Healthcare Bill Passed in the House

Major Provisions of Affordable Health Care for America Act (H.R. 3962)

November 10, 2009

The Affordable Health Care for America Act passed the house on the evening of Saturday November 7, 2009 by a vote of 220 in favor to 215 opposed. One Republican voted with the majority (John Cao from New Orleans) and 39 Democrats and the remainder of the Republicans voted against it. The 2,000 page bill includes the following MAJOR provisions:

MANDATES

• Individual Mandate — Requires nearly all individuals to have health insurance by 2013, or pay an excise tax, equal to 2.5% of gross income, capped at the amount of the average premium under the health insurance exchange. The measure, however, provides a hardship exception and exemptions for religious beliefs. The measure allows parents to maintain coverage for their children until their 27th birthday.
  
  
• Employer Mandate — Requires most employers to offer health insurance to their employees, or pay a tax in lieu of such coverage equal to 8% of payroll. Businesses with payrolls of less than $500,000 would be exempt from the payment, and there would be reduced rates for those with payrolls between $500,000 and $750,000. Employers offering coverage would have to cover 72.5% of premiums for individuals and 65% for families.

AFFORDABILITY

• Insurance Exchanges — Establishes a federal health insurance exchange for each state and territory under the new Health Choices Administration in 2013 that would allow individuals without government-provided or employer-provided coverage, and certain businesses, to purchase health insurance. The bill permits states to run exchanges if they meet certain criteria. The Congressional Budget Office (CBO) estimates that roughly 30 million people will likely take advantage of the exchange. This will allow those participating to take advantage of lower negotiated insurance rates than can be currently obtained in the individual and small business markets. Unlike the current Senate Finance Committee bill, it does not exclude individuals based on immigration status.
  
  
• Compacts & Cooperatives — Allows two or more states to enter into compacts to facilitate the purchase of coverage across state lines, and requires the establishment of a program to assist organizations that want to start nonprofit insurance cooperatives. This allows smaller states and states that have populations integrated across state lines to cooperate in order to allow for greater “portability” of insurance coverage. However, it keeps insurance regulated at the state level and accountable locally.
  
  
• Public Option — Creates a government-run public health insurance option within the exchange but administered by the U.S. Department of Health and Human Services (HHS), which would have to meet the same requirements as private plans. The public option would negotiate with providers to determine reimbursement rates. The option would receive start-up money from the government, but would be dependent on premiums. CBO estimated that 6 million people would likely be covered by the option, about 2% of the population. These 6 million are expected to be the workers earning above 150% of the poverty line who receive some subsidies, or small businesses who have limited funds for covering their employees. This is a Medicare model program that controls costs by having lower administrative costs than the private sector. By having it in the exchange, it will help to drive down the costs private insurers will charge because of increased competition for new participants.
  
  
• Subsidies — Provides subsidies called "affordability credits" to those making up to 400% of the federal poverty line to reduce premiums and out-of-pocket costs, but bars undocumented immigrants from receiving them and imposes a citizenship verification process. The bill also provides a tax credit to certain small businesses for providing coverage.
  
  
• Medical Malpractice — Rather than federally regulating medical malpractice, this bill allows HHS to pay “incentive” payments to states that pass laws regulating malpractice suits and engage in other actions to promote quality healthcare. However, states that already have caps on attorneys’ fees and damages can maintain them.
  

BENEFIT PACKAGE AND CO-PAYS

• Health Insurers — Requires the creation of an "essential benefits package" for health plans to qualify as meeting the mandate. The benefits package would be defined by a Benefit Panel set up within the Department of Health and Human Services. It limits yearly out-of-pocket expenses to $5,000 for an individual and $10,000 for a family; limits variations in premiums based on age to a ratio of 2 to 1; prohibits lifetime limits; prohibits the rescission (rejection) of coverage except in cases of fraud in getting the policy; and bars the exclusion of pre-existing conditions. This will be in full effect in 2013. The measure repeals a "blanket" exemption for health and medical malpractice insurers from antitrust legislation. It also creates processes for reviewing premium increases. The bill permits continued coverage under certain "grandfathered" plans and provides a five-year "grace period" for plans outside of the insurance exchange.
  
