House Tri-Committee

America's Affordable Health Choices Act of 2009 (H. B. 3200)

Senate Finance Committee

America's Healthy Future Act of 2009

Senate HELP Committee

Affordable Health Choices Act

Overall Approach

Require individuals to have health insurance. Create a Health Insurance Exchange through which individuals and smaller employers can purchase health coverage, with premium and cost-sharing credits available to individuals/families with incomes up to 400% of the federal poverty level (or $ 73,240 for a family of three in 2009). Require employers to provide coverage to employees or pay into a Health Insurance Exchange Trust Fund, with exceptions for certain small employers, and provide certain small employers a credit to offset the costs of providing coverage. Impose new regulations on plans participating in the Exchange and in the small group insurance market. Expand Medicaid to 133% of the poverty level.

Require most U. S. citizens and legal residents to have health insurance. Create state-based health insurance exchanges through which individuals can purchase coverage, with premium and cost-sharing credits available to individuals/families with income between 100-400% of the federal poverty level (the poverty level is $ 18,310 for a family of three in 2009) and create separate exchanges through which small businesses can purchase coverage. Assess a fee on certain employers that do not offer coverage for each employee who receives a tax credit for health insurance through an exchange, with exceptions for small employers. Impose new regulations on health plans in the exchange and in the individual and small group markets. Expand Medicaid to all individuals with incomes up to 133% of the federal poverty level.

Require individuals to have health insurance. Create state-based American Health Benefit Gateways through which individuals and small businesses can purchase health coverage, with subsidies available to individuals/families with incomes up to 400% of the federal poverty level (or $ 73,240 for a family of three in 2009). Require employers to provide coverage to their employees or pay an annual fee, with exceptions for small employers, and provide certain small employers a credit to offset the costs of providing coverage. Impose new regulations on the individual and small group insurance markets. Expand Medicaid to all individuals with incomes up to 150% of the federal poverty level.

Individual Mandate

Require individuals to have “acceptable health coverage. ” Those without coverage pay a penalty of 2. 5% of modified adjusted gross income up to the cost of the average national premium for self-only or family coverage under a basic plan in the Health Insurance Exchange. Exceptions granted for dependents, religious objections, and financial hardship.

Require U. S. citizens and legal residents to have qualifying health coverage. Enforced through a tax penalty of $ 750 per adult per year. The penalty will be phased-in according to the following schedule: $ 0 in 2013; $ 200 in 2014; $ 400 in 2015; $ 600 in 2016; and $ 750 in 2017. Exemptions will be granted for financial hardship, religious objections, American Indians, and if the lowest cost plan option exceeds 8% of an individual's income or if the individual has income below 133% of the poverty level.

Require individuals to have qualifying health coverage. Enforced through a minimum tax penalty of $ 750 per individual per year (maximum penalty per family of 4 times the individual penalty). Exemptions to the individual mandate will be granted to residents of states that do not establish an American Health Benefit Gateway, members of Indian tribes, those for whom affordable coverage is not available, those without coverage for fewer than 90 days, and those with incomes below 150% FPL.

Employer Requirements

● Assess employers with more than 50 employees that do not offer coverage a fee for each employee who receives a tax credit for health insurance through an exchange. The penalty is the lesser of a flat dollar amount equal to the average national tax credit for each full-time employee receiving a tax credit or $ 400 times the total number of full-time employees in the firm.

● Exempt employers with 50 or fewer employees from the penalty.

● Require employers with 200 or more employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage if they have coverage from another source.

● Require employers to offer health coverage to their employees and contribute at least 60% of the premium cost or pay $ 750 for each uninsured full-time employee and $ 375 for each uninsured part-time employee who is not offered coverage. For employers subject to the assessment, the first 25 workers are exempted.

● Exempt employers with 25 or fewer employees from the requirement to provide coverage.

