Back to Work
The Labor Day holiday yesterday was the final day of the summer recess for Congress, and both chambers are back in session today. One member of Congress who worked during the recess was Senator Max Baucus, who unveiled an 18-page “framework” for a healthcare reform bill over the weekend.
The broad outlines of the framework are familiar. It would include an individual mandate requiring most Americans to have health insurance. It would also create state insurance exchanges in which private insurance companies would compete to offer health insurance plans to individuals and small businesses, while subsidizing the cost of insurance for individuals or families with incomes up to 300% of the federal poverty level, as well as ensuring that individuals and families with incomes of up to 400% of the federal poverty level would have to pay no more than 13% of their income in health insurance premiums. Insurance reforms would prevent insurance companies from denying to coverage to individuals with pre-existing medical conditions and would also require insurance companies to cap beneficiaries’ out-of-pocket expenses. The Baucus proposal would also expand eligibility for Medicaid to 133% of the federal poverty level.
These provisions, which mirror provisions in the House bill, are relatively uncontroversial. Unlike the House bill, the Baucus proposal does not include a “play or pay” provision requiring employers to provide health insurance to their employees, but it would impose fees on employers whose employees receive subsidies on health insurance plans purchased through the new insurance exchanges.
The biggest sticking point on healthcare reform for Republicans in Congress, and even some conservative Democrats, has been over the inclusion of a public plan among the health insurance plans offered in the exchanges. The Baucus proposal does not include a public plan, but it does include a provision of non-profit health-insurance cooperatives to compete with private plans in the exchanges.
The other novel feature of the Baucus proposal is that it would impose excise taxes on insurance companies for high-end health insurance policies, defined as plans with premiums in excess of $8,000 per year for individuals and $21,000 per year for families. The rationale for taxing high-end insurance plans is that, because these plans so completely shield beneficiaries from medical treatment costs, beneficiaries have no incentive to seek cost-effective treatment. It is assumed that, by requiring insurance companies to pay a 35% tax on premiums received in excess of the thresholds, they will pass on their costs to employers in the form of higher premiums. Employers, therefore, may opt to offer their employees less generous health insurance plans, and, faced with higher potential out-of-pocket expenses, their employees may become more cost-conscious consumers of healthcare services.
Even if the costs eventually get passed onto employers, it sounds politically more palatable to tax insurance companies than employers. Some employers and unions offering such high-end plans, however, are self-insured, so they would also be subject to the tax. Moreover, not all high-premium plans offer excessive benefits. Some plans have high premiums because the employees covered are much older and sicker than average beneficiaries.
Still, although unions and public employees may be opposed to this financing option, it has the advantage of potentially contributing to a lower rate of healthcare inflation. Alternatives, such as simply taxing high-income individuals, would raise revenue but contribute nothing to lowering healthcare costs.
To raise additional revenue, across-the-board annual fees would be imposed on companies in several industries based upon their market shares, including $2.3 billion for the pharmaceutical industry, $4 billion for the medical device industry, $6 billion for the health insurance industry, and $750 million for clinical laboratories. Other provisions affecting the pharmaceutical industry include an increase in the Medicaid rebate to 23.1% and a requirement to discount the cost of drugs purchased in the Medicare Part D doughnut hole by 50%.
The lack of a public option in the Baucus proposal will likely infuriate many Democrats. In releasing a proposal that excludes a public plan, however, Senator Baucus is essentially calling the Republicans’ bluff. If Republicans are unwilling to support even his very moderate plan, then he will have made it clear that Republicans were not serious about seeking a compromise in the first place. On the other hand, if Republicans are willing to embrace his proposal, then the Senate will have a bill it can pass with bipartisan support. Excluding the public plan option may alienate many House Democrats, but both Democrats and Republicans appear to have been focusing on the public plan for ideological reasons rather than the impact it would have on choices available in the insurance exchanges. Either way, the outcome of negotiations today and tomorrow between Senator Baucus and key Republicans on the Senate Finance Committee may impact what President Obama says in his speech to Congress Wednesday night.
