Wednesday, September 23, 2009

Update on Reform - Legislation 101

I've promised to keep you up to date on health care reform proposals and negotiations, but at the moment, the situation is changing so fast -- and, frankly, it's so depressing -- that it's hard to know what to say.

The long-awaited draft from the Senate Finance Committee was released and it's already been amended in some important ways. But there still are real problems created by the desire to find ways to pay for covering the uninsured and providing subsidies and tax credits to the middle class that make it hard to get excited about this.

There are no pre-existing condition exclusions, and there's an insurance "exchange" or marketplace for individual and small group plans where people can go and compare and choose coverage. Policies sold through the exchange can't have annual or lifetime caps, but policies NOT sold through the exchange -- meaning large group plans -- CAN still have caps as long as they are not unreasonable. That's useless and a cop out.

There's an individual mandate, which is going to be part of any plan. The insurance companies only agreed to take on people with pre-existing condition if they get the benefit of everybody being required to have insurance so the healthy people balance out the sick ones. But this draft has monetary penalties on people who don't buy insurance, and insurance is allowed to cost as much as 12% of income for people earning 300% of the federal poverty level -- around $40,000. That's down from 13% in last week's draft, but it's still too high. The penalties are down to $1900 for a family that doesn't buy insurance, but that's also still hefty since it's most likely that a family that doesn't buy insurance will make that decision based on finances.

In addition, so-called "Cadillac plans" will be taxed heavily. The current draft says any amount over $8750 for an individual will be taxed to the insurer at 40%! That means either the insurer will pass the cost onto the insurer or these plans won't be available. I have what they think of as a Cadillac plan. I have no deductible, very small co-pays, but a very high premium of $1000 per month. It's a plan that the insurer is required to offer to nonprofits in Connecticut. So people like me can expect to have to pay up to a $2000 deductible (that's the limit in the current draft), much higher copays -- and the real question is whether my premiums really will be lower. Since there's no public option to compete with private insurers, the private insurers have no incentive to bring premiums down to anything less than 12% of salary. Of course, 12% of my salary makes the plan a Cadillac plan, so go figure how that's going to work out.

There's no public option, but there is the creation of nonprofit co-ops that will be owned and governed by members. There currently is debate over whether the co-ops should be allowed to negotiate rates with providers or, instead, whether the rates should be tied to Medicare rates -- something the doctors and other health care providers are very much against because Medicare rates are lower than private insurance rates. The question is whether co-ops are really viable.

Today's draft has a $2000 cap on deductibles, but unlike the other drafts out there, there is no cap on out-of-pocket expenses, so this version would not eliminate catastrophic losses for patients.

It's important to understand where we are in the process. The Senate HELP Committee already has voted out a bill with a public option, lower premiums and out-of-pocket expenses. Since the Senate Finance bill -- which will change all day every day for the next several days -- and the Senate HELP bill will be vastly different, the Senate will then have to come up with a single bill to be voted on by the whole Senate. The Senate Majority Leader Harry Reid will exert some very real control over that process. The only truly engaged Republican, Olympia Snowe of Maine, has been advocating for a public option with a trigger, meaning that there would be the THREAT of a public option if private insurance wasn't sufficiently affordable. That, she believes, would be a better incentive on insurers to keep premiums down. Her idea may well be a middle ground between a public option without a trigger and co-ops. We'll have to wait and see.

Once there is one Senate bill, there will be floor debate, and here's where the Republicans have some muscle. They can filibuster -- dragging out debate and precluding a vote on the merits -- unless the Democrats invoke "cloture," which means an end to debate and time for a vote. The catch is that the Democrats need 60 votes to invoke cloture. Right now, they have 59 Democrats in the Senate, with Senator Kennedy's seat open. However, the Massachusetts legislature has passed legislation that would allow the Governor to appoint someone to that seat immediately, until the special election in January. Governor Deval Patrick definitely will appoint a Democrat, giving the Democrats 60 votes. But will the conservative Democrats who oppose the merits of the Senate bill stick together to get to cloture? If so, then the Democrats just need a majority to pass the bill.

The House of Representatives has to do the same sort of thing, although there are no rules about filibusters and cloture, so getting to a vote will be easier. Speaker Nancy Pelosi will reconcile the House bills that already have passed committee -- all of which have a public option -- and then there will be a House vote. The Democrats have a much wider margin in the House, so Speaker Pelosi should be able to get her bill passed.

Then comes the real negotiating in what's called the Conference Committee -- all of this other stuff has just been a prelude. The House and Senate bills will be substantially different, with the House bill being far more expensive and, if the President holds tight to his pledge to keep reform deficit neutral, the Senate bill being much closer to reality, and much less generous, as well. The big question: Will there be a public option? Your guess is as good as mine.

One more point. The exchange is NOT a public option -- these are two completely different ideas. The exchange is a place where all of the available policies can be posted for people to be able to compare and select a plan. All of the versions have a minimum benefits package, but there will be "premium" plans that are somewhat more generous for more money. Consumers will be able to shop for health insurance in a way that they never have been able to do before.

The public option would be a plan just like any other insurance plan except run by the government. So the public option would be one of the plans listed in the exchange that consumers could choose if they wish.

That's it for today. Stay tuned. Jennifer


  1. Thanks Jennifer for the update. I was watching the news for this but there is so much cat fighting and ratings grabbing that a clear explanation like this one is so helpful.

    Thank You

  2. Big thanks for take the time to post this. Very informative.

  3. Jennifer, Thanks much for posting this update. I'm finding it depressing too. I'm particularly concerned that almost none of the reform will take place until 2013. Sure hope that date can be moved up at least a couple of years. So, people with prior conditions will not be able to buy insurance since, like you say. there is no prior conditions exclusions in the bill before 2013. In the meantime tens of thousands will die. The Marquette Univ Law School Faculty Blog wrote about some major flaws including this one in the bill on September 16th. Here's that link to tthat blog: Go to the September 16th story:

    CBS also reported on the Harvard University Study this year that concluded 45,000 Americans die each year because they do not have health insurance. Here's a link to that CBS report. It has a link in it for the full study:

  4. Frank, I've been asking and asking for weeks why nobody, including the President, is telling the public that most of the provisions won't take effect until 2013, when the exchange is up and running. There are going to be a lot of angry people if this passes and then people first find out that it doesn't take effect right away.

    I've seen the CBS report, but I haven't read the Marquette blog. I'll check it out - thanks. Jennifer