How the Senate Bill Would Change Healthcare

The stage is set for sweeping new rules on insurance companies, doctors, hospitals—and patients.

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It’s not official yet—but it’s getting awfully close. With the Senate finally passing an $871 billion healthcare reform bill, there’s just one major step left before the most sweeping healthcare legislation in at least 45 years becomes law. Senate negotiators will next meet with their counterparts in the House—which passed its own $894 billion bill in November—to work out the differences and try to forge one bill that Congress can present to President Obama.

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The last hurdle is a high one, though. Like most of the deliberations so far, the House-Senate negotiations will probably be rancorous and tense, with familiar standoffs over the cost of healthcare reform, new fees and taxes, the virtues of a public option, abortion coverage, and pet projects rolled into the bill even though they have nothing to do with healthcare. Obama had hoped to have a signed bill that he could tout during his State of the Union speech, which typically occurs in late January or early February. But the two chambers may still be dickering when Obama takes to the podium. Still, momentum is building toward a historic set of new rules that will profoundly change healthcare, for better or worse.

One reason the final negotiations will be so daunting is that both bills contain hundreds of provisions that would impose new rules on insurers, healthcare providers, employers and patients, while also setting up numerous pilot programs to experiment with ways to provide better, cheaper care. Here are a few provisions of the Senate bill that would impact consumers the most, with a summary of how the House bill compares:

Required coverage (the “individual mandate”). American citizens and legal residents would be required to have health insurance, or pay a fine. For an individual, the fine would be $750 per year or 2 percent of household income, whichever is greater; for a family, the maximum fine would be $2,250 per year or 2 percent of household income. The fines would go into effect gradually, starting in 2014. The House bill is similar, with exemptions for certain low-income people.

Employer obligation. Companies with more than 200 employees would be required to enroll their workers in a health insurance plan, with no ability for employees to opt out. Companies with more than 50 but fewer than 200 workers would not be required to offer insurance, but if they didn’t, they’d have to pay a fee of $750 per employee each year (with some variations). Companies with fewer than 50 workers would not have to offer insurance or pay any fees. Those rules would go into effect in 2014. The House bill would place similar requirements on employers, but with a different way of determining which companies are required to offer insurance.

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Government-run health insurance (the “public option”). There is no public option in the Senate bill. The House bill would establish a government-run insurer that would compete with private insurers offering coverage to those not covered by their employers. The public option is one of the biggest differences between the House and Senate bills, and is likely to be one of the biggest battles as healthcare reform hits the home stretch.

Insurance exchanges. This is how people would buy insurance if they don’t have an employer that provides it. The structure is complicated, but these exchanges would basically be run by each state in conjunction with the federal government, and states would be allowed to create additional mechanisms for offering insurance to their residents. Traditional insurance companies would be allowed to compete for customers through the exchanges, provided they met a set of requirements set by the federal government. The least expensive plans would offer catastrophic coverage only, and not be available to everyone. There would be several other levels of coverage, priced more for each bump-up in benefits. The exchanges would go into effect in 2014. The House bill includes similar reforms, although there would be an additional health-insurance exchange at the national level. And the public health-insurance plan (not included in the Senate bill) would compete with private plans on each of the exchanges.

Subsidies to help pay for coverage. In general, government subsidies would help cover the cost of insurance for individuals earning as much as 400 percent of the poverty level. (In 2009, the poverty level for an individual in most states was $10,830; for a family of 4, it was $22,050. So an individual earning less than $43,320 or a family of 4 earning less than $88,200 would qualify for some aid.) The House bill has a similar income threshold for subsidies, but a different formula for determining how much the subsidy would be.

[See why more competition won’t fix healthcare.]

Medicaid expansion. Eligibility for Medicaid would be expanded to people or families earning 133 percent of the poverty level (with exceptions), effective in 2014. The House bill would broaden Medicaid eligibility to those earning 150 percent of the poverty level, and do so by 2013.

Insurance for high-risk patients. People who can’t get traditional coverage on account of a pre-existing medical condition would be eligible for insurance under a new “national high-risk pool,” with rates comparable to those for the general population. The pool would go into effect quickly—within 90 days of a bill becoming law. The House bill has a similar provision, with different ceilings for allowed premiums and deductibles.

Lifetime limits. Insurance companies would no longer be allowed to cap the amount of lifetime benefits or cancel coverage, unless the patient defrauded the insurer. Those rules would go into effect in 2010. By 2014, there would be tougher limits prohibiting annual caps on benefits, in addition to lifetime caps. The House bill has similar provisions and would go a step further by severely restricting insurance companies’ ability to deny coverage on account of pre-existing conditions.

New taxes. To help pay for increased coverage, a number of long-standing tax credits and deductions would decline, while taxes on some other benefits would increase. One of the most prominent changes would be a tax on “gold-plated” health insurance plans that provide lavish benefits but are expensive; the threshold at which the surtax would kick in would be $8,500 for an individual’s annual premium and $23,000 for a family’s. There’s a lot of fine print, however, and some people with gold-plated plans would probably end up exempted from the tax. The House bill doesn’t tax gold-plated plans, but raises funds through an additional 5.4 percent income tax on individuals earning $500,000 or more per year, and families earning $1,000,000 or more. All of these new taxes are controversial, creating more flash points for negotiators.

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Abortion coverage. Federal subsidies cannot be used to fund abortion unless the life of the mother is at risk or there’s a case of rape or incest. The House bill has a similar provision, with an additional stipulation that prohibits federal money from being spent on any insurer that provides abortions, even if it’s with private funds.

Indoor tanning. Beginning in 2010, there would be an additional 10 percent tax on the cost of indoor tanning services, to help pay for health reform. No kidding. The House bill contains no such provision. Yet.

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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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