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Q: What is the status of the bills in the House and Senate?
A: On November 7, 2009, the House of Representatives passed HR 3962, the Affordable Health Care for America Act by a vote of 220-215. The close vote demonstrates the fractious nature of the debate, with disagreement between Democrats and Republicans and within the Democratic Party. The Senate is currently debating their version of reform, HR 3590 Patient Protection and Affordable Care Act. Senate leadership hopes to have a vote on the final bill by Christmas.
Q: Do I have to buy coverage?
A: Both bills require individuals to have coverage. The House bill would require individuals to have "acceptable health coverage" or to pay a penalty of 2.5% of their adjusted income above the filing threshold (under 65, $9,350 for singles and $18,700 for couples) up to the cost of the average national premium for self-only or family coverage under a basic plan in the Health Insurance Exchange. The Senate bill will require those without coverage to pay a tax penalty of $750/year up to a maximum of three times that amount ($2,250) per family. The penalty is phased in from 2015 to 2016, after which the penalty will be increased annually by the cost-of-living adjustment. In both bills, exceptions are made based on income, religious objections and financial hardship.
Q: I own a small business, how will this impact my business?
A: In the House bill, employers are required to offer coverage to their employees and contribute at least 72.5% of the premium cost for single coverage, and 65% of the premium cost for family coverage of the lowest cost plan that meets the essential benefits package requirements or pay 8% of payroll into the Health Insurance Exchange Trust Fund. Employers who offer coverage must automatically enroll into the employer's lowest cost premium plan any employee who does not elect coverage under an employer plan or does not opt out of such coverage. This would begin on January 1, 2013. Businesses with annual payroll of less than $500,000 would be exempt from the above and between $500,000 and $750,000 would have to contribute between 2-6% of payroll. Businesses with an annual payroll of more than $750,000 would be required to comply as above. In the Senate bill, employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will pay a fee of $750 per full-time employee. Employers with more than 50 employees that offer coverage and have at least one employee receiving a premium tax credit will pay the lesser of $3000 for each employee receiving a premium credit or $750 for each full-time employee. Employers with less than 50 employees would be exempt from the above. The Senate bill would require employers with more than 200 employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.
Q: Are there any subsidies for businesses?
A: Both bills offer a tax credit for small employers with fewer than 25 employees and average wages of less than $40,000. The House bill allows for the health coverage tax credit for up to two years. The full credit of 50% of premium costs paid by employers is available to employers with 10 or fewer employees and average annual wages of $20,000 or less. The credit phases out as business size and the number of employees increases. The tax credit is not permitted for employees earning more than $80,000/year. The Senate bill works in two phases: Phase 1: Tax years 2011-2013. Employers would receive a tax credit of up to 35% of the employer's contribution toward the employee's health insurance premium. Employers with 10 or fewer employees and average annual wages of $20,000 or less would receive the full credit. As with the House bill, the credit phases out as the size of the business and number of employees increase.
Q: My employer is exempt from offering health care benefits, and as a result, does not offer health insurance. Are there any premium and cost-share subsidies for individuals who have to purchase insurance on their own?
A: Both bills provide premium and cost share subsidies for individuals. The House bill provides premium and cost share subsidies for individuals with incomes up to 400% of the federal poverty level (currently $18,310 for a family of 3). The Senate bill provides premium credits to individuals and families with incomes between 100-400% of the federal poverty level, and cost-sharing credits to individuals and families with incomes between 100-200% of the federal poverty level.
Q: Will this raise taxes?
A: There will be taxes associated with both the Senate and House bills. The House bill would raise revenue through the following: require those individuals or families without acceptable health care coverage to pay a tax of 2.5% of their adjusted income above the filing threshold up to the cost of the average national premium for self-only or family coverage under a basic plan in the Health Insurance Exchange (Effective January 1, 2013); impose a 5.4% tax on individuals with modified adjusted gross income exceeding $500,000 and families with modified adjusted gross income of $1,000,000 (Effective January 1, 2011); will permit only prescribed drugs to be reimbursable through a health savings account or flexible spending arrangement for medical expenses; limit the amount of contributions to a flexible spending account for medical expenses to $2500/year (Effective January 1, 2011); increase the tax on distributions from a health savings account that are not used for qualified medical expenses to 20% (currently 10%) of the disbursed amount(Effective January 1, 2011); and impose a tax of 2.5% of the price on the first taxable sale of any medical device (Effective January 1, 2013). The Senate bill requires those without coverage to pay a tax penalty of $750/year up to a maximum of three times that amount ($2,250) per family (phase -in beginning 2014); impose an excise tax on employer-sponsored health plans with aggregate values that exceed $8500 for individuals and $23,000 for family coverage. Threshold amounts are increased for retired individuals 55+ and employees engaged in high risk professions. The tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is imposed on the issuer of the policy (Effective January 1, 2013); excludes the cost for over-the-counter drugs not prescribed by a doctor from health savings accounts or flexible spending accounts (Effective January 1, 2011); limit the amount of contributions to a flexible spending account for medical expenses to $2500/year (Effective January 1, 2011); increase the threshold for the itemized deduction for medical expenses from 7.5% adjusted gross income to 10% of adjusted gross income; waived for individuals over 65 for tax years 2013-2016 (Effective January 1, 2013); increase the Medicare Part A (hospital insurance) tax rates (Effective January 13, 2013); impose fees on pharmaceutical manufacturing sector ($2.3B), medical device manufacturing sector ($2B), and health insurance sector ($6.7B); limit deductibility of executive and employee compensation to $500,000 per applicable individual for health insurance providers (Effective January 1, 2009); and impose a 5% tax on the amount paid for cosmetic surgical and medical procedures (Effective January 1, 2010).
