HR 3962, the Affordable Health Care for Americans Act, hit the House floor with a thud Thursday morning at 1990 pages, almost double the size of the bill we last saw before the Energy and Commerce hearings at the end of July.  The bill incorporates, of course, amendments from the House jurisdictional committees, but also ideas from the Senate Finance bill and some new initiatives as well. In addition, far more than earlier congressional versions of health reform legislation, the new bill includes important initiatives that will impact the American public quickly, an important consideration both substantively and politically.

The intent of this post is to describe what is in the bill and the longer-term politics and policies that the bill’s contents represent.  The politics de jour of the bill are being amply covered by the media and will be given less attention here.

Most of the discussion over the summer and fall has focused on the health insurance reforms in the bill, and in particular on the public plan.  These reforms remain in the bill, and have indeed been expanded.  Over three-quarters of the bill, however, concerns other subjects.  The legislation would make major changes in the Medicare and Medicaid programs; establish a number of workforce, wellness, and prevention initiatives; significantly amend Native Americans health care legislation, establish a new voluntary insurance program for community living assistance services and support (CLASS) like that advanced by the late Senator Kennedy; revoke the insurance antitrust exemption, encourage certain state malpractice reform efforts, and enact a licensing pathway for biosimilars.

The bill finances health care coverage expansions in part through payment reductions to or excise taxes imposed on insurers and providers, which will also affect the health care system.  The bill comes in under the $900 billion for 10 year marker set by President Obama, although just includes the cost of coverage expansions.  The CBO scores it as reducing the deficit over the next 10 years and has cautiously stated that it may reduce the deficit going forward.  The legislation also, like the Senate Finance bill, does not include a permanent Medicare physician payment fix, and thus does not accurately portray the future cost of health care.

Health Care Financing Reforms 

The basic elements of the health care financing reforms are very similar to those found in HR 3200, and indeed in the bills marked up in the Senate by the Health, Education, Labor, and Pensions (HELP) and Finance Committees.  The details, however, are somewhat different.  The basic building blocks of reform are as follows:

  • First, the bill would dramatically reform the insurance market, prohibiting pre-existing condition exclusions; eliminating underwriting based on health status, gender or occupation; limiting out-of-pocket expenses; removing lifetime or annual coverage caps; and mandating medical loss ratios. It would also define “essential” benefits that must be covered by insurance plans, improve insurance disclosure and transparency, define marketing standards, and require fair grievance and appeal procedures.  This part of the bill closely resembles the Senate bills and is likely to be part of the final legislation.
  • Second, the legislation would create a national health insurance exchange through which all new nongroup policies would be sold and through which insurance would also be available for employees of small and perhaps eventually large employers. The exchange is supposed to increase the accountability of health insurers and the transparency of their products as well as reducing costs through increasing competition and limiting administrative costs.  The Senate bills also create exchanges, but at the state level.  The final legislation is likely to include exchanges, but as will be discussed in my next post, the House version of exchanges is the most ambitious approach.
  • Third, the legislation would require employers with payrolls exceeding $500,000 per year to provide health insurance to their insurers or pay a penalty (which does not fully phase in until payroll reaches $750,000).  According to House leadership, 86% of American businesses would be exempt from this requirement, though most employees would be covered.  The legislation would provide tax credits to small businesses who offer their employees health insurance.  The Senate Finance bill has a much weaker mandate, but the final bill is likely to include a mandate of some sort.
  • Fourth, individuals would be required to purchase health insurance or pay a tax of 2.5% of their adjusted gross income above the income tax filing threshold up to the cost of an average insurance policy.  If insurers are not allowed to underwrite based on health status, healthy as well as unhealthy individuals must be in the market, and this mandate would help drive them into it.  For this reason, all of the bills contain an individual mandate and one is likely to be in the final bill, although this is one of the provisions of the bill that evokes the most visceral opposition. 
  • Fifth, affordability subsidies are available to help lower income individuals and families purchase insurance and to lower their cost sharing obligations. This should lessen the burden of the individual mandate.  The subsidies are set at the levels established by the Blue Dog amendments in the Energy and Commerce Committee.  On the whole, the premium subsidies are much more generous than those found in the Senate Finance Committee but less generous than those in the HELP bill, while the cost-sharing subsidies are generally more generous than those found in either of the Senate bills.
  • Sixth, the bill would expand Medicaid eligibility to 150% of poverty level and eliminate current categorical eligibility requirements.  The Federal Medicaid match for those to whom coverage is extended would be 100% in 2013 and 2014 and 91% after 2015.   The Senate Finance bill sets eligibility at 133% of poverty, as did HR 3200. Because Medicaid coverage costs the federal government less than would the premium subsidies needed to cover those between 133% and 150% of poverty through private health insurance, however, HR 3962 lifted the coverage ceiling.  Significantly, the legislation would increase payments to primary care practitioners who participate in Medicaid to 100% of the Medicare level by 2012 and transfers most of the cost of the increased payments to the federal government. The legislation goes a good distance toward reducing the burden of Medicaid expansions on the states, which are currently reeling from the recession. The states are likely to continue to be wary of the future costs the legislation threatens, however.
  • Finally, there is the public plan.  HR 3200 had a “robust” public plan, while the Senate HELP bill provides for weaker, state-based plans and the Finance bill has no public plan at all.  HR 3962, as has been widely reported, continues to have a public plan available to individuals who purchase insurance through the exchange.  The public plan, however, would have to negotiate rates with providers, which, as will be discussed in a subsequent post, will in all likelihood doom it from the start.

