP) as of December 31, 2013. Children below 150% of the federal poverty level (FPL) would then move into Medicaid and those above would be moved into the new Health Insurance Exchange or employer-based insurance.   While CHIP is still in place, HR 3692 eliminates waiting periods for children who were previously covered by employer sponsored insurance.  By the end of 2011, the Secretary of HHS will have to conduct a study for what the Exchange will look like and make recommendations to Congress for improving the Exchange for children’s coverage.

Senate bill
H.R. 3590 maintains CHIP for children above 133% FPL through
2019. However, it does not allocate funding past its current renewal date of September 30, 2013. If Congress does not fund CHIP after 2013 then families may enroll in the Exchange and may qualify for subsidies. 

Some advocates fear that moving children out of CHIP without first ensuring that the Exchange is comparable in price and benefits, would harm families and children. They fear that CHIP goes well beyond what private plans in the Exchange would offer in terms of benefits and covered
services. However, others argue that moving entire families into the Exchange would simplify the process and increase the likelihood that children get coverage. Studies have found that when the parents are covered, the children are more likely to be covered and receive necessary benefits. Additionally, there would be an “essential benefits package” requirement in the Exchange that would serve as a benefits floor for private plans. Finally, in the Exchange all families up to 400% FPL would qualify for subsidies, whereas one state has CHIP eligibility to 400% FPL, thereby covering more families. On the Senate side, Senator Bob Casey (D-PA) introduced an amendment to protect and ensure health care coverage for low-income children, including continued full funding for CHIP through 2019. 

Medicaid Expansion:
House bill
The House bill expands Medicaid to 150% FPL in January 2013 with 100% federal financing for 2 years and 91% federal financing beginning in year 2015 for new eligibles (such as childless adults) and some current eligibles covered by a waiver. States with Medicaid levels above 150% will be required to maintain their current levels. The House bill’s additional funding is geared towards helping states transition to the expanded Medicaid program.   Additionally, the House bill would increase Medicaid payment rates to primary care providers to 100% of Medicare rates by 2012. 

Senate bill
The senate bill expands Medicaid to 133% FPL and includes childless adults. The bill requires that the expansion occurs by 2014, but states could begin expanding as early as
2011. Some individuals who qualify for Medicaid could also receive subsidies in the Exchange, although people below 100% FPL could only receive subsidies if they do not qualify for Medicaid. 

Health Affairsdid a study about a year ago, which found that average medical expenses are lower per person under public programs than under private insurance. When controlling for demographics and income, the medical expenditures for the same adult would be 26% higher under private insurance than Medicaid. Additionally, out-of-pocket costs are vastly higher under private insurance than under Medicaid. A Medicaid enrollee would spend 6 to 7 times more on out-of-pocket costs under private insurance than under Medicaid. The CBO estimates that Medicaid expansion to 150% FPL will cover 15 million people. This is not to say that we should balk at the Senate’s Medicaid expansion to 133%, and both bills expand Medicaid to previously ineligible childless adults, which finally addresses a longstanding gap in public coverage for those who often do not qualify or cannot afford private insurance. 


House bill
HR 3692 requires all individuals to purchase coverage, but provides tax credits to individuals and families with incomes above Medicaid eligibility but below 400% FPL. A family of four headed by a 45-year-old making $44,000 a year would pay roughly $2,400 in premiums, or $200 a month, according to the Kaiser Family Foundation. The tax credits are awarded on a sliding scale based on income to limit premium contributions to an affordable percentage of income, starting at 1.5% of income for 133% FPL to 12% of income for 400% FPL. The House bill requires employers to provide health insurance or pay a tax on their total payroll. However, for businesses with annual payrolls less than $750,000 the tax is assessed on a sliding scale, and businesses with annual payrolls under $500,000 are exempt from the tax entirely. 

Senate bill
Similarly, in the Senate bill individuals will receive affordability credits to pay for premiums. The credits would start at 4% of income for households at 134% of FPL and increase to 9.8% of income for households at 300%-400% FPL. The Senate bill also includes employer mandates and penalties, but exempts employers with 50 or fewer employees.

The Senate bill is more affordable for households between 250-400% FPL, but the House bill is more affordable for households under 250% of FPL. In the case of those at the bottom of the subsidy scale, under the Senate bill they could end up paying at least twice as much as what they would pay under the House bill. However, a recent analysis by MIT economist, Jonathan Gruber, found that the Senate bill makes health insurance for individuals purchasing in non-group market much more affordable. The same plan that would cost $5500 without reform would cost $4600 with reform. Gruber also found that the House bill would deliver a savings ranging from $200 for individuals to $500 for families, even without subsidies. The nonpartisan CBO and the Joint Committee on Taxation analysis of how the Senate bill might affect health insurance premiums concluded that the Senate bill will reduce premium costs for 57% of Americans who will receive subsidies by as much as 59%, and rates in large group market by as much as 3%.   Rates may rise for individuals who have to purchase coverage on their own but do not qualify for subsidies, but this is mostly because the plans offered in the Exchange will be better plans than those currently offered and therefore slightly more expensive. 

Public Option
House bill:
HR 3692 creates a National Health Insurance Exchange, where individuals and employers (employers would be phased-in beginning with the smallest employers) can purchase plans that meet certain qualifications in order to be considered an adequate plan. A public option would be included in the Exchange. The public option would follow the same insurance industry guidelines as private plans. The public option would negotiate rates with providers so that they are not below Medicare rates but not above the average rates for comparable private plans. 

