The Week in Health Care Reform

The Week in Health Reform—Federal Legislative Overview

The Congressional Budget Office (CBO) released its long-awaited cost analysis of Senate Majority Leader Harry Reid’s (D-NV) health care reform legislation on November 18.  The analysis titled “The Patient Protection and Affordable Care Act” (H.R. 3590) will cost $848 billion over ten years, and will cut the federal deficit by $127 billion.  The CBO estimated that the bill would cover 94 percent of Americans and reduce the number of uninsured by 31 million people.

Later in the week on November 21, the Senate voted on a “motion to proceed” to debate.  Senate Majority Leader Harry Reid (D-NV) received the 60 votes needed to proceed to a full debate on the bill, but it is unlikely that he has corralled the 60 votes Democrats will need to achieve final passage of the reform bill.

The Senate legislation includes a public plan with an “opt-out” for states and provider reimbursement rates not tied to Medicare, although there would be limits imposed on reimbursement fees relative to those negotiated by other health plans in the Exchange.  The legislation also includes the creation of health care cooperatives and a state-based health insurance exchange known as “American Health Benefit Exchanges”.

Unlike the House bill (H.R. 3962), there is no surtax on the wealthy, but there is an extra Medicare payroll tax of 1.95 percent on couples who earn more than $250,000 annually.  Excise taxes on high cost employer-sponsored health coverage, new fees on health insurers, 3 to 1 age rating bands and an individual mandate to purchase coverage are also included.  More controversial parts of the bill show that illegal immigrants will not be able to receive health care benefits through the Exchange under this proposal, and taxpayer funding of abortion is prohibited.  It remains to be seen if the abortion language will satisfy the pro-life groups.  It is still likely that once official debate begins on the legislation, immigration and abortion will prove to be hot-button issues, although perhaps not as strongly as they were in the House.  Additional details of the bill and its implementation timeline are in the next section.

The House has been quiet since it passed its health care reform bill in early November. The amendment by Rep. Bart Stupak (D-MI), which stated that insurers selling plans through the Exchange could not offer policies covering elective abortion procedures to people who receive federal subsidies for premiums, continues to cause divisions in the Democratic Party.
Rep. Diana DeGette (D-CO) has assembled a group of 41 progressive Democrats in the House who will not vote for any final health care reform legislation if the Stupak amendment remains in the bill.  Senator Barbara Boxer (D-CA) is vowing to keep abortion-restricting language out of the final Senate bill. In the current merged Senate bill, health plans could choose whether to cover abortion, but subsidy funds would not need to be kept separate from the private premiums paid by individuals.  In each state there would have to be at least one plan that covers abortions and one that does not.

Overview: Key Issues and Implementation Timeline in “The Patient Protection and Affordable Care Act”

The Senate health care reform bill, H.R. 3590, still leaves 21 million U.S. residents uninsured and delays the implementation of insurance market reforms and other provisions until 2014 – one year longer than the House bill.  Specific provisions of the bill are below.


Immediate Access to Insurance for Uninsured Individuals with a Pre-Existing Condition: Provides eligible individuals access to coverage that does not impose any coverage exclusions for pre-existing health conditions. This provision would end when Exchanges are operational.
Coverage of Preventive Health Services: All group health plans and plans in the individual market must provide first dollar coverage for preventive services. This takes effect for plan years beginning on or after the date that is six months after enactment.

Extension of Dependent Coverage: Requires any group health plan or plan in the individual market that provides dependent coverage for children to continue to make that coverage available until the child turns 26 years of age. This takes effect for plan years beginning on or after the date that is six months after enactment.

Health Insurance Provider Fee: Imposes an annual non-deductible flat fee of $6.7 billion on the health insurance sector allocated across the industry according to market share. The fee does not apply to companies whose net premiums written are $25 million or less and whose fees from administration of employer self-insured plans are $5 million or less.


Small Business Tax Credit: Initiates the first phase of the small business tax credit for qualified small employers for contributions to purchase health insurance for its employees. The credit is up to 35 percent of the small business employer’s contribution to provide health insurance for its employees. There is also up to a 24 percent credit for small nonprofit organizations.

High Cost Insurance Excise Tax: Imposes an excise tax of 40 percent on insurance companies and plan administrators for any health insurance plan that is above the threshold of $8,500 for singles and $23,000 for family plans. The tax would apply to the amount of the premium in excess of the threshold. The threshold would be indexed at CPI-U plus one percentage point, and a transition rule would increase the threshold for the 17 highest cost states for the first three years. An additional threshold amount of $1,350 for singles and $3,000 for families is available for retired individuals over the age of 55 and for plans that cover employees engaged in high risk professions.

Health Insurance Reforms: Implements strong health insurance reforms that prohibit insurance companies from engaging in discriminatory practices that enable them to refuse to sell or renew policies due to an individual’s health status. Insurers would no longer be able to exclude coverage for treatments based on pre-existing health conditions. It also limits the ability of insurance companies to charge higher rates due to heath status, gender, or other factors. Premiums can vary only on age (no more than 3:1), geography, and family size.

Health Insurance Exchange: Opens health insurance Exchanges in each state to the individual and small group markets. This new venue will enable people to comparison shop for standardized health packages. It facilitates enrollment and administers tax credits so that people of all incomes can obtain affordable coverage.

Public Health Insurance Option: Creates a new public health insurance plan that competes on a level playing field against private health plans.  It includes a state opt-out which to allow states to decide whether or not to participate.

Individual Responsibility: Requires most individuals to obtain acceptable health insurance coverage or pay a penalty of $95 for 2014, $350 for 2015, $750 for 2016 and indexed thereafter. Penalties for families are capped. If affordable coverage is not available to an individual, they will not be penalized.

Employer Responsibility: Requires employers with 50 or more employees who do not offer coverage to their employees to pay $750 annually for each full-time employee as long as one of their employees receives a tax credit. Precludes waiting periods more than 90 days and requires employers to pay $400-600 annually for each full-time employee in a waiting period between 30-90 days. Requires employers who offer coverage but whose employees receive tax credits to pay for each worker receiving a tax credit up to a cap of $400 per full-time employee.

Small Business Tax Credit: Continues the second phase of the small business tax credit for qualified small employers.

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