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Finishing Reform Right: Fixing affordability before the President signs a health care bill

As I noted yesterday, there are two crucial areas that need attention before a final health care bill is sent to President Obama for his signature: Affordability and insurance company accountability. Today, I’ll focus on what specifically needs to be done to make good health care affordable.

The Senate health care bill slated to be passed by Christmas Eve falls short of affordability in three ways:

  1. It lacks adequate subsidies to make health care affordable for those who don’t get it through work and are buying it in the new health insurance exchange
  2. It lacks any shared responsibility provision for employers, meaning employers don’t have to give their employees good health benefits, increasing cost to workers
  3. And it taxes health care benefits to pay for reform, again increasing costs

The House bill comes extremely close to taking care of all of those points in a way that reduces costs for you and me, although it needs improvement on subsidies for low and moderate income people, as discussed below.

Subsidies

The comparison between the subsidies the House bill offers to people purchasing insurance through the exchanges and the subsidies the Senate bill offers is instructive. The House bill is much more affordable for people who make less than about 300% of the Federal Poverty Level (FPL), and the Senate bill is more affordable for people making more than 300% of the FPL.

Some low and moderate-income families won’t be able to afford the Senate bill: For example, a family of 3 that earns $41,000 a year will pay an average of $7,000 a year for health care, or 17% of their income, under the Senate bill, an average obligation that is $2,134 more than under the House bill. And that family could pay a maximum of $9,000 a year on health care, $2,175 more than under the House bill.

Some middle-income families won’t be able to afford the House bill: For example, a family of 3 that earns $70,500 a year will pay an average of $12,166 a year, or 17% of their income, under the House bill, an average obligation that is $1,339 more than under the Senate bill. They could pay a maximum of $18,250 a year, $3,419 more than under the Senate bill.

Click the chart on the right [pdf] for a comparison between the House and Senate bill. Especially check out pages 4-9 for an in-depth look at how much individuals and families would pay for both their premiums and out-of-pocket costs under each bill.

These discrepancies must be fixed to make sure good benefits are within reach for Americans buying insurance on their own. The two bills should be combined so the House’s low and moderate-income provisions are preserved, and the Senate’s middle-income provisions are preserved.

Employer Responsibility

In this area – what and how employers are asked to pitch in to make good health care affordable to their workers – the House bill gets it right. The House bill asks all but the smallest employers to "pay or play." In other words, they have to either provide good health benefits that meet the same standards as the health insurance exchange to their employees and cover the large majority of the cost, or they have to pay into a pool to help cover their employees through the exchange. The House bill’s provisions apply to part-time employees as well as full time.

The Senate bill does almost none of that. Employers do not have to provide coverage to their employees at all. If employers do provide coverage, they can provide low-quality coverage, meaning employees can be stuck with junk health insurance with high deductibles. And, employers don’t have to cover a set percentage of their employees’ health benefits. In fact, they can charge up to 10% of an employee’s wages for health care. So, in the worst-case scenario, an employer can provide bare-bones, high deductible coverage that does nothing for their employee, and charge 10% of their wages for the "benefit." And the employee has no choice but to take the coverage and pay the fee.

To make things worse, employers do have to pay a small fine for full-time workers who receive subsidies in the exchange if there is no health care provided, but not for part-time workers. This provision encourages reducing hours to under 30 per week to avoid this fine.

As a result, the House bill would keep 11 million more Americans in employer-sponsored health care with a standard of good benefits, and would raise $107 billion dollars to help pay for reform. The Center for Budget and Policy Priorities has a rundown of the policy, with the same conclusion.

The final bill should reflect the House’s structure, not the Senate’s, asking employers to pitch in their fair share to help their employees – full and part timers alike – stay healthy and productive.

Fair Financing

The Senate health care bill also taxes "high-cost" health plans to pay for health reform, similar to provisions President Obama ran against.

The benefits tax, or "excise tax," is sold as a way to reduce costs. And it does reduce costs in the same way that buying half a bridge is less expensive than buying a full bridge, but it doesn’t get the job done.

Here’s how the excise tax works: A 40% tax is levied on insurance companies when they sell "high-cost" health care plans. The tax starts at plans costing $23,000 per year or more, meaning it will effect 19% – almost one in five – health care plans in this country by 2016.

That tax is passed on directly to the people who buy these health care plans in the form of premium and other cost increases. The consumers of these health care plans are largely businesses, who’ve been struggling to pay for health care benefits as it is. These businesses face a choice: They can either pass on the increased cost of this tax to their employees, meaning cut wages or higher costs for the company health care plan, or they can buy cheaper plans for their employees that aren’t affected by this tax, meaning less benefits, fewer doctors to choose from, or higher out-of-pocket costs for employees. Either way, it means higher costs or less benefits for employees.

That’s how the excise tax "reduces costs." It makes your health care worse.

By contrast, the House health care bill finances reform in a fair way by asking those in society who can most afford it – people who make over $1 million per year – to pitch in. The final bill should finance reform like the House does, in a way that doesn’t tax millions of middle class health care plans, doesn’t raise costs for businesses and workers, and doesn’t make health benefits at work worse.

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For health reform to work, it must be affordable for people, both at work and out of it. The final bill needs to address the above issues in a real way, otherwise people are going to be saddled with unreasonable costs, coverage won’t improve, medical bankruptcy will still be a reality, and people will continue to die for lack of care.

The bill is heading to conference, and in conference we have an opportunity to merge the House and Senate bill in a way that makes health care affordable for everyone. But we’ll have to fight to get these changes.

Coming up tomorrow, what needs to be changed to really hold the insurance companies accountable.

(also posted at the NOW! blog)

I’m proud to work for Health Care for America Now

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Finishing Reform Right: Fixing affordability before the President signs a health care bill

As I noted yesterday, there are two crucial areas that need attention before a final health care bill is sent to President Obama for his signature: Affordability and insurance company accountability. Today, I’ll focus on what specifically needs to be done to make good health care affordable.

The Senate health care bill slated to be passed by Christmas Eve falls short of affordability in three ways:

  1. It lacks adequate subsidies to make health care affordable for those who don’t get it through work and are buying it in the new health insurance exchange
  2. It lacks any shared responsibility provision for employers, meaning employers don’t have to give their employees good health benefits, increasing cost to workers
  3. And it taxes health care benefits to pay for reform, again increasing costs

The House bill comes extremely close to taking care of all of those points in a way that reduces costs for you and me, although it needs improvement on subsidies for low and moderate income people, as discussed below.

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Jason Rosenbaum

Jason Rosenbaum

Writer, musician, activist. Currently consulting for Bill Halter for U.S. Senate and a fellow at the New Organizing Institute.

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