Senate bill:
HR 3590 creates a state-based Exchange for individuals and businesses with fewer than 100 employees. States can allow bigger businesses to buy insurance in the Exchange beginning in 2017. The Exchange would include a public option, which must comply with insurance industry regulations for private plans. The Senate bill permits states to choose not to offer the public option, but they would have to pass legislation to do so. The Senate bill would also create a program to foster the development of CO-OPS or non-profit health insurance companies. 

According to the CBO, the House bill’s public option would enroll less than 2% of the population (about 6 million customers over the next 10 years) and probably have higher premiums than private plans. The Senate’s bill would attract about 4 million customers. Nevertheless, the
public option has become a heated topic. If Senator Reid can find a public option compromise that pleases all 60 democratic votes, then he can close debate and move toward the final vote. Republicans want six weeks of debate, but as soon as Democrats come to an agreement on the public option they can shut down the debate and avoid the Republican arsenal of stalling and bill-killing tactics. Finding this magical compromise is much easier said than done. Senator Joe Lieberman (I-CT) and other conservative Democrats, most notably Ben Nelson (D-NE), Mary Landrieu (D-LA) and Blanche Lincoln (D-AR) have voiced opposition to the opt-out public option. Landrieu has said that she would support the “trigger” option, which would activate the public option if the private industry does expand coverage fast enough.   Sen. Olympia Snow (R-VT), the only Senate Republican to vote for health reform this year, has also voiced support for the “trigger”. Sen. Nelson supports an opt-in option for states, while Lieberman and Lincoln are going to be much harder to bring to the table on the public option. Meanwhile, Democrats on both the House and Senate side can be lost if there is not a public option. However, a potential compromise is beginning to emerge from negotiations between five liberal and five moderate Democratic Senators. The compromise would remove the public option and replace it with a network of non-profit health insurance plans, which the Office of Personnel Management would administer. The Office of Personnel Management currently administers the Federal Employee Benefits Program. In exchange for removing the public option, moderate Democrats would agree to expanded Medicare and Medicaid.  Getting the 60 votes necessary to close debate involve negotiation on several issues, but the public option balancing act may be the single most important issue for getting to 60. 

Insurance Market Reforms
House bill:
HR 3692 would require private insurers within the Exchange to guarantee coverage regardless of the policyholder’s health and renew the coverage each year, and insurance companies could not rescind a policyholder’s plan. Insurance companies would be required to issue plans despite pre-existing conditions. Variation in premium rates would be illegal based on gender and geography. Premiums can vary based on age but limited to a ratio of 2 to 1. Insurance companies could not impose annual or lifetime caps for medical care.  

Senate bill
The Senate bill also guarantees issue and renewability. As in the House legislation, companies could not rescind coverage or refuse coverage based on a pre-existing condition. Premium variation is allowed based only on age and tobacco use within ratios of 3 to 1 and 1.5 to 1 respectively. 

Insurance market reforms are some of the most needed and least debated aspects of health reform. Countless people have been denied coverage or had their coverage rescinded due to pre-existing conditions or post claims underwriting and rescission practices. These insurance reform changes are significant change to current insurance company business practices. However, even if one issue causes health reform to fail then even these widely agreed upon changes will get thrown out. These changes would mean significant improvements in care for lots of Americans who currently struggle to find adequate coverage.    However, since insurance companies currently charge the young and healthy much less than middle-age people who are more likely to get sick, the young may pay more under both bills than they currently do, if their income is too high for them to qualify for public coverage or subsidies. 

Impact on the deficits and paying for reform:
House bill:
The House bill uses a combination of penalties for lack of coverage, taxes on wealthy Americans and changes to Medicare payment to pay for reform. It is expected to reduce deficit by $109 billion over ten years. 

Senate bill:
The Senate bill uses a combination of taxes on high cost insurance plans, increases to the Medicare payroll tax and a 5% tax on non-medically necessary cosmetic surgery. The Senate bill is expected to reduce the deficit by $130 billion over the first ten years and by more than half a trillion dollars in the following decade. 

Both bills offer positive elements to craft an affordable bill that curbs the cost of health insurance over time. The tax on wealthy individuals will raise considerable revenue, while the tax on high-cost insurance plans will slow health care growth over time. 

Other Hot Issues:

Abortion: Federal funding for abortions became a contentious issue at the last minute in the House debate. The House passed their bill with language which makes it illegal for the public plan to cover elective abortions, and for individuals receiving subsidies to purchase plans which cover elective abortions. The Senate bill, on the other hand, allows individuals who receive federal subsidies to purchase plans which cover abortions, but insurance companies would have to segregate federal funds to ensure that only the policyholder’s money is used to pay for the procedure. It is expected that early this week Senator Bill Nelson (D-NE) will introduce an amendment to make the language in the Senate bill more like that in the House bill. Some House Democrats have said that while they voted for the amendment once, they will not do it again, and their votes could be lost if the language remains as restrictive as it now is. Speaker Pelosi has stated, however, that health reform will not fail on account of the abortion debate. 

Immigration: The House bill allows undocumented immigrants to buy insurance in the Exchange; however they would have to use their own money to do so. The Senate bill, on the other hand, restricts access to the Exchange completely. Some Congressional Democrats, in particular the Hispanic Caucus, are disappointed with the language regarding immigrants, particularly in the Senate bill. 

