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Baucus Healthcare Reform Framework Drops Public Policy Option

Janice Simmons, for HealthLeaders Media, September 9, 2009

Just in time for President Obama's speech before Congress on healthcare tonight, Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, released on Tuesday a "framework"—but not the actual bill—of the plans under consideration by his bipartisan six working group.

As expected, the public insurance plan is out, and the state co-op plans are in. As proposed under the framework, the co-op must be organized as a "nonprofit, member corporation under state law"; must not be "an existing organization that provides insurance as of July 16, 2009"; and must not be an affiliate or successor of any such organization.

A "high-cost insurance excise tax" is in. This excise tax of 35% would be levied on insurance companies and insurance administrators for health insurance plans above $8,000 for singles and $21,000 for family plans. This tax would apply to self insured plans and plans sold in the group market, but not to plans sold in the individual market.

Other highlights include:

Family and Individual
Small business tax credits. Tax credits would be available for tax years 2011 and 2012 for firms with fewer than 25 employees and average wages below $40,000. Qualifying employers could receive the credit for up to two years, with a maximum credit of 35%.

Part D drug discount program. In order to have their drugs covered under Medicare, manufacturers beginning in 2010 must provide a 50% discount off the negotiated price for brand name drugs covered on plan formularies when beneficiaries enter the coverage gap.

Health insurance exchange. States would establish an exchange in 2010; so called mini medical plans with limited benefits and low annual caps would not be offered in the exchange.

Ombudsmen. States would be required in 2010 to establish an ombudsman office to act as a consumer advocate for those with private coverage in the individual and small group markets.

Transparency. Beginning in 2010, to ensure transparency and accountability, health plans would be required to report the proportion of premium dollars that are spent on items other than medical care. Also, hospitals would be required to list standard charges for all services and Medicare diagnosis-related groups.

High-risk pools. In 2010, the proposal would increase funding for state high-risk pools, so long as the funds are not used to replace current premium assessments and are not distributed to high-risk pools that have a waiting list.

Insurance Market Reforms
Non group and small group markets. Beginning in 2013, health insurance plans in the individual market would be required to offer coverage on "a guaranteed issue basis" and would be prohibited from excluding coverage for pre existing health conditions. Limited benefit plans and lifetime limits now would be prohibited.

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