Premium Subsidies

● Provide affordability premium credits to eligible individuals and families with incomes up to 400% FPL to purchase insurance through the Health Insurance Exchange. The premium credits will be based on the average cost of the three lowest cost basic health plans in the area and will be set on a sliding scale such that the premium contributions are limited to the following percentages of income for specified income tiers:

133-150% FPL: 1. 5 - 3% of income

150-200% FPL: 3 - 5% of income

200-250% FPL: 5 - 7% of income

250-300% FPL: 7 - 9% of income

300-350% FPL: 9 - 10% of income

350-400% FPL: 10 - 11% of income

[E&C Committee amendment: Replaces the above subsidy schedule with the following:

133-150% FPL: 1. 5 - 3% of income

150-200% FPL: 3 – 5. 5% of income

200-250% FPL: 5. 5 - 8% of income

250-300% FPL: 8 - 10% of income

300-350% FPL: 10 - 11% of income

350-400% FPL: 11 - 12% of income]

[E&C Committee amendment: Increase the affordability credits annually by the estimated savings achieved through adopting a formulary in the public health insurance option, pharmacy benefit manager transparency requirements, developing accountable care organization pilot programs in Medicaid, and administrative simplification. ]

[E&C Committee amendment: Increase the affordability credits annually by the estimated savings achieved through limiting increases in premiums for plans in the Exchange to no more than 150% of the annual increase in medical inflation and by requiring the Secretary to negotiate directly with prescription drug manufacturers to lower the prices for Medicare Part D plans. ]

● Provide affordability cost-sharing credits to eligible individuals and families with incomes up to 400% FPL. The cost-sharing credits reduce the cost-sharing amounts and annual cost-sharing limits and have the effect of increasing the actuarial value of the basic benefit plan to the following percentages of the full value of the plan for the specified income tier:

133-150% FPL: 97%

150-200% FPL: 93%

200-250% FPL: 85%

250-300% FPL: 78%

300-350% FPL: 72%

350-400% FPL: 70%

● Limit availability of premium and cost-sharing credits to US citizens and lawfully residing immigrants who meet the income limits and are not enrolled in qualified or grandfathered employer or individual coverage, Medicare, Medicaid (except those eligible to enroll in the Exchange), TRICARE, or VA coverage (with some exceptions). Individuals with access to employer-based coverage are eligible for the premium and cost-sharing credits if the cost of the employee premium exceeds 11% of the individuals' income [E&C Committee amendment: To be eligible for the premium and cost-sharing credits, the cost of the employee premium must exceed 12% of individuals' income. ].

Tax Changes

Impose a tax on individuals without acceptable health care coverage of 2. 5% of modified adjusted gross income.

● Impose a tax on individuals without qualifying coverage of $ 750 per adult per year to be phased-in beginning in 2014.

● Impose an excise tax in 2013 on insurers of employer-sponsored health plans with aggregate values that exceed $ 8,000 for individual coverage and $ 21,000 for family coverage (these threshold values will be indexed to the consumer price index for urban consumers (CPI-U) plus 1%). The threshold amounts will be increased for retired individuals age 55 and up and for employees engaged in high-risk professions by $ 1,850 for individual coverage and $ 5,000 for family coverage. In the 17 states with the highest health care costs, the threshold amount is increased by 20% initially; this premium increase is subsequently reduced by half each year until it is phased out in 2015. The tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is imposed on the issuer of the health insurance policy, which in the case of a self-insured plan is the plan administrator or, in some cases, the employer. The aggregate value of the health insurance plan includes reimbursements under a flexible spending account for medical expenses (health FSA) or health reimbursement arrangement (HRA), employer contributions to a health savings account (HSA), and coverage for dental, vision, and other supplementary health insurance coverage.

● Conform the definition of medical expenses for purposes of employer provided health coverage (including HRAs and health FSAs), HSAs, and Archer medical savings accounts to the definition for purposes of the itemized deduction for medical expenses. This change will exclude the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through an HRA or health FSA and from being reimbursed on a tax-free basis through an HSA or Archer MSA.

● Increase the tax on distributions from a health savings account that are not used for qualified medical expenses to 20% (from 10%) of the disbursed amount.

● Limit the amount of contributions to a flexible spending account for medical expenses to $ 2,500 per year.