Homestretch 6: Paying for it and the impact on the deficit

Co-Authored by Carrie Gilbert

[This is the sixth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

Last week the Senate released their combined bill which has been sent to the floor for debate. Many of the basic principles of the Senate and House bills are similar; however there are still major differences, including the method for paying for reform. For our final installment in our homestretch series we will compare these two proposals on how they will pay for reform and their impact on the budget deficit. 

Covering millions of previously uninsured Americans obviously has an upfront cost; however given the current state of our broken health insurance system, the proposed reforms will actually reduce the deficit. Both bills have received deficit neutral scores from the Congressional Budget Office (CBO), despite having different methods for reducing the budget.

The House bill, called the Affordable Health Care for America Act or HR 3962, proposes a combination of mandate penalties, reforms to Medicare and Medicaid and a tax on wealthy individuals to raise revenue to pay for reform.   The House bill is projected to save $426 billion over ten years by reforming Medicare and Medicaid. The federal government currently pays about $1,100 more per person to cover the same beneficiaries through Medicare Advantage, private Medicare plans, than through traditional Medicare. HR 3962 will reduce overpayments to Medicare Advantage plans.   Overall, the bill attempts to reduce fraud and waste in both the Medicaid and Medicare systems. 

In addition to extensive reforms to Medicare and Medicaid, H.R. 3962 includes a 5.4% surcharge on couples with incomes over $1 million, which would affect less than 1% of taxpayers, and amount to a moderate tax burden for these households. Some people fear that this new tax would harm small businesses that file taxes as individuals. However, the Tax Policy Center calculates that just 1.6% of taxpayers in this group would face the surcharge, and that many in this group are actually wealthy investors and not true small business owners. Ultimately, only 0.6% of taxpayers who derive more than half of their income from business sources would face this surcharge

The newly released Senate bill, The Patient Protection and Affordable Care Act or HR 3590, may slow the growth of health care costs over time by, for instance, imposing an excise tax on high-cost health insurance plans, decreasing overpayments that private insurers receive through Medicare Advantage, and reducing the cost of prescription drugs in Medicaid.   The new tax on high-priced health insurance policies (or Cadillac plans with yearly premiums of $8,500 for individuals and $23,000 for families) applies to self-insured plans and plans sold in the group market, and not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). HR 3590 would also increase the Medicare payroll tax from 1.45 to 1.95% on individuals earning $200,000 per year and couples earning $250,000 per year. Both of these new taxes will yield considerable revenue.   

HR 3590 imposes many fees to pay for the bill, including on pharmaceutical manufacturers, medical device manufacturers and the health insurance sector. Many of these fees do not apply to companies whose sales are below $5 million and the fees are allocated across the industry based on market share. Moreover, HR 3590 mandates that non-profit Blue Cross Blue Shield (BCBS) organizations have a medical loss ratio of 85% or higher to receive the special tax benefits provided to them. This means that they have to spend at least 85% of profits on their beneficiaries’ medical care. 

Ultimately, the House bill will reduce deficits by $109 billion over the next ten years. The Senate bill will reduce deficits by $130 billion over the next ten years, and by about one-quarter of one percent of GDP in the decade thereafter, which amounts to about $55 billion in 2020 and several hundred billion dollars over the 2020-2029 period. The bill finances its expanded health coverage by redirecting existing spending and tax subsidies from less productive uses elsewhere in the health sector. Therefore, the Center for Budget and Policy Priorities’  and CBO report that the Senate Bill extends health coverage to 31 million more Americans, while keeping the total federal cost for all health care spending and tax subsidies in the decade after 2019 essentially where it would be under current law. Additionally, a group of economists sent a letter to President Obama last month advocating for many of the reforms in the Senate bill as a way to stem the costs of the health care industry. 

This does not mean that the Senate bill is the better bill. There are provisions in both bills which are worth preserving the in the final bill. Over the next several weeks, as the Senate works to pass their version of the bill and then the two bills go to conference committee, there will be several opportunities for improving the bills and producing a superior final bill. Both bills contain key provisions for slowing the growth of health care costs and paying to insure more Americans. As always, the ultimate goal is affordable quality health insurance for all Americans.

Homestretch 5: Health insurance market reform

[This is the fifth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

 A recent Congressional Report initiated by Senator Jay Rockefeller found that while the insurance industry has long claimed that 87% of premium dollars go to pay for medical care, in fact, the average is 82% for the top six insurers. This five point difference equates to billions of dollars not being spent on hardworking families’ medical care. And these findings underscore the need for meaningful reform of the insurance industry. The three bills in Congress (H.R. 3962, Senate HELP and Senate Finance) include major reform to the private health insurance companies. These reforms will vastly change the way in which companies decide who qualifies for insurance and who does not. In a historic vote this past weekend, the House passed H.R. 3962, including many changes to the health insurance market.   Senator majority leader Harry Reid (D-NV) has combined the two Senate proposals and sent a couple of different versions to the Congressional Budget Office (CBO) for consideration. He is waiting on the report from the CBO before releasing a final Senate bill, which will be the version sent to the Senate floor for debate. Until the final Senate bill is released we will offer comparison and analysis on the two Senate bills (HELP and Finance).

The three bills provide for significant reform to the health insurance industry, which would greatly expand access to health insurance. As discussed in Homestretch part 4, all three proposals create a health insurance Exchange, which would regulate the individual and small group insurance plans available in the Exchange.   Benefit plans in the Exchange would be standardized. Plans would vary on the level of cost-sharing of co-pays and deductibles. Private insurance companies participating in the Exchange could not deny coverage based on pre-existing conditions. Additionally, premiums could not vary because of gender or pre-existing conditions. 

