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Health Care & Insurance

A Makeover for Health Care

Congress promises to deliver a package by year-end. But there's still a lot to iron out.

Amid heated protests, marathon negotiations and provocative advertising campaigns, U.S. lawmakers vow to change health care as we know it by Christmas. Here's the latest on what the new system might look like.Nearly all of us would be required to have health insurance, with limited exceptions -- cases of extreme financial hardship, for example. Those who go without would have to pay a penalty: $750 a year under one proposal and 2.5% of adjusted gross income (about $1,000 for the median wage earner) under another.


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Complex underwriting standards would virtually disappear: No one could be turned away for a preexisting health condition, and if you got sick, you wouldn't face higher premiums or have to worry about being dropped. Nor would there be caps on annual or lifetime benefits. Even age-based variations would be limited, with the House proposing that the most expensive policy cost no more than twice what the least expensive plan costs. That would lower premiums for older people but boost them big-time for the young and healthy. There's talk in the Senate of raising the ratio to five to one. Kids might stay on your policy longer, with one Senate bill keeping them covered until age 26.

Health plans would have to meet minimum standards. If you have insurance now, your existing plan would likely be grand-fathered in, unless it changes significantly. New plans would probably cover preventive services in full, or nearly so, as well as a percentage of mental-health services, hospital stays, drug prescriptions and so on. But how much of the overall cost of care would be covered is key -- and still up for debate. A bill passed by three House committees says insurance should cover 70% at a minimum; the typical plan now covers 87%. House lawmakers would limit an individual's annual out-of-pocket costs to $5,000, and cap families' outlays at $10,000.

Small businesses and individuals not covered by their employer would shop for insurance on an exchange, where insurers would compete on cost and service. Families with incomes up to four times the federal poverty level ($73,240 for a family of three in 2009) would be granted subsidies on a sliding scale. A huge sticking point is whether a government-run option should be included in the exchange and, if so, how it should pay doctors and other providers. Another option would be to include nonprofit, consumer-owned co-ops.

The $1-trillion question: how to pay for it all. It seems no one wants to treat employer-paid premiums as taxable income for workers. But if House lawmakers prevail, families with incomes above $350,000 ($280,000 for individuals) would face a surcharge ranging from 1% of adjusted gross income to 5.4%.


More likely to pass: an idea floating around the Senate Finance Committee to levy an excise tax on insurers selling high-end plans with premiums above a certain threshold -- say, 35% on premiums exceeding $21,000 to $25,000 for a family policy. Another proposal would cap flexible spending accounts, which let you pay for uncovered health expenses with pretax dollars, at $2,000 a year.