This is part 1 of a yet-to-be-determined length in a series on the healthcare reform debate in the USA.
Since healthcare is such a big issue these days and there seems to be a lot of discussion as to what the ‘socialist’ suggestion by the Democrats will and will not do, let’s look at the actual bill in question. Feel free to follow along and/or verify the information I’m reporting here; I have tried to merely summarise the bill without much commentary. It’s really long, so I’ll be highlighting sections rather than try a line-by-line analysis. A few things are clear to me after reading through the sections on the healthcare industry reform (Division ‘A’ of the bill).
- This is not setting up a single-payer system (e.g. the ‘socialised healthcare’ of the UK or Canada), but rather a government-run insurance ‘company’. In other words, it would be better to see this as the government setting up public schools while not removing private schools rather than the government setting up and consolidating militias into government-run militaries.
- The second aim of this bill is to introduce minimum standards for healthcare. Keeping with my above example, it is similar to the government requiring particular subjects to be taught in school for a particular amount of time (e.g. 3 years of mathematics). These standards do not appear very strict; in fact healthcare plans that I have had previously already meet these requirements.
- In order to carry out the above two aims ‘universally’, there are additional regulations and points of enforcement. Most of these are aimed at health insurance companies and employers. The only line of enforcement aimed at the individual taxpayer is a 2.5% tax based on an individual’s adjusted gross income (§401). This tax applies only to individuals who do not have a healthcare plan that meets the minimum requirements (i.e. the previous point).
Purpose And Overview (§101-§116)
In general, it appears this bill is supposed to establish standards for the health insurance industry. Plans that take effect after the change date (not listed in the bill) must meet the new standards (of this bill). People may choose to remain on their current plan, but insurance companies cannot enrol new people under that plan after the change date. Additionally insurance companies must apply rate increases to entire ‘risk groups’ and cannot change any of its terms or conditions on plans that people choose to keep. These kept-back plans must switch to meet the standards within the 5 year grace period after the change date. There are some exceptions to this, notably flexible spending accounts, onsite employer facilities (e.g. a first-aid station), and coverage that only provides mental health, dental, and/or vision care. Insurance plans cannot use pre-existing condition exclusions. Insurance companies are prohibited from dropping clients except in cases of fraud. Insurance premiums are prohibited from excess variation. Variation is allowed by predefined age groups (as long as the highest premium is no more than double that of the lowest), area, and family/group bundling (as long as the variation is uniform compared to individual premiums). A report on the financial aspect of these changes is due within 18 months of the bill. The report will evaluate and compare group-insured and self-insured plans/markets. Insurance company may use a provider network, as long as it provides transparency in the cost difference between in-network and out-of-network coverage. Additionally, these provider networks must meet standards established by the Commissioner. If a plan does not meet a predetermined medical-loss ratio, it must provide rebates to enrolled participants to meet the ratio. In other words, if a company has a low payout on a plan one year (say 20%), it must (in effect) refund the people on that plan until its payout meets the required magic number.
Health Insurance Exchange (§201-§203)
Sets up the Health Insurance Exchange. This will serve as an insurance gateway in addition to offering a public insurance option. The Commissioner is responsible for overseeing the operations of the HIE (e.g. ensuring plans offered through the HIE are qualified, fair, etc). Insurance companies do not need to offer any insurance plans through the HIE, however they still must meet the minimum standards. Individuals who continue to get health insurance through their employer will have choice of any insurance plan offered through the HIE once the employer begins offering any plan through the HIE. It is also here that insurance companies may offer multiple plans through the HIE but if they do, they must conform to the listed package levels In other words, all plans through the HIE must meet the basic plan requirements but there are optional levels of enhanced, premium, and premium-plus which require at least one plan in a lower package level (e.g. if a company offers a premium plan through the HIE, they must also have a basic and enhanced plan available). Only plans at the premium-plus level may offer benefits beyond the required standards. Plans not offered through the HIE may offer benefits beyond the basic requirements (§121).