The only characteristics that are permitted to factor into premiums are age, tobacco use, family composition and geography. The three proposals set ratios for premium variation based on age and tobacco use. The Senate Finance bill limits age variation to a 4 to 1 ratio and tobacco use to a 1.5 to 1 ratio. For example, a company can only charge its oldest customers four times that of its youngest customers.   The Senate HELP bill limits age variation to a 2 to 1 ratio and tobacco use to a 1.5 to 1 ratio. H.R. 3962 limits age variation to a 2 to 1 ratio, but does not allow insurance companies to vary premiums based on tobacco use.   The insurance companies indicated they will fight the limiting ratios, because they argue that they will raise costs to younger and healthier individuals

The Exchange contained in the three bills would also require that insurance companies issue insurance to a consumer regardless of their health status. Additionally, an insurance company could not sell a consumer a plan that explicitly does not cover their pre-existing medical condition. Companies would have to guarantee that they will renew an individual’s policy each year.   Additionally, each proposal sets limits for annual out-of-pocket costs to policy holders.   Insurance companies would not be able to limit the amount of claims a policy holder makes either annually or in a lifetime. In other words, an insurance company could not suddenly tell a policyholder that they will no longer cover that policyholder’s claims. 

Senator Rockefeller faced significant difficulties in getting the insurance companies to voluntarily divulge what portion of the premiums goes to medical care versus profit, administration, etc. This would change under all proposals. Both of the Senate proposals require insurance companies to report how much of the revenue from premiums goes toward paying for medical services. The House proposal requires that the Secretary of Health and Human Services sets a minimum percentage of revenue that must pay for medical services.   If the companies do not meet this minimum then they must provide rebates to their customers. 

The aforementioned reform is quite similar among the three proposals, but to whom they would apply differs. Senate Finance would apply these changes to the individual and small group market (businesses with fewer than 50 employees). Senate HELP and the House bill would apply reforms to all private insurance markets, including businesses of all sizes. And the Senate Finance bill would, however, require that all new policies, both inside and outside of the Exchange, meet the standards of one of four benefit levels set forth in the proposal. 

These reforms will offer greater consumer protections and decrease insurance companies’ discriminatory practices. Some of these measures may face fierce debate an opposition in the coming weeks as the Senate sends a final bill to the floor for debate and final bill is composed for President Obama’s consideration.   These reforms will mean containing costs, creating choices, upgrading care and ultimately covering all

Homestretch 4 - The Exchange, public option and CO-OPs

[This is the fourth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

55% of Americans who favor a government insurance plan and health reform advocates are rejoicing over yesterday’s news from Senate Majority Leader Harry Reid (D, NV). Yesterday, Reid stated that the bill he intends to send to the Senate floor next month will include a "public option" – a federal government created insurance plan offered to Americans who do not get medical coverage through their employers -- with the condition that states could opt out of the program. Reid’s move is being hailed as a bold and vital move by health reform supporters throughout the country and a major milestone for health insurance reform as it moves forward in both houses. This is not to say that Reid’s model of the public option is a definite or that amendments will not attempt to eliminate or alter the public option in the Senate bill.  

Majority Leader Reid and House Speaker Nancy Pelosi (D-San Francisco) are advancing separate healthcare bills, each containing different provisions for the public option. House Democrats may have the support to pass a bill that would create a nationwide government plan without any option for states not to offer the plan; however Speaker Pelosi has stated that the opt-out alternative could be included in a reconciled bill. Both the Senate bill and the House bill will need to be reconciled later this year before final legislation could be sent to the White House for President Obama's signature.

All three of the current versions of the bill in Congress (Senate HELP, Senate Finance and the House Tri-committee bill--H.R. 3200) include a health insurance Exchange, which would serve as the marketplace for qualified plans that follow new insurance provisions. The Exchange would create a competitive marketplace that offered choices of plans, which would have to follow a common set of regulations. The Exchange has several advantages including choice, price competition and portability if you choose to change jobs. In all three proposals, the Exchange would be a place where individuals without access to employer-sponsored coverage could purchase insurance. Small employers could also purchase plans for their employees through the Exchange. In both the Senate Finance bill and H.R. 3200, eligibility for employers would be phased in starting with smaller employers. 

Conservative Democrats and some Republicans supported a Consumer Operated and Oriented Plan (CO-OPs) program. The Senate Finance bill included a CO-OP program, which would encourage the creation of non-profit health insurance companies run by the members. Members would be required to use the profits to lower premiums, improve benefits or improve the quality of the care consumers receive. In order to be included in the Exchange, CO-OPs would have to follow the same regulations as the private plans. Many health reform advocates maintain that CO-OPs have failed in the past and will fail this time too. Additionally, the Congressional Budget Office does not find significant savings in the CO-OP model, whereas it does with the public option planSenate Finance Committee Chairman Baucus has said that he chose to include the CO-OP over the public option in the Finance bill because he felt it would garner greater support, but he is still open to the public option

Despite the disagreement among policy makers regarding the potential success of CO-OPs, much of the debate has now turned to the
public option.  With Reid’s announcement, the question seems to have become not if there will be a public option, but what form the public option will take. Reid’s opt-out model allows states to withdraw from the public plan in 2014, a year after the public plan goes into effect. Senator Olympia Snowe (R-ME), the only Republican on the Senate Finance committee to vote for the Finance committee version of the bill, supports the “trigger” model of the public option. The trigger would only put a public option into effect in states that do not meet standards of affordability. Snowe stated yesterday that she was disappointed with Reid’s decision to go with the opt-out model over the trigger model.   