● Increase the threshold for the itemized deduction for unreimbursed medical expenses from 7. 5% of adjusted gross income to 10% of adjusted gross income for regular tax purposes. Individuals age 65 and older are exempt from the increased threshold.

● Impose new fees on segments of the health care sector:

○ $ 2. 3 billion annual fee on the pharmaceutical manufacturing sector;

○ $ 4 billion annual fee on the medical device manufacturing sector; and

○ $ 6. 7 billion annual fee on the health insurance sector.

Impose a minimum tax on individuals without qualifying health care coverage of $ 750 per individual per year (maximum family penalty of 4 times the individual penalty).

Pooling Mechanism

● Create a National Health Insurance Exchange, through which individuals and employers can purchase qualified insurance. Allow states to operate state-based exchanges if they demonstrate the capacity to meet the requirements for administering the exchange.

● Restrict access to coverage through the Exchange to individuals who are not enrolled in qualified or grandfathered employer or individual coverage, Medicare, Medicaid (with some exceptions), TRICARE, or VA coverage (with some exceptions).

● Create a new public health insurance option to be offered through the Exchange that must meet the same requirements as private plans regarding benefit levels, provider networks, consumer protections, and cost-sharing. Require the public plan to offer basic, enhanced, and premium plans and permit it to offer premium plus plans. Finance the costs of the public plan through revenues from premiums. For the first three years, set provider payment rates in the public plan at Medicare rates and allow bonus payments of 5% for providers that participate in both Medicare and the public plan and for pediatricians and other providers that don't typically participate in Medicare. In subsequent years, permit the Secretary to establish a process for setting rates. [E&C Committee amendment: Require the public health insurance option to negotiate rates with providers so that the rates are not lower than Medicare rates and not higher than the average rates paid by other qualified health benefit plan offering entities. ] Health care providers participating in Medicare are considered participating providers in the public plan unless they opt out. Permit the public plan to develop innovative payment mechanisms, including medical home and other care management payments, value-based purchasing, bundling of services, differential payment rates, performance based payments, or partial capitation and modify cost sharing and payment rates to encourage use of high-value services. [E&C Committee amendment: Clarify that the public health insurance option must meet the same requirements as other plans relating to guarantee issue and renewability, insurance rating rules, network adequacy, and transparency of information. ] [E&C Committee amendment: Require the public health insurance option to adopt a prescription drug formulary. ]

● Create four benefit categories of plans to be offered through the Exchange:

○ Basic plan includes essential benefits package and covers 70% of the benefit costs of the plan;

○ Enhanced plan includes essential benefits package, reduced cost sharing compared to the basic plan, and covers 85% of benefit costs of the plan;

○ Premium plan includes essential benefits package with reduced cost sharing compared to the enhanced plan and covers 95% of the benefit costs of the plan;

○ Premium plus plan is a premium plan that provides additional benefits, such as oral health and vision care.

● Require guarantee issue and renewability; allow rating variation based only on age, premium rating area, and family enrollment. Limit the medical loss ratio to a specified percentage.

● Require plans participating in the Exchange to be state licensed, report data as required, implement affordability credits, meet network adequacy standards, provide culturally and linguistically appropriate services, contract with essential community providers, and participate in risk pooling. Require participating plans to offer one basic plan for each service area and permit them to offer additional plans. [E&C Committee amendment: Require plans to provide information related to end-of-life planning to individuals and provide the option to establish advance directives and physician's order for life sustaining treatment. ]

● Require risk adjustment of participating Exchange plans.

● Provide information to consumers to enable them to choose among plans in the Exchange, including establishing a telephone hotline and maintaining a website and provide information on open enrollment periods and how to enroll.

● [E&C Committee amendment: Prohibit plans participating in the Exchange from discriminating against any provider because of a willingness or unwillingness to provide abortions. ]

● [E&C Committee amendment: Facilitate the establishment of non-for-profit, member-run health insurance cooperatives to provide insurance through the Exchange. ]

Private Insurance

● Prohibit coverage purchased through the individual market from qualifying as acceptable coverage for purposes of the individual mandate unless it is grandfathered coverage. Individuals can purchase a qualifying health benefit plan through the Health Insurance Exchange.

