A health care reform bill could be debated on the floor of the House starting as early as November 5. Late last week, on October 29, the House unveiled the much-anticipated Affordable Health Care for America Act, H.R. 3962. House Leaders have been working for months to merge the health care bills that were approved by the Energy and Commerce, Ways and Means, and Education and Labor Committees in July. H.R. 3962 is the fruit of that labor and replaces H.R. 3200, the original bill put forth by the House. According to the Congressional Budget Office, the bill comes under the President’s $900 billion cost limit at $894 billion over ten years, the net total cost of the bill’s health care coverage.   H.R. 3962 is expected to reach 96 percent of Americans and cover an additional 36 million people by 2019. It is the most far-reaching proposal put forth thus far.
H.R. 3962 keeps many of the basic components of its predecessor, H.R. 3200, but also incorporates some significant changes. It would still establish a national insurance exchange where the uninsured could purchase affordable health plans and create a new public health plan to compete against other private plans offered in the exchange. However, unlike before, the government would have to negotiate payment rates with health providers participating in the new public plan instead of paying them Medicare rates. Because the Exchange would not be ready for some years, H.R. 3962 would create an insurance program that would be available immediately to people who have been uninsured at least for several months or have been denied coverage due to a pre-existing condition. Tax subsidies would continue to be provided to individuals with incomes between 133 and 400 percent of the federal poverty line (FPL) on a sliding scale basis. However, the sizes of the subsidies are less generous in the new House bill. H.R. 3962 also continues to include shared responsibility requirements. All individuals would be required to obtain coverage; those who do not would have to pay a penalty worth 2.5 percent of their adjusted gross income. Hardship exemptions would be provided. Employers will have to offer coverage or pay a fee equal to a percentage of their payroll, although a greater number of businesses would be exempted from the employer mandate in H.R. 3962. The bill exempts businesses with payrolls up to $500,000, instead of $250,000 as set in the earlier version.

Medicaid would be expanded so that all individuals with incomes below 150 percent of the federal poverty level, or about $33,000 for a family of four, would be eligible. The earlier version expanded Medicaid to all eligible individuals below 133 percent of FPL.  The expansion would be financed fully by federal funds for the first two years (2013 and 2014); thereafter states would have to pay 9 percent while federal funds would cover the rest. The bill would also extend for two additional fiscal quarters the increased Medicaid federal matching rate that was provided to states with high unemployment rates in the American Recovery and Reinvestment Act. Currently, these funds are set to expire at the end of 2010. As before, children enrolled in the Children’s Health Insurance Program (CHIP) would be moved into Medicaid or the Exchange when CHIP expires in 2013. Thanks to a new provision in H.R. 3962, young adults would be able to remain on their parents’ health plans up until their 27th birthday.

The bill continues to include critical insurance market reforms that would diminish discriminatory practices and better protect consumers. It would set an annual cap on out-of-pocket costs, limit age-rating (premiums for older age groups could not be more than twice the cost of premiums for younger consumers), ban annual and lifetime benefit limits, and prohibit insurance companies from denying coverage based on pre-existing medical conditions.  These reforms would apply to all policies, including, over time, to employer-sponsored plans.

There are also provisions to strengthen Medicare and improve the health benefits for the elderly and people with disabilities participating in the program. Currently there is a coverage gap for prescription drug benefits in Medicare Part D; this gap is usually called the doughnut hole. H.R. 3962 would begin to close the doughnut hole one year earlier and at a faster rate than in the initial House bill. Beginning in January of 2010 it would provide an additional $500 in coverage which would increase over time to completely eliminate the doughnut hole by 2019. The earlier House bill would have eliminated the doughnut hole over 15 years. H.R. 3962 also eliminates overpayments to private Medicare Advantage health plans over three years. It currently costs the government 14 percent more on average to cover patients in these private plans than through the regular Medicaid program.

To help pay for part for health reform, H.R. 3962 continues to include a tax surcharge on wealthy households. In the new bill households with incomes above $1 million ($500,000 for individuals) would have to pay a 5.4 percent surcharge. This is a much higher income threshold than what was proposed in the original House bill.

The changes included in H.R. 3962 have helped to garner greater support for the bill among moderate Democrats and have increased the prospects for passage of health care reform legislation in the House.  Negotiations in the Senate still continue. Senate Majority Leader Harry Reid (D-NV) has sent the Congressional Budget Office a draft bill including a public option plan that states can choose whether or not to include in their health care exchange. Intended to reassure senators who oppose a public option, the persuasiveness of this “opt-out” approach will likely depend on the cost estimates CBO provides.

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