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Obama Leaves Public Option Out of Reform Plan

Janice Simmons, for HealthLeaders Media, February 22, 2010

The 10-year, $950 billion healthcare reform package called for by the Obama administration leans more toward the Senate bill approved in December.

Missing from the bill is a public insurance option, but taking on new significance is a section that calls for protection from rising health premium costs. Approximately 31 million would be covered under the proposal, which will be discussed this Thursday at the healthcare summit.

Obama's plan touches upon numerous areas:

Health premiums. New in the proposed bill are efforts to hold down high premium spikes—an issue that received prominence last week. The proposal would create a new Health Insurance Rate Authority, which would provide federal assistance and oversight for states to conduct reviews of "unreasonable rate increases and other unfair practices" of insurance plans.

Consumer protections. The President's proposal calls for covering adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate reviews. When the exchanges would be implemented in 2014, additional protections would be added that would prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals. Beginning in 2018, the President's proposal would require grandfathered plans to cover proven preventive services with no cost sharing.

Financing. The excise tax, or the so-called "Cadillac tax," remains. The President's proposal changes the effective date of the Senate policy from 2013 to 2018 to provide additional transition time for high cost plans to become more efficient. The amount of premiums that are exempt from the assessment would rise from $8,500 to $10,200 for individuals and from $23,000 to $27,500 for families.

The President's proposal, similar to the Senate approach, would add a 2.9% assessment on income from interest, dividends, annuities, royalties, and rents.

For fees on pharmaceuticals, the President's proposal calls for increasing the revenue from the assessment on the industry from $23 billion (in the Senate bill) by another $10 billion over 10 years.

Employer mandate. The President's proposal follows the Senate bill in that it does not impose a mandate on employers to offer or provide health insurance. However, it would require employers (with more than 50 workers) to cover costs if taxpayer dollars cover their workers.

But to defray costs, the assessment would provide a transition: employers with 50 or more employees would be able to subtract the first 30 workers in the payment calculation. This new factor would be multiplied by $2,000 per employee—an amount the White House says is "one third less than the average House assessment for a typical firm and less than half of the average employer contribution to health insurance in 2009."

In line with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies. In addition, small businesses would be eligible to receive $40 billion in tax credits supporting coverage for their workers.

Individual responsibility. All individuals would be required to obtain insurance coverage. For those who don't, the President's proposal follows in part the Senate approach, but lowers the flat dollar amount that individuals would pay—from $495 (in the Senate bill)—to $325 in 2015; and from $750 to $695 in 2016. Subsequent years would be indexed to $695.

Exceptions are made for those who can't afford to pay. The President's proposal would change the payment exemption from the Senate policy (individuals with income below the poverty threshold) to individuals with income below the tax-filing threshold (the House policy). This means that a married couple with income below $18,700 would not have to pay the assessment.

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