● Impose the same insurance market regulations relating to guarantee issue, premium rating, and prohibitions on pre-existing condition exclusions in the insured group market and in the Exchange (see creation of insurance pooling mechanism).

● Limit health plans' medical loss ratio to a percentage specified by the Secretary to be enforced through a rebate back to consumers. [E&L Committee amendment: Limit health plans' medical loss ratio to at least 85%. ]

● Improve consumer protections by establishing uniform marketing standards, requiring fair grievance and appeals mechanisms, and prohibiting insurers from rescinding health insurance coverage except in cases of fraud.

● Adopt standards for financial and administrative transactions to promote administrative simplification.

● Create the Health Choices Administration to establish the qualifying health benefits standards, establish the Exchange, administer the affordability credits, and enforce the requirements for qualified health benefit plan offering entities, including those participating in the Exchange or outside the Exchange.

● Impose the same insurance market regulations relating to guarantee issue, premium rating, prohibitions on pre-existing condition exclusions, risk adjustment, and rescissions in the individual market, in the exchange, and in the small group market, phasing in the new rules for small group market over five years. (See new rating and market rules in Creation of insurance pooling mechanism. )

● Require health plans to report the proportion of premium dollars spent on items other than medical care and require plans to compile information on coverage in a standard format.

● Require all new policies (except stand-alone dental, vision, and long-term care insurance plans) to comply with one of the four benefit categories, including those offered through the exchanges and those offered outside of the exchanges. Require health plans in the individual and small group markets to at least offer coverage in the silver and gold categories. Existing individual and employer-sponsored plans do not have to meet the new benefit standards. Individuals with existing policies that are equal in value to the “young invincible” plan (catastrophic only policy with coverage levels at the HSA current law limit and preventive benefits exempt from the deductible) are considered to have minimum creditable coverage for purposes of meeting the individual mandate. (See description of benefit categories in Creation of insurance pooling mechanism. )

● Require small employers to provide a plan with a deductible that does not exceed $ 2,000 for individuals and $ 4,000 for families unless contributions are offered that offset deductible amounts above these limits. This deductible limit will not affect the actuarial value of bronze plans and does not apply to “young invincible” plans. (See description of benefit categories in Creation of insurance pooling mechanism. )

● Allow states the option of merging the individual and small group markets.

● Create a temporary reinsurance program to help stabilize premiums during the first three years of operation of the exchanges when the risk of adverse selection due to enforcement of the new rating rules and market changes is greatest. Finance the reinsurance program through mandatory contributions by health insurers.

● Allow insurers to offer a national health plan with a uniform benefits package in the states in which they are licensed.   National plans would be required to offer plans with silver and gold benefit packages and would be exempt from state benefit requirements. Allow states to opt out of the national plan.

● Permit states to form health care choice compacts and allow insurers to sell policies in any state participating in the compact. Insurers selling policies through a compact would only be subject to the laws and regulations of the state where the policy is written or issued.

● Impose the same insurance market regulations relating to guarantee issue, premium rating, prohibitions on pre-existing condition exclusions, and prohibitions on insurance plan rescissions in the individual and group markets and in the American Health Benefit Gateways. (See new rating and market rules in Creation of insurance pooling mechanism).

● Require health insurers to report their medical loss ratio.

● Require health insurers to provide financial incentives to providers to better coordinate care through case management and chronic disease management, promote wellness and health improvement activities, improve patient safety, reduce medical errors, and provide culturally and linguistically appropriate care.

● Provide dependent coverage for children up to age 26 for all individual and group policies.

● Require insurers and group plans to notify enrollees if coverage does not meet minimum qualifying coverage standards for purposes of satisfying the individual mandate for coverage.

● Permit licensed health insurers to sell health insurance policies outside of the Gateway. States will regulate these outside-the-Gateway plans.

Cost Containment

● Simplify health insurance administration by adopting standards for financial and administrative transactions, including timely and transparent claims and denial management processes and use of standard electronic transactions.

