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Health Care Reform 2009 Part 5: The Bill

hr 3200

Before we start talking about what’s in the bill, let’s make sure we’re talking about the same bill.  There have been three major health care reform proposals introduced in Congress over the past year:

  1. A single payer bill (HR 676):  this would basically eliminate private insurance. One way to think of it is as Medicare for everyone- the government would pay every citizen’s medical bills with money collected in taxes.
  2. The Wyden-Bennett Healthy Americans Act (S 391): would do away with employer based insurance. Instead of your employer providing you with insurance, they would give you that money, and you would buy private insurance yourself through state-based Health Help Agencies.
  3. America’s Affordable Health Choices Act (HR 3200)

We’ll talk about the first two proposals in more detail in a later post, but for right now, they’ve more or less been taken off the table.  The bill that people are usually referring to when they talk about health care reform is the third one… The Affordable Health Choices Act

Versions of this bill have passed four of the five Congressional committees that cover health care (for more on that process, see our previous posts here and here).  Each committee’s version is slightly different, and it’s still way too early to tell exactly what the final bill will look like, but the basics of each version are essentially the same.

Whereas the first two bills would completely overhaul the health insurance system and change the way every American gets health insurance, the Affordable Health Choices Act is more targeted.  The thinking is that many people who have insurance are happy with it, and wouldn’t support a sweeping change if it means giving up the coverage they have now.  This bill attempts to leave the current system more or less intact, while still dealing with the two major crises in American health care:

  1. the rising number of uninsured/underinsured Americans who don’t have access to affordable care; and
  2. the unsustainable rise in the cost of health care for everyone, no matter how they get insurance.

We’ll take a look at how this bill deals with each crisis separately.  Today we’ll focus on the first one…

The Uninsured/Underinsured Health Crisis

Most of these provisions really only affect you if you don’t have insurance, if you buy your own insurance on the private market, or if you work for or own a small business.  But, if like the vast majority of Americans, you get your insurance through a large employer, most of this doesn’t apply to you.  It would help you if you get fired or laid off, but if you think your job is fairly secure you might want to just skip down a ways.

If you’re uninsured or buy insurance on the private market, here’s how the bill proposes to help you…

I can’t get insurance because I have a preexisting condition or I’m worried about getting dropped by my insurance if I get sick

One of the major features of this bill is something called guaranteed issue and renewability.  Guaranteed issue means that insurance companies have to provide insurance to anyone who applies- regardless of whether you have a preexisting condition.  And the insurance company couldn’t  cancel your policy when you got sick- you’d be able to decide when to cancel.

Sweet- so I could just wait until I get sick, and just buy insurance then.

Well, no.  The bill would also contain an individual mandate, meaning that you would have to get insurance or pay a tax penalty.  In the Senate HELP version, that penalty would be $750 per year.  In the House Version, the penalty is 2.5% of your modified adjusted gross income, up to the cost of the cheapest plan available.

Whoa, wait– I have to buy insurance?  I don’t make much money, I’m barely getting by- how am I supposed to afford health insurance?

Don’t worry, there would be subsidies for people that can’t afford it.  Most of the discussion about this bill in the various committees has centered around this part actually, because these subsidies are where most of the cost of the bill comes from.  The subsidies are different in each committee’s version, but the principle is the same.  Depending on how much money you make in relation to the federal poverty level(FPL), you’ll pay a certain percentage of your income on premiums and the government will cover everything else.

The FPL is the amount that the government has determined is necessary for an individual or family to meet their basic needs.  The government uses this number to determine who’s eligible for certain social services.  It’s based on how many people are in your household.  For a single individual, the FPL is $10,830.  For a family of four it’s $22,050.

So say you’re single and make $15,000 per year– that’s just under 150% of the federal poverty level.  In the Senate HELP version of health care reform, you would pay 1% of your income in premiums– about $150 per year- and the government would cover the rest.  In the House version, you’d pay a little more- 3% of your income, or $450 per year, and the government would subsidize the rest.

It’s a sliding scale (up to 400% of the FPL), so if you make more money then you would contribute a higher percentage of the cost of your premium.  Also, keep in mind that this is for the cheapest, basic plan available.  You couldn’t get the most expensive plan, pay a small percentage of your income, and have the government pay the rest.

I make too much money to qualify for subsidies, but I have a chronic illness, so I have to pay crazy high premiums.  How am I supposed to afford insurance?