The Insurance industry has released a report which argues that the public option will raise costs to those people with private insurance plans, in order to offset the reduced cost of the public plan. In fact, public health insurance actually costs less than private insurance. However, the public option as proposed by Reid would be offered through the Exchange, which would only be available to those individuals without employer sponsored insurance. And only a fraction of people would choose the public option, according to the Congressional Budget Office. Moreover, the Exchange would serve as a regulator of benefit plans, and Reid’s proposal also requires the government plan to negotiate provider rates, instead of relying on Medicare rates, which are often lower than private reimbursement rates. 

Congress must produce a bill that creates competition in the health insurance market, in order to successfully lower costs and provide quality choices to consumers. A majority of Americans, policy makers and advocates see the public option as the best way of doing this. H.R. 3200 and Reid’s proposal can achieve this but we cannot lose focus on the overall goal of passing health insurance reform this year. If an opt-out or trigger can create competition while lowering costs and providing quality care, then they should be considered to keep the momentum going. The ultimate goal is quality affordable health insurance for all Americans.

Homestretch Part 3: Affordability Measures

[This is the third in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

Health insurance reform is crucial for the success and prosperity of American families. However it will only succeed if there are affordability measures in place for families, individuals and small business owners.   Congress now has three bills that have passed out of committee and must be reconciled to create the final bill. The key will be to take the best elements of each bill to ensure Americans adequate and affordable health insurance.   In all three bills, almost all individuals are required to carry health insurance. The goal of the individual mandate is to encourage the use of primary care providers and preventive care, while reducing the use of emergency rooms for non-emergency care. This could prove problematic for individuals who do not qualify for subsidies but cannot find an affordable plan, and for low-income individuals. However, with adequate subsidies and affordability measures, Congress can ensure that health insurance is affordable for everyone.

Individual and Employer mandate
All three bills require that almost all individuals have health insurance and those who do not will be required to pay a penalty. However, each of the bills has a different method of penalizing certain individuals. Both Senate bills (Health, Education, Labor and Pensions (HELP) and Finance) impose a tax penalty of $750 per individual per year and per adult per year, respectively. The Senate HELP bill exempts people whose incomes are below 150% of the Federal Poverty Level (FPL), people without coverage for fewer than 90 days, members of Indian tribes, and residents of states without an Exchange in place. The Senate Finance Committee exempts certain individuals as well, including, individuals with incomes below 133% FPL, individuals with religious objections, individuals who can prove financial hardship, American Indians, and if the lowest cost plan exceeds 8% of an individual’s income. 

The House Tri-Committee bill (H.R. 3200) imposes a penalty of 2.5% of income up to the cost of the Exchange’s national average premium. The House bill exempts dependents, individuals with religious objections or financial hardship. 

The three bills also include employer mandates which require employers to contribute to their employees’ cost of insurance. An employer mandate is necessary to ensure that costs do not get passed to employees and that employers do not drop employee insurance with the adoption of the Exchange. However, these mandates must be carefully designed as not to impose higher costs on small business owners or discourage the hiring of low-income individuals.

The Senate Finance bill would impose a tax on employers with more than 50 employees that do not offer coverage. They would be taxed for each employee that receives a tax credit through the Exchange. This provision may discourage employers to hire low-income individuals who would be more likely to receive credits in the Exchange. Additionally, the Finance bill would require an employer with more than 200 employees to automatically enroll employees into the employer’s health insurance plan. Employees may choose to receive coverage from another source. 

The Senate HELP bill requires employers to offer health insurance and pay 60% of the premium cost. Under this bill, employers will be subject to a $750 penalty for each full-time employee and $375 for each part-time employee who is uninsured and not offered insurance. The provision exempts employers with 25 or fewer employees. 

H.R. 3200 requires employers to offer coverage and pay at least 72.5% of premium for an individual and 65% of premium for a family. The penalty for not following this requirement is to pay 8% of the employer’s total payroll into the Health Insurance Exchange Trust Fund. Certain employers would receive exemptions from the penalty. For small employers with a payroll of less than $750,000 a year, the penalty would be imposed on a sliding scale instead of the flat assessment rate of 8%. 

The key to successfully mandating health insurance without creating a financial imposition on low and middle income families, is implementing adequate
subsidies for people to buy insurance through the Exchange. The goal of the subsidies is to limit the premium cost to individuals based on a sliding scale. The House bill does the best job of limiting the percentage of an individual’s income that goes toward premiums. However, the Senate HELP bill provides the best subsidies or individuals below 150% FPL. The Senate Finance bill has improved their subsidies substantially; however more could still be done.   It is also important to keep in mind that Medicaid eligible individuals, non-citizens and non-Legal Permanent Residents will not qualify for the subsidies, with the exception of some Medicaid eligible individuals under the Senate Finance bill. Here is a table of the subsidies for income tiers under each bill:


Senate Finance Committee

Senate HELP Committee

H.R. 3200**

































 *The HELP bill raises Medicaid eligibility to 150% FPL and excludes Medicaid recipients from receiving subsidies. Both the Senate Finance and H.R. 3200 bills raise the eligibility to 133% FPL. However, under the Senate Finance individuals can choose to enroll in the Exchange and receive subsidies. 