● [E&C Committee amendment: Limit annual increases in the premiums charged under any health plans participating in the Exchange to no more than 150% of the annual percentage increase in medical inflation. Provide exceptions if this limit would threaten a health plan's financial viability. ]

● Modify provider payments under Medicare including:

○ Modify market basket updates to account for productivity improvements for inpatient hospital, home health, skilled nursing facility, and other Medicare providers; and

○ Reduce payments for potentially preventable hospital readmissions.

● Restructure payments to Medicare Advantage plans, phasing to 100% of fee-for-services payments, with bonus payments for quality.

● Increase the Medicaid drug rebate percentage and extend the prescription drug rebate to Medicaid managed care plans. Require drug manufacturers to provide drug rebates for dual eligibles enrolled in Part D plans.

● [E&C Committee amendment: Require the Secretary to negotiate directly with pharmaceutical manufacturers to lower drug prices for Medicare Part D plans and Medicare Advantage Part D plans. ]

● [E&C Committee amendment: Authorize the Food and Drug Administration to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed. ]

● Reduce Medicaid DSH payments by $ 6 billion in 2019, imposing the largest percentage reductions in state DSH allotments in states with the lowest uninsured rates and those that do not target DSH payments.

● Require hospitals and ambulatory surgical centers to report on health care-associated infections to the Centers for Disease Control and Prevention and refuse Medicaid payments for certain health care-associated conditions.

● Reduce waste, fraud, and abuse in public programs by allowing provider screening, enhanced oversight periods, and enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs, and by requiring Medicare and Medicaid program

● Establish a Health Care Program Integrity Coordinating Council and two new federal department positions to oversee policy, program development, and oversight of health care fraud, waste, and abuse in public and private coverage.

● Simplify health insurance administration by adopting standards for financial and administrative transactions, including timely and transparent claims and denial management processes and use of standard electronic transactions.

State Role

● Require states to enroll newly eligible Medicaid beneficiaries into the state Medicaid programs and to implement the specified changes with respect to provider payment rates, benefit enhancements, quality improvement, and program integrity.

● Require states to maintain Medicaid and CHIP eligibility standards, methodologies, or procedures that were in place as of June 16, 2009 as a condition of receiving federal Medicaid or CHIP matching payments.

● Require states to enter into a Memorandum of Understanding with the Health Insurance Exchange to coordinate enrollment of individuals in Exchange-participating health plans and under the state's Medicaid program.

● May require states to determine eligibility for affordability credits through the Health Insurance Exchange.

● Require states to create health insurance exchanges for individuals and small businesses and require state insurance commissioners to provide oversight of health plans with regard to the new insurance market regulations, consumer protections, rate reviews, solvency, reserve fund requirements, and premium taxes, and to define rating areas.

● Require states to enroll newly eligible Medicaid beneficiaries into state Medicaid programs, coordinate enrollment with the new exchanges, and implement other specified changes to the Medicaid program. Require states to maintain Medicaid and CHIP eligibility levels until 2013 for those with incomes above 133% FPL and until 2014 for those with incomes at or below 133% FPL. A state is exempt from the maintenance of effort requirement for non-disabled adults with incomes above 133% FPL between January 2011 and January 2013 if the state certifies that it is experiencing a budget deficit or will experience a deficit in the following year.

● Require states to establish an ombudsman office to serve as an advocate for people with private coverage in the individual and small group markets.

● Permit states to obtain a waiver of certain new health insurance requirements if the state can demonstrate that it provides health coverage to all residents that is at least as comprehensive as the coverage required under an exchange plan and that the state plan is budget-neutral to the federal government over 10 years.

● Establish American Health Benefit Gateways meeting federal standards and adopt individual and small group market regulation changes.

● Implement Medicaid eligibility expansions and adopt federal standards and protocols for facilitating enrollment of individuals in federal and state health and human services programs.

● Create temporary "RightChoices" programs to provide uninsured individuals with immediate access to preventive care and treatment for identified chronic conditions. States will receive federal grants to finance these programs.