H.R. 3200, America's Affordable Health Choices Act of 2009: A summary

August 19, 8:06 PMEconomic Policy ExaminerJoseph Hight

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Moheb Ghali, Vice Provost Washington Western University

Most of us don’t have time to read the 1017 pages of the full health care reform House bill, so here is a summary by Moheb Ghali, an economist and Vice Provost for Research and Dean of the Graduate School Western Washington University.  What follows is Ghali’s summary, without comments, of the heart of the bill, Division A – Affordable Health Care Choices:  

1. A Health Choices Administration is created and led by a Commissioner. Within the Health Choices Administration an entity called the Health Insurance Exchange (Exchange) [along with a Health Insurance Exchange Trust Fund] is created to facilitate access by individuals and employers to the variety of optional plans including the public health insurance option.

2. Existing health insurance providers offering Qualified Health Care Benefit (QHCB) plans can participate in the Exchange, such plan is required to provide specified levels of benefits (Basic, enhanced, and premium plans) and, in the case of a plan offering a premium plus level of benefits, provide additional benefits.

3. An existing QHCB plan may choose not to participate in the Exchange; however, such plan must offer the basic package and any other packages it may specify.

4. Four health benefit packages are described: The basic plan (essential coverage) includes: (1) Hospitalization. (2) Outpatient hospital and outpatient services, including emergency department services (3) Professional services of physicians and other health professionals. (4) Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care in institutional settings, physician offices, patients’ homes or place of residence, or other settings, as appropriate.(5) Prescription drugs. (6) Rehabilitative and habilitative services. (7) Mental health and substance use disorder services. (8) Preventive services, including those services recommended with a grade of ‘A’ or ‘B’ by the Task Force on Clinical Preventive Services and those vaccines recommended for use by the Director of the Centers for Disease Control and Prevention. (9) Maternity care. (10) Well baby and well child care and oral health, vision, and hearing services, equipment, and supplies at least for children under 21 years of age.
An enhanced plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing. A premium plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing. A premium-plus plan is a premium plan that also provides additional benefits, such as adult oral health and vision care.

5. Limits on out of pocket cost to participants:
 
a. Annual out of pocket limit: $5,000 for individuals and $10,000 for family, adjusted annually by CPI.
b. Insurance covers 70% individual pays 30%

6. Funding the Exchange:

The Exchange is funded from three sources: (1) Dedicated payments of (a) Taxes on individuals not obtaining acceptable coverage 2.5% of income but not exceeding national average health insurance premium, see (9) below; (b) taxes on employers not providing acceptable coverage, 8% contribution to the Trust Fund in lieu of coverage see (8) below; and (c) Excise tax of 8% of wages of non-covered employees, see (9) below. (2) Premium from the Public health option plan, and (3) Appropriations from Treasury to cover any remaining costs.

7. The public health option

In addition to the QHCB that choose to participate in the Exchange, The Secretary of Health and Human Services shall offer a low-cost health benefits plan (public option plan). The plan must meet all the Exchange requirement of other participating plans. The public option plan shall offer basic, enhanced, and premium plans; and may offer premium-plus plans. The Secretary is authorized any data required to establish premium and benefits and to improve quality and to reduce racial, ethnic, and other disparities in health and health care.

8. Affordability for low income individuals and families

The Commissioner shall pay, out of the Trust Fund to Exchange participating QHBP in which a low income individual or family (income below 400% of poverty level) is participating two subsidies: (a) Affordable premium credit and (b) Affordable cost-sharing credit. The affordable premium credit is the difference between the premium for the coverage, and a percentage of the monthly income determined by the ratio of the family’s income to the poverty level income. The affordable premium is initially1.5% of monthly income for persons with income between 133% and 150% of the poverty level, and graduates to 10% of income for individuals with income between 350% and 400% of poverty level.  [The Medicaid section of the bill makes all those below 133% of poverty income level eligible for Medicaid.] The affordable cost-sharing credit is the difference between the cost sharing under the policy covering the individual and the cost sharing the individual can afford. For those with income between 133% and 150% of the poverty level, the individual would initially be expected to pay 3% of the cost. This graduates to 30% for those whose income is between 350% and 400% of the poverty level.

9. Employers may choose to contribute to Exchange trust fund in lieu of providing coverage.
 
An employer may pay 8% of average wages to the Exchange Trust Fund instead of providing health insurance coverage. For employers with annual payroll of less than $400,000, the contributions are smaller – ranging from 0% for payrolls under $250,000 to 6% fro payrolls between $350,000 and $400,000. This contribution is not applied to the employee’s health insurance premium.

10. Failure of employers to provide coverage or of individuals to enroll in a plan results in tax penalty

Individuals who fail to enroll in a health insurance plan will pay a tax of 2.5% of gross income but not to exceed the average annual premium of health insurance plans.

Employers electing not to provide health benefits must pay an excise tax equal to 8% of the wages of employees not covered (this is in addition to the 8% contribution to the Exchange Trust Fund – this 8% penalty is in the Internal Revenue Code).

11. Tax surcharge on high income individuals.

Individuals earning more than $350,000 will pay a tax surcharge as follows:
Income more than $350,000 but less than $500,000: tax of 1% increases to 2% in 2012
Income more than $500,000 but less than $1,000,000: tax of 1.5% increases to 3% in 2012
Income more than $1,000,000: tax of 5.4%