Summary of Senate Health Care Bill with Reconciliation
The Senate health care bill, H.R. 3590, passed the House on Sunday, March 21, 2010, by a vote of 219 to 212. A corrections bill, H.R. 4872, has also been passed that makes a number of changes to the underlying Senate bill. Both bills have been signed into law.
This $938 billion health care reform package makes a number of changes to our national healthcare system that mostly take effect in 2014. It includes over $500 billion in cuts to Medicare and over $550 billion in new taxes. It fines individuals who do not obtain qualified coverage and businesses that do not offer coverage. The bill also creates a system of state-run health insurance exchanges and places new requirements on health insurance plans.
New Taxes (in billions): Total $569
• $210.2 – Additional Medicare (HI) payroll tax of 0.9% on earned income in excess of $200,000 for individual and $250,000 for couples. Additional 3.8% on investment income for those with an AGI in excess of $200,000/$250,000. Effective 2013.
• $32.0 – 40% “Cadillac tax” on high-cost health plans. Effective 2018.
• $60.1 - Annual tax on health insurance providers. Effective 2014.
• $52.0 - Employer mandate tax. Effective 2014.
• $27.0 - Annual tax on drug manufacturers / importers. Effective 2011.
• $20.0 - Annual tax on medical device manufacturers / importers. Effective 2013.
• $17.1 - Information reporting on payments to corporations. Effective 2012.
• $15.2 - Raise 7.5% Adjusted Gross Income (AGI) floor on medical expense deduction to 10%. Effective 2013.
• $17.0 - Individual mandate tax. Effective 2014.
• $13.0 - Limit health Flexible Spending Arrangements (FSAs) in cafeteria plans. Effective 2013.
• $4.5 - Eliminate Medicare Part D subsidy deduction. Effective 2013.
• $5.0 - Restrict Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), and FSAs. Effective 2011.
• $2.7 - Impose 10% excise tax on tanning services. Effective 7/1/2010.
• $2.6 - Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund. Effective 2013.
• $1.4 - Increase penalty for nonqualified HSA distributions. Effective 2011.
• $0.6 - Limit deduction for remuneration to officers, employees, directors, and service providers of certain health insurance providers. Effective 2013.
• $0.4 - Modify section 833 treatment of certain health organizations such as requiring that non-profit Blue Cross Blue Shield organizations have a medical loss ratio of 85 percent or higher to get the tax deduction. Effective 2010.
• $60.0 - Other revenue effects
• $23.6 - Deny eligibility of “black liquor” for cellulosic biofuel producer credit. Effective 2010.
• $4.5 - Codify economic substance doctrine. Effective immediately.
Individual Health Insurance Mandate – Do I have to get insurance?
Starting in 2014, you will be required to obtain qualified health insurance for yourself and any dependants or pay a penalty for every month you are not covered. You are allowed a coverage gap of less than 90 days every year.
The penalty begins in 2014 and phases up to its maximum amount in 2016. You will either have to pay a set dollar amount of $695 per year (adjusted for inflation) or 2.5% of your base household income, whichever is higher. Your base income is defined as any amount over the filing threshold for the applicable tax year.
The penalty is assessed for every person in your house who does not have insurance up to a cap of 300 percent of the set dollar amount. In 2016, this cap would be $2,085. If you are a dependent under 18, your set dollar amount is cut in half.
If you are required to pay a penalty but fail to do so, you will receive a notice from Internal Revenue Service (IRS). If you still fail to pay, the IRS can reduce the amount of your future tax refunds by the amount owed. However, if you fail to pay you will not be subject to criminal penalties and the Secretary cannot file notice of a lien or levy against your property.
Exemptions from Individual Mandate: You are exempt from the mandate if;
• you are not required to file a tax return because your income is under the filing threshold;
• your annual premium for the lowest cost plan available exceeds 8 percent of your household income;
• the Secretary of Health and Human Services (HHS) determines you have suffered a hardship to obtain coverage;
• you have a qualifying religious exemption;
• you participate in a health care sharing ministry;
• you are an illegal immigrant;
• you are incarcerated; or
• you are a member of an Indian tribe.
What is considered “Qualified Insurance?”
You will be considered covered and meeting the terms of the individual mandate if you have health insurance under any of the following programs:
• Government Sponsored Programs:
- Children’s Health insurance Program (CHIP)
- Veteran’s Health Care Program
- the Peace Corps Program
- a local, state, federal, or Indian tribal government program
• Employer-sponsored plans that meet the government requirements
• Plans purchased in the newly created state-run exchanges
• Grandfathered plans - Existing policies could remain in effect as long as you continuously maintained your coverage. However, these plans would be subject to the new requirements and restrictions.
• Any other health benefits coverage recognized by the Secretary of Health and Human Services
State-Run Health Insurance Exchanges
This bill creates a system of state-run health insurance exchanges for the individual and small-group insurance market. Insurers do not have to participate in the exchange, and private insurers would be able to sell policies directly to consumers as well.
