The all-important Senate Finance Committee – which still hasn’t put forward its version of a healthcare bill – did release an 18-page framework for reform legislation. (Correction, Sept. 9, 12:29 p.m.: The proposed framework was circulated to SFC members by chairman Max Baucus (D-MT)).
Read it carefully, because when all is said and done, this is pretty much what healthcare reform is going to look like — no matter what President Obama says in his speech tonight.
The framework calls for guaranteed issue of healthcare insurance regardless of a person’s health status, an individual mandate, state-based insurance exchanges, Medicare Advantage cuts and Medicaid expansion. No limited benefit plans, no rescissions, and no lifetime coverage limits allowed. No surprises here. The framework also calls for co-op health plans, rather than the highly controversial public health plan endorsed by the President. Again, no big surprise.
One thing that did stand out, however, is that health plans would get hit with a $6 billion annual “Health Insurance Provider Fee,” plus a 35% tax on any benefit options with premiums topping $8000 single, $21,000 family.
According to Wachovia analyst Matt Perry, the fee would represent 20% to 25% of the health insurance industry’s 2008 pretax profits and 40% of after-tax profits — and would almost certainly be passed along to customers in the form of higher premiums.
The pharmaceutical, medical device and lab industries would get hit with similar fees of $2.3 billion, $4 billion and $750 million; however, hospitals, biotech companies and others would not. (Note: while the SFC is saying these are “fees,” it’s not clear what direct benefit accrues to the healthcare companies making the payments; so I’m going to call them taxes).
Benefit options in the health insurance exchange would have actuarial values of 65% for the Bronze option, 73% Silver, 81% Gold, and 90% Platinum. A separate option aimed at “young invincibles” would also be available.
Health plans would be allowed to vary premium rates based on a few factors, such as age and geography, according to the following ratios: age 5:1; tobacco use 1.5:1; family composition (single 1:1; adult with child 1.8:1; two adults 2:1; family 3:1). All told, premium variation wouldn’t be greater than 7.5:1.
The framework would mean a big expansion to Medicaid, with eligibility set at 133% of the federal poverty level and including childless adults. That’s a plus for health insurers; however, gains could be offset by disruption in the State Children’s Health Insurance Program, which would run through the insurance exchanges beginning in 2013.
Tax credits would be available to individuals and families at 134% to 300% of the federal poverty level (there would also be a variety of other credits and cost-sharing assistance to insure affordable coverage). While individuals would be mandated to purchase health insurance, penalties would be relatively mild — $750 single, $1500 family for those at 100% to 300% of FPL; $950 single, $3800 family for those above 300% of FPL.
While there isn’t an employer mandate to provide health insurance, employers with 50 or more employees would get hit with a fee of up to $400 per employee if any one employee receives a tax credit to purchase insurance through an exchange.
One final note: the framework does little to address rising healthcare costs. Notes Oppenheimer analyst Carl McDonald, “Sure, there are provisions for accountable care organizations and some value based purchasing initiatives, but these apply only to Medicare and will only be implemented on a very limited scale.” In the end, that may very well be the thing that comes back to haunt all these reform efforts.