Q: What is the "Health Insurance Exchange"?
A: Both bills would create exchanges where individuals can purchase insurance. The House bill would create a National Health Insurance Exchange where individuals and employers (phased in) can purchase qualified insurance, including insurance from private health plans and the public health insurance option. The Senate bill would create state-based American Health Benefit Exchanges and Small Business Health Options Program Exchanges where individuals and employers with up to 100 employees can purchase qualified coverage. In 2017, businesses with more than 100 employees may be permitted to purchase insurance in the exchange. Both the House and Senate bills will create a Consumer Operated and Oriented Plan (CO-OP) which would foster the creation of non-profit, member run health insurance companies offering qualified health benefits plans.
Q: What about "public options"?
A: Both the House and Senate bills would offer a "public option". The House bill would create a public insurance option to be offered through the Health Insurance Exchange. This option would be financed through premiums, and would meet the same requirements as private plans regarding benefit levels, provider networks, consumer protections and cost-sharing. The Senate bill would create a community health insurance option that would be offered through the state exchanges. The community health insurance option must meet the same requirements as a qualified health plan. The community health plan would be funded through premiums. States may "opt out" of the community health insurance option.
Q: How will the exchanges work?
A: Both the House and Senate bills offer four basic benefit categories. The House bill offers a Basic Plan, which includes essential benefits package and covers 70% of the benefit costs of the plan; Enhanced plan, which includes the essential benefits package, reduced cost-sharing compared to the basic plan and would cover 85% of benefit costs of the plan; Premium Plan which includes the essential benefits package with reduced cost-sharing compared to the Enhanced plan and covers 95% of the benefit costs of the plan; and Premium Plus plan which is a premium plan plus additional benefits such as oral or vision care. The Senate bill offers the Bronze plan, which represents minimum creditable coverage and provides the essential health benefits, cover 60% of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010); Silver plan which provides the essential health benefits, covers 70% of the benefit costs of the plan, with the HSA out-of-pocket limits; Gold plan which provides the essential health benefits, covers 80% of the benefit costs of the plan, with the HSA out-of-pocket limits; and Platinum plan which provides the essential health benefits, covers 90% of the benefit costs of the plan, with the HSA out-of-pocket limits. The Senate bill also has an additional category- the Catastrophic plan is available to those up to age 30 or to those who are exempt from the mandate to purchase coverage and provides catastrophic coverage only with the coverage level set at the HSA current law levels except that prevention benefits and coverage for three primary care visits would be exempt from the deductible. This plan would only be available in the individual market.
Q: What is the "essential benefits package"?
A: The House bill would create an essential benefits package that would provide a comprehensive set of services (to be recommended by the Health Benefits Advisory Council); cover 70% of the actuarial value of the covered benefits; limit annual cost-sharing to $5000/individual and $10,000 family; does not require cost-sharing for preventive services; and does not impose annual or lifetime limits on coverage. Effective January 1, 2013, all qualified health plans, including those in the Exchange and outside the Exchange, must provide at least an essential benefits package (except grandfathered individual and employer-sponsored plans). The Senate bill would create an essential benefits package that provides a comprehensive set of services (defined by the Secretary of Health and Human Services through a transparent and public process); covers at least 60% of the actuarial value of the covered benefits; limits annual cost-sharing to the current law Health Savings Accounts (HSA) limits ($5,950/individual and $11,900/family in 2010); and is not more extensive than the typical employer plan. Effective January 1, 2014, all qualified health benefits plan must offer the essential benefits package (except grandfathered individual and employer-sponsored plans). (Actuarial value represents the portion of the total cost of covered benefits that are paid by a health insurance plan.)
Q: Where can I get additional information about this legislation?
A: The Kaiser Family Foundation offers an excellent side-by-side comparison of the bills.
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