After letting Congress try their hand at Health Care reform with just a few very broad priorities, President Obama has gotten a little more specific with his proposal for Health Care Reform (though much more detail is needed to make an accurate assessment). The President’s plan builds upon the House and Senate Proposals in an effort to create a compromised bill. I will reserve judgment on the specific provisions of this proposal until I am able to digest the information in more detail. For now, I have included excerpts from the President’s summary of “Improved” Individual and “Strengthened” Employer Responsibilities under plan.
I will be keeping very close tabs on this and, as information is released, I will continue to share it. If you have more questions or comments, don’t hesitate to share them with us.
Improve Individual Responsibility.
All Americans should have affordable health insurance coverage. This helps everyone, both insured and uninsured, by reducing cost shifting, where people with insurance end up covering the inevitable health care costs of the uninsured, and making possible robust health insurance reforms that will curb insurance company abuses and increase the security and stability of health insurance for all Americans. The House and Senate bills require individuals who have affordable options but who choose to remain uninsured to make a payment to offset the cost of care they will inevitably need. The House bill’s payment is a percentage of income. The Senate sets the payment as a flat dollar amount or percentage of income, whichever is higher (although not higher than the lowest premium in the area). Both the House and Senate bill provide a low-income exemption, for those individuals with incomes below the tax filing threshold (House) or below the poverty threshold (Senate).The Senate also includes a “hardship” exemption for people who cannot afford insurance, included in the President’s Proposal. It protects those who would face premiums of more than 8 percent of their income from having to pay any assessment and they can purchase a low-cost catastrophic plan in the exchange if they choose.
The President’s Proposal adopts the Senate approach but lowers the flat dollar assessments, and raises the percent of income assessment that individuals pay if they choose not to become insured. Specifically, it lowers the flat dollar amounts from $495 to $325 in 2015 and $750 to $695 in 2016. Subsequent years are indexed to $695 rather than $750, so the flat dollar amounts in later years are lower than the Senate bill as well. The President’s Proposal raises the percent of income that is an alternative payment amount from 0.5 to 1.0% in 2014, 1.0 to 2.0% in 2015, and 2.0 to 2.5% for 2016 and subsequent years – the same percent of income as in the House bill, which makes the assessment more progressive. For ease of administration, the President’s Proposal changes the payment exemption from the Senate policy (individuals with income below the poverty threshold) to individuals with income below the tax filing threshold (the House policy). In other words, a married couple with income below $18,700 will not have to pay the assessment. The President’s Proposal also adopts the Senate’s “hardship” exemption.
Strengthen Employer Responsibility.
Businesses are strained by the current health insurance system. Health costs eat into their ability to hire workers, invest in and expand their businesses, and compete locally and globally. Like individuals, larger employers should share in the responsibility for finding the solution. Under the Senate bill, there is no mandate for employers to provide health insurance. But as a matter of fairness, the Senate bill requires large employers (i.e., those with more than 50 workers) to make payments only if taxpayers are supporting the health insurance for their workers. The assessment on the employer is $3,000 per full-time worker obtaining tax credits in the exchange if that employer’s coverage is unaffordable, or $750 per full-time worker if the employer has a worker obtaining tax credits in the exchange but doesn’t offer coverage in the first place. The House bill requires a payroll tax for insurers that do not offer health insurance that meets minimum standards. The tax is 8% generally and phases in for employers with annual payrolls from $500,000 to $750,000; according to the Congressional Budget Office (CBO), the assessment for a firm with average wages of $40,000 would be $3,200 per worker.
Under the President’s Proposal, small businesses will receive $40 billion in tax credits to support coverage for their workers beginning this year. Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies.
The President’s Proposal is consistent with the Senate bill in that it does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are footing the bill for their workers. The President’s Proposal improves the transition to the employer responsibility policy for employers with 50 or more workers by subtracting out the first 30 workers from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount). It changes the applicable payment amount for firms with more than 50 employees that do not offer coverage to $2,000 – an amount that is one-third less than the average House assessment for a typical firm and less than half of the average employer contribution to health insurance in 2009. It applies the same firm-size threshold across the board to all industries. It fully eliminates the assessment for workers in a waiting period, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.