**H.R. 3200 provides for subsidies on a sliding scale within an income bracket and designates an initial subsidy level and a maximum subsidy level for each bracket (i.e. individuals between 133%-150% FPL will receive subsidies that limit their premiums somewhere between 1.5% and 3% of their income.)

Out-of-pocket caps
Under the current health insurance system, a large number of Americans—including those who have health insurance-- pay for many services, treatments and tests out of their pockets, particularly for preventive care. The three health insurance reform bills would set a cap for what individuals and families could pay out-of-pocket in a year. The out-of-pocket caps must be substantial enough that individuals do not face underinsurance if faced with an illness or accident. That is, the caps should be low enough that insurance kicks in before families face financial insecurity and are unable to pay for necessary care. The below
chart depicts the proposed caps included in the three bills as compared to the standards that would protect Americans from underinsurance.  


Senate Finance Committee

Senate HELP Committee

H.R. 3200**

Standard that would protect Americans from Underinsurance




































*The Senate HELP bill expands Medicaid to 150% FPL, so individuals in this income bracket would qualify for Medicaid

**As estimated by House Ways and Means as of July 31, 2009.

There is still much work to be done as the three health insurance reform bills come together, in order to ensure that comprehensive health insurance is truly accessible and affordable for Americans. The groundwork for such a solution is here. As Congress negotiates to create one final bill, they must keep in mind that the mandate and subsidies must complement each other to ensure quality, affordable health insurance choices because this is what Americans need and this is what they demand

Health care advocates throughout the country are urging Americans to call their Senators and ask them to support the affordability provisions in the Senate HELP bill. If you aren’t sure who your Senators are you can find out on Families USA’s website at

Homestretch 1: Children's Coverage -- Do No Harm!

[This is the first in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

In a large sense, comprehensive health care reform is a major winner for all children, apart from the provisions that specifically apply to children.  Kids, after all, live in families, and those families live in communities.  If parents are insured and healthy, it helps kids: statistically, if parents are insured then children are enrolled, and if parents go to the doctor, then children go to the doctor.  It also helps children if there is less financial stress in families, a prime factor associated with family violence and disintegration.  And it helps children if they live in communities where people have access to health care and treatment.  It helps children if the overall health system costs less and concentrates more resources on the quality of care according to the most effective treatment methods.  It helps children if they can get insurance as dependents of their parents, regardless of where they live -- currently, many children are in a senseless lottery where their health insurance status depends on how states or employers treat their parents.  And it helps kids to make them insured on their 19th birthday, as if they continue to be important at that age.  Health reform is what awaits them on that birthday. 

But having said that, as we fight for quality affordable health insurance for every American, it is essential to ensure that the gains made to insure millions of children -- including those made earlier this year by this Administration and this Congress -- are not thoughtlessly reversed.  The recently released census data show that the rate of uninsured children is at an all time low, due largely to successful state health insurance programs.  But while the figures are encouraging for uninsured children, the numbers are distressing for their parents and other uninsured adults. The President is right in his approach to this complex national problem -- one of the cornerstones to getting it right is to affirm and even expand what works.  Above all, that should apply to children.  As Congress works through the homestretch, it should include features that guarantee that children's coverage under reform is at least equal to coverage under a good current state SCHIP program, and that we achieve universal coverage for children.  The Administration should make it clear that this is its position, too.

All of the proposals currently alive in the House and Senate essentially phase out the State Children's Health Insurance Program (SCHIP).  They move kids whose parents' income is below 133% of the federal poverty level (FPL) into Medicaid, and those whose parents' income is between 133% and 250% of the FPL into the health insurance Exchange -- which means those families will be purchasing insurance from an array of private insurance choices (and under all versions other than Baucus', the Exchange will also include the option to purchase a public health insurance plan).  The insurance available to cover children under the Exchange could be more costly to many families in the 133% to 250% FPL income range than their current coverage under Medicaid or SCHIP.  This cost increase could affect premiums as well as out of pocket co-pays.  In addition, the scope and quality of the coverage for children could be diluted under Exchange plans as compared to Medicaid or SCHIP.  There are a number of other possible losses for certain children in the Exchange as compared to the current situation in many states.

Several amendments have been added to the House bill that would protect children moving from Medicaid or SCHIP into the Exchange and strengthen SCHIP for those children who remain in the state programs.  An amendment introduced by Representative Diana DeGette (D, CO), would require the Secretary of Health and Human Services to submit a report comparing the coverage a child receives under an average state child health plan to that they would receive under the Exchange.  No child would be permitted to move from a state program into the Exchange until the Secretary has certified that children will receive comparable care under the Exchange to that they were receiving in the state programs.  If the Secretary finds that coverage is worse under the Exchange than under the state programs, changes would need to be made before children could move into the Exchange.
Also, the Scott Amendment, named for Rep. Robert C. Scott (D, VA), would require plans in the Exchange to include the full range of early and periodic screening, diagnosis and treatment services provided for under Medicaid through the age of 21.  And three amendments by Rep. Bobby Rush (D, IL) would have ensured that children receive identical coverage through the Exchange that they receive under Medicaid, that cost-sharing and affordability measures under Medicaid would follow children into the Exchange and reduce barriers to enrollment for eligible children. 

In the Senate Finance Committee, amendments to the Baucus mark have been filed that mirror those in the House bill regarding protections for children.  In addition, an amendment from Sen. Rockefeller (D, W.Va) would continue the SCHIP program until at least 2019. 

