By Drew Armstrong, CQ Staff
October 29, 2009 -- The giant health care bill introduced by House Democratic leaders on Thursday would transform the American health insurance system, moving the nation a step closer to universal coverage.
The measure would require individuals to obtain health insurance and employers to offer it. According to House Democratic leaders, 96 percent of Americans will be covered by "a quality, affordable health plan" when the legislation is fully effective.
The legislation seeks to provide a new route to affordable health insurance for individuals and small businesses by creating state-run "exchanges," or marketplaces, where people could shop for policies—including a government-run plan that would compete with the offerings of private insurance companies.
Every plan sold on the exchange would have to include specific, standardized benefits. Plans sold on the exchange and, after a grace period, those provided by employers would have to cover preventive care free of cost to the patient.
Individuals who fail to obtain health coverage either through their employers or on the exchange would face a penalty of 2.5 percent of their income, with a hardship exemption. The federal government will provide "affordability credits," or subsidies, on a sliding scale tied to income to help people cover the expense of premiums and reduce cost-sharing.
Employers who fail to offer health insurance to their workers would have to pay a fee equal to 8 percent of their payroll. To encourage employers to provide retiree health benefits to former workers who have not yet reached Medicare eligibility of age 65, the bill would create a $10 billion fund for a temporary reinsurance program to help offset the costs of health claims for retirees age 55–64.
The measure also would create a public long-term care insurance program for adults who become functionally disabled, to be financed through voluntary payroll tax deductions.
Some of the bill's provisions would take effect within 90 days of enactment to reduce the pressure on people who currently have trouble getting insurance. The legislation would extend so-called COBRA coverage—group-rate insurance for workers who lose their jobs—until the new exchanges are set up and operating.
The government also would set up a "high-risk pool" to cover people with significant medical issues, including pre-existing health conditions.
Insurers would be banned from dropping coverage for people they already insure after a policyholder becomes ill or injured, a practice called "rescissions." They could still, however, drop people who commit fraud to obtain coverage.
Insurers would no longer be able to deny coverage to new enrollees with pre-existing conditions.
To make sure that young adults are insured, the bill would let children stay on their parents' health plan until they reach age 27. So-called "young invincibles" are among those least likely to have insurance now.
The bill would limit the amount private health insurers could spend on administrative costs—including profits. That figure would be capped at 15 percent of premiums, essentially setting a limit on profit margins. Any money left over from premiums and not spent on health care for beneficiaries would be returned through rebates.