  
• Abortion —Congressman Bart Stupak’s (D-MI) amendment, adopted during the healthcare debate, puts into the law the “Hyde Amendment,” which prohibits the use of federal funds for abortion. Until now, it had been passed each year in the appropriation process. The adopted amendment prevents the use of federal funds to provide abortions, except in cases of rape, incest or danger to the mother's life. It states that insurers selling plans through a new government-run “exchange” — including a government-run plan, the public option — cannot offer policies covering elective abortion to people who receive federal subsidies for their premiums. Instead, women with subsidized policies who also want abortion coverage will have to purchase separate abortion-only “riders” for their plans, using their own money. People who do not receive federal subsidies will be able to buy policies on the exchange that cover elective abortions.
  
  
• High Risk Pools & Retirees — Establishes a $5 billion program in 2010 to provide assistance to states that create high-risk insurance pools for those uninsured for several months or denied coverage because of a pre-existing condition. It also establishes a reinsurance program to provide reimbursement to employer-based plans provided to retirees. This is especially important for the retired population aged 60 to 65 who are not eligible for Medicare.

MEDICARE AND MEDICAID

• Medicare Prescription Drug Provisions (Part D) – Gradually removes the “doughnut hole” that required participants to pay a substantial portion of their prescription drug costs. Allows for the federal government (HHS) to negotiate prescription drug prices.
  
  
• Medicare Advantage: Reduces the federal payment for the Medicare Advantage program over 3 years to bring it into line with the regular fee-for-service charges. This reduces mandatory spending by $154.3 billion.
  
  
• Reduction in Medicare Costs: Mandates a study of payment rates based on geography and allocates payments to doctors based on regional rates actually charged. It also bans new physician-owned hospitals or out-patient services, which have been shown to cause overutilization of services.
  
  
• Medicaid Expansion: Opens Medicaid to anyone with income at or below 150% of the federal poverty level who is not eligible for Medicare. This will be a significant increase in coverage for low wage workers without minor children, who have not been able to afford insurance in the past. One hundred percent of the costs for the newly covered will be paid by the federal government without a state match in 2013 and 2014. Beginning in 2015, there will be a 9% state match. It does require states to cover preventive services without charging deductibles or co-pays to Medicaid recipients.
  
  
• DISH PAYMENTS: Reduces the Medicaid “DISH” (Disproportionate Share) payments over a three-year period from 2017 through 2019 to hospitals that handle a high volume of uninsured patients. With the higher rate of insurance, it is expected that the loss to hospitals through covering the uninsured will be reduced.
  
  
• SCHIP: Beginning in 2014, children eligible for State Children’s Health Insurance Program (SCHIP) will be covered in Medicaid or the exchange.
  

REVENUE

• TAX REVENUE: Raises an estimated $460.5 billion through 2019 by imposing a surtax on those with adjusted gross incomes of more than $500,000 for an individual or $1 million for a joint return. These levels are not indexed for inflation. The surtax would be 5.4% of the revenue in excess of the “trigger” amount (i.e. $500,000 or $1 million) and would apply to tax years that begin after December 31, 2010.
  
  
• EXCISE TAX: Imposes a 2.5% excise tax on the sale or lease of medical devices to raise $20 billion over 10 years.
  
  
• HEALTH FLEXIBLE SAVINGS ACCOUNTS: Limits contributions to these savings accounts to $2,500 per year, indexed to inflation. This is expected to raise $13.3 billion over 10 years by reducing the tax exemption for contributions to these accounts.

PROVISIONS THAT START UPON ENACTMENT

Most of the provisions of the bill will begin in fiscal year 2013 (which starts on October 1, 2012). However, as transition measures, the following will begin upon the bill being signed into law.

• Begins to close the Medicare prescription “doughnut hole” and creates 50% discounts for some drugs
  
  
• Creates an interim high-risk pool for those who are uninsured until the exchange is available
  
  
• Bans lifetime limits on coverage
  
  
• Ends “rescission,” i.e. the practice of nullifying insurance after a patient files a claim
  
  
• Extends parental coverage for young people up to their 27 th birthday
  
  
• Eliminates cost sharing for preventive services in Medicare
  
  
• Improves help for low income Medicare beneficiaries
  
  
• Provides new consumer cost protections in Medicare Advantage
  
  
• Mandates immediate review and disclosure of rates in a geographic area, thus revealing price gouging
  
  
• Allows people with disabilities to keep their COBRA coverage until the exchange is set up in 2013
  
  
• Creates a fund for early retirees between the ages of 55 and 64 to help finance re-insurance
  
  
• Increases funding for Community Health Centers
  
  
• Increases incentives for training primary care doctors, nurses and public health professionals.