The bill establishes a process for the federal government to impose benefit standards for all plans, including those in the exchange. Plans in the exchange, and all other qualified health plans, would fall into several tiers: bronze (covering 60 percent of anticipated expenses), silver (70 percent), gold (80 percent), and platinum (90 percent). A young adult plan offering catastrophic coverage would also be available in the exchange, but only to individuals under the age of 30.
States would be required to implement market reforms and to establish an exchange by January 1, 2014. If states have failed to do so in time, the Secretary would implement and enforce those requirements, and would establish and operate an exchange – either directly or through an agreement with a nonprofit entity.
Exchange Eligibility: Legal residents of a state can enroll in a plan through their state’s exchange. Before 2016, small employers with less than 50 employees (100 employees if allowed by state) could offer coverage through a separate business exchange. Beginning in 2017, states could allow larger employers to participate, though they are not required to do so.
Will I get help paying for insurance coverage?
Starting in 2014, individuals earning up to 400 percent of the federal poverty level (FPL) will be eligible for a subsidy to purchase insurance through an exchange. Credits are available on a sliding scale so that a person would have to pay no more than 9.5 percent of his or her income for premiums.
If you make more than 400 percent FPL, you will not qualify for a subsidy. Currently, for a family of three, 133 percent FPL is $24,352, and 400 percent FPL is $73,240. Below is a Congressional Research Service table listing the maximum amount of out-of-pocket premiums a person receiving a subsidy would be required to pay.
Employer Requirements beginning in 2014
All businesses with more than 50 full-time employees are subject to new health insurance requirements. Full-time employees are those working an average of 30 hours per week. Seasonal workers are not counted.
Although the Senate bill exempts employers with 50 or less full-time employees, the reconciliation bill now includes part-time workers for purposes of the determining the employer’s status as a “large business.” Specifically, the bill would require employers, on a monthly basis, to divide the number of hours of part-time employees by 120.
Businesses that do not offer coverage will be fined $2,000 for each full-time employee, if at least one employee receives a subsidy to purchase insurance through an exchange.
Business that do offer coverage would face a penalty of either $3,000 for each full-time employee who receives a subsidy, or $2,000 per full-time employee, whichever would be less. To calculate the fine, the bill would subtract 30 employees from the actual number of people employed at a firm.
Small Business Tax Credit: The bill includes a sliding scale tax credit for small businesses. From 2010 to 2013, a qualifying business can get a credit worth 35 percent of their share of insurance premiums. Beginning in 2014, a firm can get a 50 percent credit for up to two years.
Small businesses with less than 10 employees and with average taxable wages of $25,000 qualify for the full credit. This credit would phase out as the number of employees increase from 10 to 25 and average compensation from $25,000 to $50,000.
Medicare
The 13th District has 104,000 seniors on Medicare with over 6,500 benefiting from extra benefits and reduced cost-sharing through Medicare Advantage (MA). This bill cuts over $500 billion from Medicare with $132 billion coming directly out of MA. Other significant cuts include $156.6 billion from inpatient and outpatient hospital services and $39.7 billion in cuts to hospitals that serve low-income patients.
The Office of the Actuary for the Centers for Medicare and Medicaid Services stated that under the base Senate bill, Medicare payments to doctors would “grow more slowly than, and in a way that was unrelated to, the providers’ costs of furnishing services to beneficiaries. Thus, providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
The bill also provides rebates of $250 and implements a 50 percent discount on brand name drugs when beneficiaries fall in the Part D coverage gap. However, it also increases Part D premiums for higher income enrollees similar to Part B premiums.
TRICARE and Veterans Affairs Health Program
The Senate bill requires that a person be enrolled in a health insurance plan that meets minimum essential coverage requirements to comply with the individual mandate. Ultimately, all persons covered under TRICARE and Veterans Affairs health programs will be considered to be in compliance. There was some concern of whether or not the language in the Senate bill properly covered these programs. However, separate legislation was passed to ensure compliance for those covered under TRICARE and VA health programs.
Additionally, the President has pledged that the Secretary of Defense would continue to maintain sole authority over TRICARE to maintain that program’s independence.
Medicaid and Texas
This bill raises the income limits for the Medicaid program that provides low-income individuals with health care and makes changes to the CHIP program that covers low-income children. The bill expands the eligibility for Medicaid to all individuals with incomes of up to 133 percent of the federal poverty level, which is currently $29,327 for a family of four.
Nearly half of the 32 million people that are expected to become newly insured will be covered under Medicaid/CHIP.
The Texas commission that oversees both programs estimates that over ten years state Medicaid/CHIP costs will increase by $24 billion ($2.4 billion per year).
With Texas already expecting to spend around $8.46 billion for Medicaid/CHIP in 2010, this bill will increase yearly Medicaid/CHIP costs by 28.4 percent.
Texas is facing at least a $10 billion budget shortfall. To maintain this new federal requirement, the State could have to raise taxes to pay for this expansion of Medicaid.
