The Senate Finance Committee will be taking up the Chairman’s Mark of America’s Health Future Act of 2009 this week. Several readers have asked questions about the Senator Baucus’ proposal and thought I’d try to address them.
Two caveats before we start, however. First, while I’ve done my best to answer the questions accurately I may have missed the mark. I hope folks who disagree with my analysis will post comments and I urge everyone to read those comments. Second, the Senate Finance Committee will begin marking up the legislation on Tuesday (to “mark-up” a bill is simply to amend it). So what emerges after the Committee’s deliberations is likely to be significantly different than the version we have today. Consequently, some of what’s provided here may be out-of-date in a few days.
1. Will the federal government define what plan designs are available?
The Baucus Proposal requires all policies issued in the individual or small group market (other than grandfathered plans) to fall into one of five benefit categories. (These benefit designs are defined on page 21 of the Chairman’s mark). The four general categories are:
- Bronze: 65% actuarial value
- Silver: 70% actuarial value
- Gold: 80% actuarial value
- Platinum: 90% actuarial value
The fifth option is available only to those 25 years or younger. This catastrophic plan would “be set at the HSA current law limit, but prevention benefits would be exempt from the deductible.”
The proposal limits out-of-pocket expenses to that permitted for HSAs ($5, 950 for individuals and $11,900 for family coverage in 2010) indexed to the “per capita growth in premiums for the insured market.” There are some other restrictions, but within these out-of-pocket guidelines, any plan design is permitted so long as it’s actuarial value is at least 65 percent.
Which begs the question: what does Senator Baucus mean by “actuarial value.” His Chairman’s Mark doesn’t define the term. However, the Congressional Budget Office describes actuarial value as a statistic that “measures the share of health care spending for a given population that would be covered by each plan and thus reflects both covered services and cost-sharing requirements.” The CBO notes, however, there are two ways of calculating this statistic. Again, it is unclear from his document which approach is proposed by Senator Baucus.
2. Underwriterguy asked what the impact would be on high deductible plans.
As noted above, HSA out-of-pocket limits are permitted by the Senator Baucus’ proposal. So HSAs should continue to be available. Further, high deductible plans, even if they are not HSA eligible, will be permitted up to the HSA out-of-pocket maximum.
3. Michael Flynn asked if the insurance exchanges will compete with private insurance brokers or eliminate them.
There is nothing in the Chairman’s Mark that prohibits exchanges from using independent brokers. Better still, the system envisioned by the proposal contemplates a role for brokers. Under the Baucus Plan, exchanges would be created on a state or regional basis. The administrators of each exchange would make the decision whether or not to use brokers. As I’ve written before, I believe the exchanges contemplated by the Senate Finance Committee will be likely to use brokers.
4. Nosedoc asked which health insurance plans will be taxed as so-called “Cadillac Plans.”
Senator Baucus is proposing an excise tax on insurers “if the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount. The tax is equal to 35 percent of the aggregate value that exceeds a threshold amount.” In 2013, the threshold amount would be $8,000 for individual coverage and $21,000 for family coverage. So if the annual insurance premium for employer-sponsored coverage was $10,000, the insurance company would pay a tax of $700 ($10,000 premium – $8,000 threshold = $2,000 x 35% = $700). The threshold amount would be indexed to the Consumer price Index for Urban consumers beginning in 2014). (Chairman’s Mark page 202).
I think these cover all the questions, but if I missed any, please let me know and I’ll do my best to find the answers.