Another new regulation on insurance companies under this bill is Community Rating.  Insurance companies wouldn’t be able to charge you more if you have a chronic illness.  In fact, the only reasons for which an insurance company could charge you higher premiums are:

  1. Based on age.  They could charge you higher premiums if you’re older (and thus more likely to get sick), but no more than twice what they charge for the cheapest premium they offer.  [Or at least in the House version- in Senator Baucus’s Finance Committee version, insurance companies could charge older folks five times as much as they charge younger customers.  According to Uwe Reinhardt, an economist at Princeton, by charging older people so much more, “You’re just using age as a proxy for health status.”]
  2. Based on the number of people in your family.  If you are married or have kids, they could charge you more than a single adult, simply because they’re covering more people.
  3. Based on geographic area.  If you live in a part of the country where the costs of seeing a doctor, getting tests, and going to the hospital is higher, then your premium would be more.  But the premium for everyone in that area (your community) would have to be the same.

There would also be subsidies for cost sharing (deductibles and co-pays)– again on a sliding scale based on income level.  So the lower your income level, the higher percentage of your co-pays and deductibles the government would cover.

Sounds great, but have you tried to buy insurance on the individual market?  It’s like something out of Mad Max.  How can I be sure that I’m not getting sold a worthless piece of paper by a toothless drug addict living in a van somewhere?

The bill would create insurance gateways, administered either by the government or another nonprofit entity, through which private insurance companies would sell various qualified plans.  You’d be able to go to a gateway, or go online, and compare various plans.  For a plan to qualify, it would have to meet certain basic requirements– and the companies offering plans would face stricter regulations.

One of those plans, according to the HELP version and the House versions of the bill would be a public option- a plan run by the government.  This part of the bill is what is getting the most attention, and the insurance companies have been fighting it vehemently.  We’ll talk about it more when we get to how the bill will reduce health care costs.

In the HELP version of the bill the gateways would be state-based, in the House version there would be one national exchange.

OKAY– IF YOU HAVE HEALTH INSURANCE THROUGH AN EMPLOYER YOU CAN START READING AGAIN.

If I currently have health insurance through my employer how will the insurance gateway/exchange affect me?

The Washington Post has a really good answer to this question, in an article they wrote called 8 Questions About Health Care Reform:

Not that much, at least initially. The legislation is intended to preserve the existing employer-based insurance system — at first, only small businesses and people who aren’t covered through their jobs will be allowed to buy plans on the new exchange. Over time, access to the exchange may be broadened, though this raises the possibility that if people buy insurance on the exchange instead of on the job, employer plans may be left with a smaller pool of employees who have greater health-care costs, a situation that could make those plans hard to sustain. The Democrats’ hope is that your employer-based insurance premiums will grow more slowly if the health-care system as a whole is more rational and less wasteful. People now covered by individual plans will be able to get better-regulated plans on the new exchange, possibly with government subsidies. People now covered in the workplace won’t have to worry as much about losing coverage if they lose their job or want to start their own business — they would turn to the exchange for new coverage.

The upside is– that if you work for a large company and you like your coverage, your employer will have to continue to offer coverage.  The downside is that if you work for a large company and don’t like your coverage, you’d be stuck with it- at least for now.

Umm… I need a picture.

Really?  Sigh.   Ok, this graph breaks it down for you (click to enlarge):

health reform flow chart

In our next post we’ll take a look at the different ways the bills propose to reduce costs.  This is where the bills get really complicated- the bulk of the 1000+ pages in the House Bill is devoted to cost saving suggestions- and because it’s so long and complicated, people that want to derail the health care debate were able to start yelling about death panels and other nonsense that has nothing to do with what’s actually in the bill.

But don’t worry- we’ll try to help break it down, so that’s a little less crazy and intimidating.  Stay posted.

[PS:  The information in this post came mainly from two sources:

  • The actual text of the bill, which is available online here.  If you do go to that site to read the bill, a word of advice- ignore the little button that displays the comments for each section of the bill.  At best they’re not helpful at all, at worst they’ll make you want to hit people.
  • The Kaiser Family Foundation has a tool that you can use to compare all of the major health reform proposals, side-by-side.  If you’re interested in diving even further into the details of these bills, we highly recommend checking that out.]
{ 1 comment… add one }
  • Suzanne November 16, 2009, 9:05 pm

    My employer is charging a higher premium for employees that have worked longer and have more seniority?
    I don’t pay a higher price for a loaf of bread at the store- why should I pay a higher premium because I make more money?

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