Those are the battle lines in the coming weeks.  Children will benefit greatly from health reform in general.  On the specifics, let's make sure that we do not roll back the recent progress on coverage and cost and that we guarantee affordable universal coverage and access to care for children.

Down the Homestretch for Health Reform

August was a long month of rowdy town hall meetings and outrageous rumors and attacks aimed at killing comprehensive health reform. But now it’s September. With his powerful speech to a joint session of Congress and vigorous personal advocacy, the President has turned the momentum and refocused the effort to pass a good bill. Polling shows strong, consistent public support. At long last the final one of the five congressional committees with jurisdiction, the Senate Finance Committee, has begun to mark up a bill. Senator Max Baucus of Montana, the committee's chair, released his version of a bill last week (known as "the chairman's mark" and normally accorded much deference by committee members of his own party). The Finance Committee will consider many amendments, and then pass a bill. All the other committees did their work before August.

The process is entering its homestretch. The Senate Finance Committee will complete its work in the next week or two, possibly improving on Baucus' suggested version. Then the Senate will need to reconcile that bill with the one passed by the health committee (called the HELP Committee, which was Sen. Kennedy's committee, now chaired by Sen. Harkin) and then pass it on the floor. The three House committees with jurisdiction have already reconciled their versions into one bill. It needs a floor vote. After both chambers pass bills, there will be a conference to reconcile the two bills, and then the conferenced version will go back to both floors for passage, at which point it will go to the President for signature.

In general, the Baucus proposal provides the "conservative" bookend of the coming debate, and the House and Senate HELP bills, which are similar, provide the other bookend. The Finance Committee, Senate reconciliation, and Senate-House conference are all points at which the whole proposal can be move one direction or another on the many issues within the package. To help understand what is being negotiated and decided, we will publish six blogs that summarize the major categories of issues and where the lines are being drawn on them. We will cover:

·         Children's coverage

·         Low-income coverage under Medicaid

·         Affordability, subsidies and the individual mandate

·         The Exchange and the public option

·         Health insurance reforms and health care cost controls

·         Paying for it and the impact on the deficit

The first one -- "Children's Coverage -- Do no Harm!" is also published today. If these blogs move you to reach out to your delegation in both houses of Congress, you can find the contact information HERE.

HMO-style Managed Care is Not the Way to Balance the Budget

As Illinois debates how to fix its disastrous budget, several politicians and interest groups are claiming that the State can save a billion dollars just by moving Medicaid enrollees to HMO-style capitated managed care.  This is recited like a liturgy in church, but rarely accompanied by any meaningful details.  There's a good reason for that -- the people chanting this verse have not learned from the failed experiments of the past, and thus, wisely, they refrain from trying to give details.  It's a political argument, not a real policy idea and not good reform.  For that reason, the debate requires some facts. 

It is first necessary to understand what Illinois is already doing.  Our existing model of primary care case management-disease management (PCCM-DM) for the majority of Medicaid enrollees has been showing impressive results.  Illinois already links 1.7 million of the 2.4 million Medicaid recipients with primary-care doctors' offices that are paid monthly fees to manage the care for each enrollee. The program encourages outreach and preventive health-care services for patients such as screenings, tests, shots and medicines, which helps catch medical problems early and avoids costly emergency room use down the road.  Last year efficient implementation of this care management program saved the state more than $100 million. 

Illinois has an additional program that helps 220,000 Illinoisans with chronic illnesses better manage and coordinate their care and reduce the incidence of costly acute medical crises.  It saved the state an additional $104 million in 2008.  

So, with the existing PCCM-DM system providing good care while capturing significant savings, the advocates for capitated managed care would seem hard pressed to explain what additional savings or care improvements their system might obtain.  They avoid trying to answer that question, and instead fall back on the panicky assertion that Medicaid costs "are not sustainable".  But that claim not only avoids the issues about what we should actually do, it is also misleading.  When you take a look at the larger picture you see that Medicaid growth is not in a vacuum; the entire health care system overall is what is unsustainable.  For instance, in 2007, the U.S. spent $2.2 trillion on health care, an average of $7,421 per person.   And since 1970, health care spending has grown at an average annual rate of 9.6 percent or 2.4 percentage points faster than nominal GDP

Compared to those numbers, Illinois' Medicaid program is actually doing quite well.  There has been an average annual reduction of 3 percent in the program's cost per person over the last four years.    Medicaid billings in Illinois grew slower than the national average at just 4.2 percent from 2008 to 2009 and just 4.4 percent over the last four years.   Medical costs are expected to grow by 7.0 percent in FY 2010-below the projected national average of 7.7 percent. Illinois ranks 42nd among states in per Medicaid beneficiary expenditures (Illinois is at $4,129 per beneficiary; the national average is $4,575).   This is much lower than the three states that have recently implemented broad-based capitated managed care programs of the type being touted for Illinois. In fact, Illinois has worked to minimize the cost of medical care to taxpayers and maximize federal dollars, resulting in needing just $.39 in state general taxes for every $1.00 spent on Illinois Medicaid programs.

So, the current Medicaid system in Illinois already captures managed care savings, already spends less per covered person than most other states, including those with capitated managed care programs, and already captures substantial federal funds for the lion's share of the costs.  What additional benefit would be derived from switching to capitated managed care?  

