UBP blog

11/24/2009

House health reform bill vs. Senate bill: what’s the same and what’s different

As many of you know, the health care reform bill just recently passed in the House of Representatives, but it still needs to pass through the Senate.

This next step could prove to be very difficult as the Senate and House only agree on a few things.

Among these are:

  • A pay or play mandate for individuals: The House bill, the Senate HELP Committee bill and the Senate Finance Committee bill all require individuals to pay an annual penalty if they do not have qualifying health insurance coverage.
  • Affordability credits to lower income individuals:These credits range from 10% of the individual’s adjusted gross income (AGI) for the Senate Finance Committee bill up to 12.5% of the individual’s AGI in the Senate HELP Committee bill.
  • Expanding Medicaid by way of lowering the threshold for eligibility

Beyond these three items, there isn’t much else that the House and Senate agree on. Below are three major points of difference between the two bills.

  1. Public Option: The House bill includes a public insurance option—a government-run plan that is intended to compete with private insurers’ plans. The Senate, however, is still in the process of combining two proposals from the Finance and HELP Committees into a final bill. This final bill is expected to include the public option as well but individual states may be able to opt out of it.
  2. Cost: The House’s bill is expected to cost $1.1 trillion over the course of 10 years (which is higher than the dollar amount at which President Obama hopes to cap health care reform–$900 billion). If the cost of the Senate bill comes out to $900 billion or less, it may have a better chance of passing as the final health care reform law than the House’s bill.
  3. How the reform will be funded: To pay for all of this health care reform, the House bill will impose a 5.4% income surcharge on individuals with an AGI that exceeds $500,000 and couples with an AGI exceeding $1 million. The Senate Finance committee, however, wants to do something entirely different.

What they’ve proposed is an excise tax on high-end health plans (or so-called “Cadillac Plans”) as well a $13 billion annual tax on health insurers, and manufacturers of both pharmaceuticals and medical devices.

The Senate Finance Committee’s proposed excise tax on “Cadillac Plans” will be a 40% tax on plans with a value above: 

  • $8,000 per-year for individual coverage ($9,850 for retirees and high-risk industries)
  • $21,000 per-year for family coverage  ($26,000 for retirees and high-risk industries)

These amounts will be indexed for inflation at the CPI-U (Consumer Price Index for all urban consumers) +1%. However, in areas where the cost of living is high, considerably more plans will be taxed (even in the first year the law is implemented). Employers are already moving to more consumer-driven plans to curb healthcare costs.

Could a 40% excise tax on “Cadillac” benefits on top of a double digit rate renewal push even more employers towards high deductible plans? If so, employers will need to clearly communicate to employees how deductible plans work and also make them more aware of their healthcare spending.

To help employees out with the sticker shock of deductibles, employers may also want to consider adding tax saving instruments such as HRAs or voluntary benefits such as accident plans to help employees with high and unexpected expenses subject to their deductibles.

We’d love to discuss some of these options with you to help you figure out the plan design that will work best for your employees. So contact us via our website or call us at 617-859-1777 to get the conversation going.

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