Policy Analysis: HR 3962 Division A - Affordable Health Care

The major change policy wise is in increasing taxes on upper income individuals and using this money to fund health care credits for low wage earners.

Protest Thursday against Healthcare in Washington D.C. photo by Ken Potter, for Salem-News.com.

(EUGENE, Ore.) - Establishes minimum requirements and eliminates anti-trust exemptions for private insurers. Establishes Health Choices Administration, and Health Insurance Exchange. Establishes public health care option bound by same requirements as private insurers.

Mandates employer and individual health care coverage. Imposes taxes to enforce mandates. Imposes taxes on individuals with incomes over $500,000 or $1,000,000 filing jointly.

At 1990 pages HR 3962 is a dauntingly long and complex piece of legislation. It is safe to say that virtually zero private citizens will read it. Pundits, news anchors, and journalists with an interest in factual reporting may get their staff or interns to read it, but that is probably about as good as it gets. In the gap, most of the other reporting on this issue will be quotes from self interested parties, either repeating complete falsehoods, or selectively cherry picking the facts that suit their own agendas.

This article is a review of the Division A of HR 3962, which is legislation to implement major changes in how health care is delivered for the entire population. I have dutifully read the first 360 pages of the bill in order to provide this analysis.

Division B of HR 3962 is the largest section of the bill, and it deals entirely with making administrative changes to existing government health care programs (Medicare and Medicaid). Division C covers plans to increase investments in health care infrastructure and health care training. Division D cover plans for “indian” health care.

The first question that some people may have is: why is HR 3962 so big?

To answer that question: Division A devotes 140 pages to a verbatim reprinting of the Protocols of the Elders of Zion, and the rest lays out the extremely complex bureaucratic process for administering death panels, forced vaccinations, and nationwide “health and wellness internment camps.”

I kid.

The fact of the matter is that developing rules for any program that is going to serve 300 million people is bound to be extremely complex.

When those rules must take into account a mixed marketplace of private for-profit and not-for-profit providers and insurers, federal insurance and health programs, the differing laws and programs of 50 sovereign States, and the ad hoc legislation that has been created over the past 50 years to administer this mess, the results are necessarily long and complex. This is an inevitable outcome of large bureaucracy.

The same process and methodology is used inside any massive private health insurance company, except that unlike with the government, there it is performed in secret by individuals with no electoral accountability.

My review of the bill will simply proceed in chronological order according to section. I will focus on the sections that I consider to be most important. Those that I have skipped are largely supporting text for the policies in the sections that I am highlighting.

I would mention that this is a somewhat superficial review because it is based on a plain text reading of the resolution as opposed to a thorough analysis that takes into account the full body of related Federal law.

*Title I – Immediate Reforms*

101. Creates temporary insurance coverage for people who have been denied coverage due to pre-existing conditions. Sets premiums at maximum of 125% of market level. Establishes $1,500 deductible with maximum of $5,000 per individual and $10,000 per family total cost sharing per year. This coverage will be terminated when Health Insurance Exchange, which includes insurers who are not allowed to exclude people with pre-existing conditions, is established.

102. Requires private insurers to give rebate on premiums if medical expenses are less than 85% of expected amount. Effectively sets limit on profits. Expires when Health Insurance Exchange is established.

103. Bans insurers from rescinding coverage without clear and convincing evidence of fraud or abuse, and establishes requirements for third party review.

104. Requires Secretary of HHS (Health and Human Services) to perform annual review of premium increases. Establishes that premium increases must be justified.

105. Requires insurers to cover dependents up to the age of 27.

109. Bans lifetime limits on coverage.

110. Bans reductions in coverage for retirees under employer health plans unless same reductions apply to active employees.

111. Establishes reinsurance trust fund of $10 billion to pay employer health plans 80% of costs over $15,000 and under $90,000 for covered employees. This is basically a subsidy for companies like GM, Ford, and other big industrial employers who now face ruinous health care liabilities. The alternatives are that the companies default and the government pays through Medicare, so this is a neutral measure from the government's perspective, which will allow these companies to avoid bankruptcy or emerge from bankruptcy more easily.

113. COBRA benefits, which allow employees to continue buying health insurance under their old plan after they are terminated, are extended until Health Insurance Exchange is established.

115. Requires creation of an electronic system to administer claims. System is required to allow for real time determination of costs of coverage at the point-of-sale (doctor's office, hospital, etc). The effect would be a system where health care beneficiaries walk in, provide their information, probably with an electronic swipe card, and immediately know exactly what the cost of care will be and what will be covered. Claims must be settled on the spot. Legislation allows 2 years for the creation of rules for this system, and 6 months to 5 years to establish rules for implementation and enforcement. In other words, this will lead to major savings in time and energy spent on paperwork, but will probably take at 5-10 years to have an effect.

*Title II – Guaranteed Standards for New Plans*

211. Bans exclusions for pre-existing conditions.

213. Establishes that premiums may not vary except on the basis of age, with no more than a 2:1 ratio, on the basis of geographical location, and on the basis of family size.

222. Establishes essential benefits. Sets maximum cost sharing of $5,000 per individual and $10,000 per family. Requires that cost sharing be arranged so that policy covers at least 70% of care. States that insurers are not required to cover abortions (Every single insurer will cover abortions, seeing as how they cost a tiny fraction of providing full maternity care). Establishes that public health care plan will not be bound by any restrictions on using public funds to provide abortions. Requires report in one year on the cost and need of including oral care coverage in health plans.

