Senate Health Proposal Includes Insurer Tax, Co-ops; Excludes Public Option

September 9, 2009

Senate Finance Committee Chairman Max Baucus has circulated a healthcare reform proposal he hopes will win support from both Democrats and Republicans.

The proposal is based on weeks of intense negotiations by a bipartisan group of six Finance Committee members led by Baucus, a Democrat.

Here are details of the proposal based on a document circulated to health industry lobbyists as President Barack Obama prepares to make a major speech on healthcare to Congress on Wednesday.

INSURANCE MARKET REFORMS

  • Creates state-based exchanges where individuals and small businesses can shop for insurance.
  • Four categories of minimum benefits would be offered through the exchange. A separate policy offering catastrophic coverage for young adults, a so-called “young invincible” plan, would be offered.
  • Beginning in 2013, insurance companies would no longer be able to exclude people from coverage based on pre-existing conditions. Limited-benefit plans and lifetime limits on coverage would be barred. Insurers would be prohibited from rescinding health coverage.
  • Starting in 2015, two or more states may form compacts to allow for purchase of non-group health insurance across state lines.

HEALTH COOPERATIVES

  • The proposal does not contain a new government health plan, which is backed by Obama and liberal Democrats but opposed by Republicans and health insurers.

    <.li>The proposal provides for the creation of non-profit “consumer operated and oriented” plans or co-operatives.

  • Federal loans would be provided to help with start-up costs and federal grants would be provided to meet state solvency requirements.
  • The co-ops would compete with private insurers in the non-group and small-group insurance markets.

MANDATES AND AFFORDABILITY MEASURES

  • Beginning in 2013, all U.S. citizens and legal residents would be required to obtain health coverage.
  • Federal tax credits would be provided to help people purchase health insurance with incomes up to 400 percent of poverty.
  • The proposal allows an exemption for those who cannot afford coverage.
  • For taxpayers between 100 percent and 300 percent of the poverty line, a penalty of $750 per individual with a maximum $1,500 penalty per family would be imposed if they fail to obtain coverage.
  • For those with income above 300 percent of poverty, a penalty of $950 per individual with maximum penalty of $3,800 per family would be imposed if they fail to obtain coverage.
  • Medicaid would be expanded so everyone up to 133 percent of poverty could qualify.
  • Employers would not be required to offer health insurance.
  • Firms with 50 or more full-time workers would pay a fee for employees who obtain policies subsidized by federal tax credits.
  • No fee would be imposed for workers enrolled in Medicaid.

REVENUE-RAISING FEES AND TAXES

  • An excise tax of 35 percent would be levied on insurance companies for health plans above $8,000 for singles and $21,000 for family plans. The tax would apply to self-insured and group-market plans, but not plans sold in the individual market. Threshold would be indexed for inflation.
  • Health insurance providers collectively would pay an annual fee of $6 billion starting in 2010. The fee would be allocated by companies’ market share.
  • Pharmaceutical companies collectively would pay an annual fee of $2.3 billion, allocated by market share.
  • Medical device makers collectively would pay an annual fee of $4 billion, allocated by market share.
  • Clinical laboratories collectively would pay an annual fee of $750 million. The fee would be allocated by market share with an exemption for small firms.

(Reporting by Donna Smith in Washington; Editing by Eric Beech)

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