Immediate Private Insurance Requirements
Although many of the bill’s provisions would not take place until 2014, there are many immediate requirements placed on the private insurance market and grandfathered insurance plans. The bill would:
• Prohibit lifetime limits and restrict annual limits on essential health benefits;
• Prohibit canceling a policy after a policy holder submits medical claims;
• Extend dependant coverage up to age 26 within 6-months; and
• Create temporary high-risk pools for individuals with a preexisting condition.
Private Insurance Requirements Effective in 2014
• Prohibit excluding coverage for preexisting health conditions;
• Prohibit basing eligibility for coverage on health status-related factors;
• Prohibit imposing a waiting period greater than 90 days;
• Impose non-discrimination requirements with respect to participating health care providers and individuals enrolled in such coverage;
• Require health insurance issuers to offer coverage on a guaranteed issue and guaranteed renewal basis;
• Require issuers in the individual and small group markets to determine premiums for such coverage using adjusted community rating rules; and
• Require insurers to offer coverage that includes the "essential health benefits package." This would include ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness and chronic disease management; and pediatric services, including oral and vision care.
Coverage
The Congressional Budget Office estimates that 32 million more people will become insured under this bill leaving 23 million uninsured (about one-third of whom are illegal immigrants). This would increase the percentage of non-elderly insured from around 85 percent to 94 percent.
16 million are expected to become newly insured under Medicaid. 8 million people are expected to drop their employer-sponsored coverage or other non-group coverage. 24 million people are expected to be covered under the newly created state-run exchange.
Members of Congress: Members of Congress and official office congressional staff are no longer eligible to be covered under the Federal Employees Health Benefits Program (FEHBP) and could only enroll in health plans created under this Act, or offered through an exchange. All other congressional committee and leadership staff, federal employees, and the President would still be eligible to be covered under FEHBP.
Abortion: The Senate Amendment permits individuals who receive a subsidy reduction to purchase an exchange plan that includes coverage for elective abortions. The measure includes payment and accounting requirements to try and separate funds attributable to a premium subsidy and those used to pay for elective abortion services. Under this mechanism, plan issuers would be required to collect two payments, one for the plan and one for the abortion rider. However, this accounting mechanism has been rejected by pro-life organizations, such as the U.S. Conference of Catholic Bishops, that see it as departure from long-standing federal policy against funding plans covering abortion.
Illegal immigrants: The bill does require a name, date of birth, and Social Security number to sign up for an insurance plan in the exchange and premium subsidies. However, there are no requirements to show valid identification to match these documents leaving the door open for fraud and abuse. There are many people that believe this provision does not go far enough to ensure that benefits go only to citizens and legal residents.
Impact on Doctors and Hospitals
Medicare Payment/ Sustainable Growth Rate (SGR) – This bill does not address the issue of the pending 21 percent payment cut to Medicare physicians. Congress has prevented these cuts from taking place since 2002. According to the CBO, preventing these cuts will cost $208 billion.
Independent Medicare Advisory Board – This bill establishes a new Medicare board to reduce Medicare payments under a new target system and fast track legislative approval process. Any recommendation made by the board would go take effect automatically unless Congress enacted specific legislation to prevent their implementation. This could begin in 2015. The board is prohibited from issuing recommendations that would ration care, or change benefits, eligibility rules, or require cost-sharing, such as premiums and co-payments.
Expansion into health market: Starting in 2015, the board is required to submit recommendations to slow the rate of growth in national health expenditures. These recommendations could be implemented either administratively by the Secretary of HHS or by Congress.
Physician Ownership Referral – This bill places new restrictions on physician self-referral. Currently, doctors are allowed to refer patients to a hospital in which that they have a financial interest if they are authorized to practice medicine at that hospital. They can also refer patients to a hospital if their ownership stake is in the “whole hospital” and not just one specific part or department.
This legislation will prevent physician-owned hospitals from receiving any Medicare reimbursement unless they have a Medicare provider agreement in place before December 1, 2010. Even for these grandfathered hospitals, there are limitations and restrictions on any future expansion. The American Medical Association believes this provision will severely limit physician-owned hospitals and effectively shut down many that are currently in operation.
Physician Quality Reporting System (PQRI) – This bill modifies the PQRI system that provides incentive payments to physicians who satisfactorily report data on quality measures. Incentive payments are extended through 2014 and eligible professional who fail to successfully report quality measures will now face a penalty beginning in 2015.
Hospital Pay-for Quality – Starting in 2012, hospitals will receive incentive payments based on their performance in meeting a set of quality measures. The Secretary of HHS is charged with establishing performance standards and a methodology for assessing the total performance of each hospital. Individual hospital performance on each measure will be publicly reported. Hospitals will have a process to appeal their performance assessment and score.
Transparency Reports – Adds a new section to the Social Security Act to require covered drug, device, biological, or medical supply manufacturers to report to the Secretary of HHS specified information on transactions to a physician or teaching hospital.
Miscellaneous
Restaurant Menu Labeling – Starting next year, all chain restaurants and food vending machines will be required to list nutritional information for each available item. This applies to any chain that has at least 20 stores and any business that operates at least 20 vending machines.
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Summary of Senate Health Care Bill with Reconciliation
