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Health Care & Insurance

Update: Health-Care Reform

Lawmakers agree that more Americans should be insured. But with two competing bills, the devil is in the details.

The similarities

The key concepts in the Senate and House bills are the same: People who already have insurance can keep their current coverage, and people with health problems will have an easier time finding affordable insurance.

Both bills prohibit insurers from rejecting anyone because of a preexisting condition (called guaranteed issue) or charging them more because of their health status. They also eliminate dollar-amount caps on coverage, expand Medicaid and provide subsidies to help more people pay for coverage. For example, a family of three earning up to about $73,000 would be eligible for a subsidy.

Each bill mandates that most Americans have health insurance and creates exchanges to make it easier to buy coverage. Large companies must provide insurance to employees or pay a fine (specific requirements are still being negotiated).

The sticking points

The House and Senate structure the insurance exchanges differently (they’re state-created in the Senate bill versus a single, national exchange in the House version), and the Senate bill would allow insurers to sell policies outside of the exchanges. Rules to make sure that policies in the exchanges aren’t competing against less-regulated ones outside the exchanges are still up in the air. If outside policies have lower premiums and less coverage than required in the exchanges, they could siphon off healthy people and leave the exchanges with the less-healthy -- and boost prices.

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Enforcing a mandate to require insurance is also tricky, aside from possible constitutional issues: The rules prohibiting insurers from rejecting applicants because of preexisting conditions or basing premiums on health status will work only if a broad enough group of people buy insurance. Both the House and Senate bills impose penalties on people who don’t have coverage, but the penalties are pretty low. Politically, it’s difficult to increase the penalties. But Cori Uccello, senior health fellow at the American Academy of Actuaries, says lawmakers could find other ways to encourage people to buy coverage, such as offering health insurance only during an annual open-enrollment period so that people don’t wait until they’re sick to get insurance.

The Congressional Budget Office estimates that the cost would be $871 billion over ten years for the Senate version and $894 billion for the House bill. The House bill proposes a 5.4% tax on individuals with annual incomes in excess of $500,000 and families with incomes above $1 million. The Senate bill relies on a 40% excise tax on plans costing more than $8,500 per year for individuals and $23,000 for families. The thinking is that this would encourage insurers to keep costs down. The White House supports this tack. Considering that the Senate passed its bill with no votes to spare, odds favor the excise tax over the income tax, although labor unions may cut a deal to change some of the details.

The timetable

Most major changes won’t take effect until 2013 (in the House bill) or 2014 (Senate). But a few provisions would become effective sooner.

Both versions would prohibit insurers from placing lifetime limits on coverage and from rescinding coverage except in cases of fraud -- two protections that would take effect six months after the law is signed. Also on the fast track: a provision in both bills that requires policies to provide dependent coverage for children up to age 26 (Senate) or 27 (House). And both versions expand funding for high-risk pools, which can help people with medical conditions find coverage until the guaranteed-issue law takes effect. Also, the House bill would immediately extend eligibility for insurance under COBRA until insurance exchanges are established (COBRA eligibility now lasts for only 18 months if you lose your job).