HR 3962’s Quick Impact

One of the most important contributions of the latest version of the House bill is that it offers a host of programs and regulatory initiatives that would be noticed immediately or in the very near future by many Americans.  The media has largely ignored a major problem with prior versions of both the House and Senate health reform bills:  almost none of the new programs would go online until 2013.  Congress would, that is, after an epic struggle and with great fanfare enact health care reform and then for three years—during which two congressional elections and a presidential contest would take place—nothing would happen.  The likelihood that the legislation would still be in place after three years of no visible signs of life is, to my mind, remote.  Remember Medicare Catastrophic.

HR 3200 contained an interim reinsurance program for high cost coverage of early retirees.  The Senate Finance bill added a temporary federal high risk pool program for persons denied coverage because of preexisting conditions.  HR 3962 retains the original reinsurance program, expands the high risk pool, and adds several additional programs or requirements that would be initiated immediately, either on an interim basis or permanently.

First, it imposes immediately a number of regulatory requirements on insurers (or, in some cases employers).

  • Health insurers in the small and large group market would have to achieve a medical loss ratio of 85%.  Insurers in the individual market would have to reach the same goal unless HHS determined that to do so would destabilize the market. 
  • Insurers would have to justify increases in premiums through a rate review process implemented by the federal and state governments.  Some insurers are reportedly demanding double-digit premium increases for next year.  This section, entitled “sunshine on price gouging,” is congressional push back.
  • Insurers would not be able to rescind coverage of either individuals or small groups without proof of fraud by clear and convincing evidence, with an independent-third party review.
  • Pre-existing conditions clauses would be dramatically limited in the small group market.
  • Lifetime caps on coverage would be eliminated.
  • Parents would be given the option of retaining their children on their policies up to age 26, although an extra premium could be charged for the coverage.
  • COBRA coverage will be extended until the exchange is operational.
  • Employers would not be able to reduce post-retirement health benefits unless they also reduced coverage for active employees.

A New High-Risk Pool

Second, a couple of new benefit programs go online immediately.  The most important of these is the high-risk pool for the uninsured.  This would be a national program, similar to existing state high risk pools, that would be established immediately and would remain in place until 2013 when the exchange went online.  It would cover persons who are not eligible for Medicaid, Medicare or SCHIP and who have been uninsured for six months or more, or who have been denied coverage or been offered limited or unaffordable coverage because of a preexisting condition.   Persons who have had employee coverage for at least 18 months and then lost coverage and exhausted COBRA coverage would also apparently be eligible.  Insurers or employers who try to dump their enrollees or employees into the plan would be sanctioned.  Premiums could cost up to 125% of the prevailing rate for individual coverage in the market and deductibles of up to $1500 and out-of-pocket limits of up to $5000 individual/$10,000 family could be imposed, so the coverage would not be a bargain.  But the provision establishes a major federal insurance program, while at the same time dramatically highlighting gaps in private coverage.

The bill would further introduce immediately a new program to reimburse employers for 80% of the cost of high cost claims (between $15,000 and $90,000) submitted by early retirees.  The payments would be used to reduce premiums and cost-sharing.  The legislation also provides for grants to states for immediate health reform initiatives. 

The bill promises noticeable improvements in Medicare and Medicaid.  It would begin shrinking the size of the Part D donut hole by $500 in 2010, and move toward the elimination of the donut hole by 2019.  It would provide Medicare beneficiaries with a 50% discount for brand-name drugs in the donut hole and eliminate cost-sharing for preventive services.  Further improvements in Medicare coverage would come in 2011 and 2012, including improving access to Part D low-income subsidies and limiting cost-sharing in Medicare Advantage plans.  It is no doubt hoped that these changes will increase support for reform among seniors, one of the groups most suspicious of reform efforts.

My next post will examine more closely the bill’s permanent insurance reforms, the exchange, the public plan, the mandates, and the affordability subsidies.  The next post will also consider, although not in as much detail, the Medicare, Medicaid, workforce, and public health sections of the bill.  Finally, it will review the revenue provisions of the bill.

Editor’s Note: A 3rd post examines delivery system reforms and other measures in the bill. And a 4th post analyzes what changed in the bill the House approved Saturday night.