223. Establishes Health Benefits Advisory Committee chaired by Surgeon General. Committee is to have nine Presidentially appointed non-Federal employees, 9 non-Federal employees appointed by the Comptroller General, and up to 8 Federal employees appointed by the President.

231. Requires establishment of uniform marketing standards.

232. Requires establishment of rules for grievance and appeals process related to claims, with external review, and expedited process for urgent claims that have been rejected.

233. Requires policy terms to be disclosed in clear and understandable language, along with inclusion of information on policy holder's rights, and transparent disclosure of cost sharing provisions.

240. Requires that information of end of life planning and advanced care directives be provided. Specifically prohibits any information discussing euthanasia, even where legal, such as Oregon.

241. Establishes Health Choices Administration with a Commissioner to be appointed by President and confirmed by Senate. This will be the main organization overseeing the Health Insurance Exchange.

262. Eliminates exemption from anti-trust laws for private health insurance providers. These laws prohibit price fixing, collusion in market allocation, and monopolization.

*Title III – Health Insurance Exchange*

301. Establishes Health Insurance Exchange where individuals can purchase coverage from insurers offering qualifying plans. Allows businesses with 25 or fewer employers to purchase coverage on exchange in first year, and businesses with 50 employers or less to purchase coverage in second year, and opens up exchange to all employers in third year.

307. Establishes health insurance trust fund to provide affordability credits funded by taxes in Title V.

310. Provides $5 billion in funding for issuing of grants and loans to non-profit member run health care cooperatives, which must meet same standards as private insurers offering plans on Health Insurance Exchange.

321. Establishes public health insurance plan, which must operate according to same rules as private insurers.

322. Provides $2 billion in initial funding for public health insurance plan. Requires that plan premiums fully finance costs.

341. Establishes affordability credit for U.S. Citizens and lawful immigrants.

343. Establishes that affordability credit will limit premium and out of pocket expenses in proportion to income for individuals under 400% of Federal Poverty Level. For individuals at 133% of the Federal Poverty Level, premiums are limited to 1.5% of adjusted gross income and out of pocket expenses are limited to $500. These numbers scale up to 12% of adjusted gross income and $5,000 in out of pocket expenses for individuals at 400% of the Federal Poverty Level. Currently the Federal Poverty Level is $10,830 for an individual in the 48 continental States.

*Title IV – Shared Responsibility*

401. Requires individuals to obtain health care coverage.

410. Establishes employer responsibility to contribute 72.5% for individual coverage and 65% for family coverage. Prohibits offsetting salary reductions. Gives option of paying 8% of salary as opposed to providing coverage. Provides exception for small employers, limiting contributions for employers with less that $500,000 in total payroll to 0, for $500-$585,000 to 2%, $585-$670,000 to 4%, and $670-$750,000 to 6%.

415. Requires impact study to determine if mandate is creating undue hardship on businesses.

*Title V – Amendments to Internal Revenue Code*

501. Establishes tax on individual incomes of 2.5% of adjusted gross income not to exceed cost of coverage for individuals who do not obtain coverage.

511. Imposes excise tax on employers electing to offer health care coverage, but failing to provide it. Tax is $100 per day per employee. For employers not electing to offer health care coverage, the 8% tax on salary applies, with the exceptions listed above.

521. Provides small business credits for offering health care. Credit is 50% of expenses for employees with a salary of $20,000 or less, and decreases progressively up to a salary of $40,000. Provides tax credit to small businesses with less than 25 employees on a similar basis, but limits it to employees earning less than $80,000. 551. Imposes 5.4% tax on individuals with adjusted gross incomes over $500,000 or joint filings over $1,000,000.

552. Imposes 2.5% tax on medical devices.

*Conclusion*

These provisions are the essence of HR 3962 as it applies to major changes in how health insurance is bought, sold, and regulated. At this point, the House and the Senate will begin to negotiate on a consolidated bill. Many of these provisions are likely to change in large or small ways. The purpose of this analysis is to provide a clear picture of what the House has actually proposed, which should give you some insight into the further negotiations, and the merits of the final bill.

My own conclusions are that this is an imperfect bill, but that it represents the Federal government doing the best that it can under the circumstances. The new regulations on private insurers seem to be basic common sense and in no way punitive. The public option is set up to run on an equal basis with private insurers, and required to fund itself through premiums.

The major change policy wise is in increasing taxes on upper income individuals and using this money to fund health care credits for low wage earners. This seems reasonable under the circumstances. The greatest flaws with this bill have to do with the fact that it is extremely difficult to administer anything on the scale of the entire United States.

It would be greatly preferable if individual States would fulfill their responsibilities to their own citizens and provide reasonable public health care options. I am extremely optimistic about the inclusion of funding for non-profit health care cooperatives. I think that this model would be preferable to government or for-profit corporate health care, and it is heartening to see that it has been thought of and included in this bill.

I will leave you to analyze these matters for yourself, but I would strongly encourage you to contact your elected representatives to share with them whatever informed opinion you may reach.

Ersun describes his writing as being "in the language of the boardroom from the perspective of the shop floor." He adds that "he has no education in journalism other than reading Hunter S. Thompson." But along with life comes the real experience that indeed creates quality writers. Right now, every detail that can help the general public get ahead in life financially, is of paramount importance.

You can write to Ersun at: warncke@comcast.net