Required Services (§122)
Defines which services must be offered by every insurance plan: hospitalisation, emergency services, outpatient services, all healthcare professional services (assumingly, this is so that the insurance company cannot deny payment to a professional along the chain, such as an anesthesiologist), equipment and supplies necessary for a health professional to deliver care (again, probably so that a company cannot deny payment for the bottle of iodine used during that surgery), prescription drugs, rehab services, mental health and substance abuse services, recommended preventive services (e.g. vaccination), maternity care, baby and child care (including dental, vision, and hearing) for children under 21. Companies may offer deductibles, but these are limited annually to $5000 for an individual and $10,000 for a family. That limit can change annually (increments of $100). For plans offered through the HIE that are not premium-plus levels, companies may utilise copayments but not coinsurance (i.e. an individual may still have the $20 copay for office visits but not the 10% payment for surgery). Plan prices should be designed to split healthcare costs at 70/30 (i.e. an individual should pay no more than 30% out-of-pocket).
While I am not going through the section on bureaucratic establishments in its entirety (§205-§208), I did want to mention a few pieces of information here. Children born in the US who are not covered by an acceptable plan get up to 60 days on Medicaid automatically. Additionally, any individual who is eligible for Medicaid and is not enrolled in another plan will be automatically added to Medicaid. Adds a trust fund in the US Treasury for the operation of the HIE. This will be funded by individuals not enrolled in a qualified plan and employers not providing a qualified health plan through taxes. If a state wishes to run its own HIE, it is free to do so, however its offered plans cannot cost more than the federal plans.
The Public Option (§221-§226)
The government will offer a public health option offered solely through the HIE. Its premiums will be geographically-adjusted and comply with the rules form above (§113). This public option will be funded by its own premiums; it makes no mention here of any increase in taxes. As of now, I believe, then, that this public option will be functionally like an independent company and not a government agency. The government is giving the public option a $2B loan, which is to be payed back to the Treasury within 10 years. Initially, payment rates will be similar to those currently under Medicare and extrapolated from there for things not covered by Medicare. As an incentive, these payments will pay an additional 5% for the first 3 years. Current Medicare providers will be considered ‘in-network’ to the new system unless they opt-out. The in-network physicians and other participating providers (e.g. chiropractors) must agree to the payment rates the new system sets. Physicians may choose to participate out-of-network, but they must charge within a certain ratio of the in-network price. Healthcare providers who choose to not participate may do so.
Employer-offered plans (§311-§314)
Employers have three requirements to meet.
- They must offer each employee coverage under a qualified plan (see above on §201-§203 and §122) or under a grandfathered plan (which will be phased out at the end of 5 years).
- They must contribute to the full-time employee’s plan as already required (which is 72.5% of the premium for the lowest cost plan offered for an individual or 65% for family coverage). They should also contribute to any part-time employee’s plan proportionately (e.g. as a proportion of the average weekly hours the part-time employee works to minimum full-time weekly hours). Also, these contributions must not correspond to a reduction of employee’s compensation (i.e. it can’t come from the employee). Unless an employee opts out of coverage, s/he is automatically enrolled in the plan with the lowest premium.
- After the second year of the HIE, if an employee declines an employer-offered plan and takes coverage through an HIE plan (other than as part of a spouse’s or parent’s family plan), the employer must make a contribution (equal to 8% of the employee’s average pay) to the HIE trust fund. Small Businesses that have annual payrolls under $400k will pay a smaller percentage.
Rates for Low-Income Families (§241-§246)
Individuals who are enrolled in a plan through the HIE that has a family income below 400% of the Federal poverty level for his/her family size and is not eligible for Medicaid will be eligible for a reduced rate on the basic (bottom-level) plan offered through the HIE. This reduced rate does not apply to full-time employees whose employers offer coverage under a group plan that meets the above specifications specifications unless (after the first year of the HIE) the premium exceeds 11% of family income (Adjusted Gross Income as reported to the IRS). The reduced rate will be determined as a percentage of the family’s expected annual income (see the table in §243(d).1. For reference, the FPL for a single person in the Lower 48 for 2009 is $10,830. For an example here, let us assume an individual earns $30k a year (AGI). This would mean that the premium for that individual would be between $175 and $225 per month.
Extra Revenue (§441-§442)
Individual taxpayers who earn more than $350k (AGI) must pay an additional surcharge tax (1% for AGI between $350k and $500k, 1.5% up to $1M, and 5.4% for over $1M). This tax will increase for tax year 2013 (to 2%, 3%, 5.4% respectively). If this tax generates more than $150B, the increase for TY2013 will not apply; if more than $175B, the surcharge for AGI below $1M will be removed. This income will be determined by the OMB by 1 Dec 2012.
Thus ends the first section of HR 3200. The remaining two sections to be analysed deal with restructuring Medicare/Medicaid and development of public health and workforce.
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