The broad outlines of the framework are familiar. It would include an individual mandate requiring most Americans to have health insurance. It would also create state insurance exchanges in which private insurance companies would compete to offer health insurance plans to individuals and small businesses, while subsidizing the cost of insurance for individuals or families with incomes up to 300% of the federal poverty level, as well as ensuring that individuals and families with incomes of up to 400% of the federal poverty level would have to pay no more than 13% of their income in health insurance premiums. Insurance reforms would prevent insurance companies from denying to coverage to individuals with pre-existing medical conditions and would also require insurance companies to cap beneficiaries’ out-of-pocket expenses. The Baucus proposal would also expand eligibility for Medicaid to 133% of the federal poverty level.
These provisions, which mirror provisions in the House bill, are relatively uncontroversial. Unlike the House bill, the Baucus proposal does not include a “play or pay” provision requiring employers to provide health insurance to their employees, but it would impose fees on employers whose employees receive subsidies on health insurance plans purchased through the new insurance exchanges.
The biggest sticking point on healthcare reform for Republicans in Congress, and even some conservative Democrats, has been over the inclusion of a public plan among the health insurance plans offered in the exchanges. The Baucus proposal does not include a public plan, but it does include a provision of non-profit health-insurance cooperatives to compete with private plans in the exchanges.
The other novel feature of the Baucus proposal is that it would impose excise taxes on insurance companies for high-end health insurance policies, defined as plans with premiums in excess of $8,000 per year for individuals and $21,000 per year for families. The rationale for taxing high-end insurance plans is that, because these plans so completely shield beneficiaries from medical treatment costs, beneficiaries have no incentive to seek cost-effective treatment. It is assumed that, by requiring insurance companies to pay a 35% tax on premiums received in excess of the thresholds, they will pass on their costs to employers in the form of higher premiums. Employers, therefore, may opt to offer their employees less generous health insurance plans, and, faced with higher potential out-of-pocket expenses, their employees may become more cost-conscious consumers of healthcare services.
Even if the costs eventually get passed onto employers, it sounds politically more palatable to tax insurance companies than employers. Some employers and unions offering such high-end plans, however, are self-insured, so they would also be subject to the tax. Moreover, not all high-premium plans offer excessive benefits. Some plans have high premiums because the employees covered are much older and sicker than average beneficiaries.
Still, although unions and public employees may be opposed to this financing option, it has the advantage of potentially contributing to a lower rate of healthcare inflation. Alternatives, such as simply taxing high-income individuals, would raise revenue but contribute nothing to lowering healthcare costs.
To raise additional revenue, across-the-board annual fees would be imposed on companies in several industries based upon their market shares, including $2.3 billion for the pharmaceutical industry, $4 billion for the medical device industry, $6 billion for the health insurance industry, and $750 million for clinical laboratories. Other provisions affecting the pharmaceutical industry include an increase in the Medicaid rebate to 23.1% and a requirement to discount the cost of drugs purchased in the Medicare Part D doughnut hole by 50%.
The lack of a public option in the Baucus proposal will likely infuriate many Democrats. In releasing a proposal that excludes a public plan, however, Senator Baucus is essentially calling the Republicans’ bluff. If Republicans are unwilling to support even his very moderate plan, then he will have made it clear that Republicans were not serious about seeking a compromise in the first place. On the other hand, if Republicans are willing to embrace his proposal, then the Senate will have a bill it can pass with bipartisan support. Excluding the public plan option may alienate many House Democrats, but both Democrats and Republicans appear to have been focusing on the public plan for ideological reasons rather than the impact it would have on choices available in the insurance exchanges. Either way, the outcome of negotiations today and tomorrow between Senator Baucus and key Republicans on the Senate Finance Committee may impact what President Obama says in his speech to Congress Wednesday night.
posted by MSA Partners at
2:50 PM
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