HMO-style managed care pays a doctor a flat rate each month for each patient, regardless of how much care is provided (that is called "capitation").  The health care provider assumes all of the risk for all of the health care provided.  Historically, and logically, this model of care has resulted in difficult problems for patients to access needed care, preventive care, and specialty care.  It is a bottom line-focused business that has to include a margin to pay its senior executives and produce profits for shareholders.  The model itself raises concerns about its ability to produce savings to the state below its already-low per person Medicaid expenditures, plus profits, without compromising care.

To be clear, we are interested in any and all efficiencies in Medicaid, including those that might flow from a capitated managed care model, but they must be done in a way that realizes savings without compromising care and patient outcomes. 

Adding to the concerns evident from the model itself, there have been misadventures around the country.   California experimented with requiring its Medicaid population to move to capitated managed care in an effort to control costs.  In the end, it was found that despite a dramatic increase in Medicaid capitated managed care enrollment there was neither a significant reduction in spending nor improved health outcomes, and a study concluded that this policy actually, "reduced the efficiency of the Medicaid program in California...In fact, Medicaid spending appeared to increase by almost 20 percent following the shift to managed care and persisted long after the mandates first took effect."   

Nor can Illinois ignore its own recent history: The Illinois case of Memisovski v.Maram revealed that well child care at Medicaid HMOs in Cook County was well below that provided in fee for service, and it revealed that the HMOs could not account for the amount of care being provided. Further, Amerigroup, one of the managed care organizations with which Illinois once contracted, defrauded Medicaid by enrolling recipients in a discriminatory way, systematically avoiding pregnant women and people with disabilities.  This history places a burden of proof on the proponents of capitated managed care to show that it will not endanger patients in a failed attempt to save money.  The baldly political invocation of the capitated managed care idea in the current state budget debates does not meet this burden - it doesn't even try.

Perhaps the state can devise and implement an integrated, well-coordinated capitated managed care program that resolves these concerns.  The Quinn Administration is planning a pilot program, and we hope it is done with this kind of care.  But if it is meant magically to produce $1 billion dollars in quick savings, then it will fail.  The only way to get a billion dollars, if you're not just cutting care, is to reform the whole healthcare system.  They're doing that in Washington.

Real People Demand Health Reform

Why Health Reform Will Happen: Real People Explain Why They're Fed Up

This week, the Shriver Center and United Power for Action and Justice have collected stories that illustrate the damaging effects of the health care crisis on small business owners. Small business owners struggle to provide affordable insurance for themselves and their employees. Strong small businesses are key to the United States' economic health. Encouraging small business growth and strength means reforming the health care system to ensure affordable, quality care choices. Below, three individuals share their stories: A small business owner faces staggering premiums. A self-employed consultant struggles to find a policy to cover a child's eye condition. And a non-profit organization CEO grapples with trying to adequately cover his employees in an uncontrollable health insurance system.

Click here to see real people tell their stories.

Please share this widely with your friends, family members and colleagues

To share your own story click here.

Call your legislators today at 1-800-828-0498, and let them know that reform can't wait! Don't know who your legislators are? Click here.

Health Care Reform: A Lifeline for Small Businesses

“The high cost of health care is killing us.” So testified John Arensmeyer, the founder and CEO of the Small Business Majority, before a congressional committee regarding its health care reform draft proposal. The Small Business Majority (SBM) is a nonprofit, nonpartisan organization representing 27 million Americans who are self-employed or business owners of less than 100 employees. SBM is supporting comprehensive health care reform efforts that control the skyrocketing cost of health care to make coverage affordable and improve the competitiveness of small businesses.   A significant portion of the SBM membership is uninsured: of the 45 million uninsured Americans in 2007, almost 23 million were small business owners, employees or their dependents.

At the hearing, Arensmeyer testified that the crushing cost of health care was reported to be the biggest overall problem by 78% of small businesses responding to a Robert Wood Johnson Foundation survey-outranking even fuel and energy costs and the weak economy. A telephone survey of small business owners in 16 states furtherrevealed that 72% are struggling to afford health insurance and 69% say reform is necessary to save the economy. The results are not partisan; 68% of respondents identified as Republican or independent. 

“Health care reform is not an ideological issue—it’s an economic one,” said Arensmayer. Small businesses are the economic engine of our country; when they struggle, our entire economy struggles. Health insurance companies charge the self-employed and small businesses much higher rates than larger companies. Consequently, small businesses are forced to either drop coverage for their employees, charge employees a higher share of the premiums or dramatically scale back health care coverage. 

“It’s common to hear about double-digit premium increases each year, eating into profits and sometimes forcing staff reductions,” Arensmeyer testified. He called for:

  • guaranteed availability of coverage
  •  no exclusions for preexisting health conditions
  •  health insurance rating rules that prohibit adjustments for health status
  •  a cap on premiums and out-of-pocket spending
  •  marketplace transparency
  •  affordability credits to ensure that small business employees can actually participate without financial hardship

Health care costs are growing faster than the overall economy and without comprehensive health care reform, small businesses will pay nearly $2.4 trillion dollars over the next 10 years in healthcare costs for their workers, according to MIT economist Dr. Jonathan Gruber. Further, without reform, 178,000 small business jobs are estimated to be lost by 2018 as a result of healthcare costs.

Comprehensive health care reform is essential for the health of American small business, which is essential for the American economy and is a cornerstone of the American notion of opportunity and growth. We all need a health care system that controls costs, restores a sense of control and choice, and gets out of the way of individual enterprise.