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Lawmakers Look to Address Affordability of Mandated Health Coverage

By Drew Armstrong, CQ Staff

A central issue in the health care overhaul debate has been how much the legislation will cost taxpayers. But as Senate Finance Committee members head into their Tuesday markup, Democrats on the panel are becoming increasingly vocal about how much the bill will cost people required to buy insurance.

Committee Democrats have criticized Chairman Max Baucus' draft as too stingy. Baucus, D-Mont., is offering tax subsidies to those required to buy coverage, but liberal critics say they are not enough.

"We have to make this as affordable as possible to the people in middle America, the people who have incomes of $88,000 and down," said Sen. John Kerry, D-Mass. "They can't be paying an unfair chunk of that total income to health care."

The cost of the insurance requirement has become a major issue for committee Democrats, said Sen. John D. Rockefeller IV, D-W.Va., after a meeting of those members Sept. 17.

"There was so much talk on affordability that I actually stepped in to cut it off, because we had already spent an hour on it and there were other issues we had to get at," Rockefeller said.

It is crucial, politically, that Democrats get the affordability issue right. "That's the way most people around the country will perceive the value of health care reform," said Ron Pollack, executive director of the consumer group Families USA.

Much of the affordability debate centers on the size of the tax credit the Baucus bill would give families and individuals making between 133 percent and 400 percent of the federal poverty level. At a maximum, families making up to 400 percent of the federal poverty level would be asked to pay 13 percent of their income toward premiums.

Baucus has already indicated that he may change the bill to ease some of those concerns. According to the Congressional Budget Office, the current bill would produce a $49 billion surplus by the end of a 10-year cost window. Much of that money could go to increasing the size of the subsidies people receive to help them buy coverage.

However, according to Democratic Finance Committee aides, the tax credits already make up a large portion of the bill's costs—$400 billion out of roughly $850 billion. Adding to them could create unease among Republicans, strengthening opposition to the proposal on that side.

"You're talking about the most expensive thing in the entire bill," said the committee's top Republican, Charles E. Grassley of Iowa. "If you want to make that richer, I think you're going to have concerns from about a quarter of the Democrats, and all the Republicans."

Looking to Pass the 'Smell Test'

The tax credit would set up a relationship with the government similar to that which employees buying coverage through their workplace have with their employer. For workers who get insurance, the average company pays a substantial proportion of the premium—74 percent in 2009, according to the Kaiser Family Foundation.

Under the Baucus plan, the government would do the same for people buying insurance through the bill's exchange: Consumers would be responsible for some cost, while the government would issue tax credits to pick up the rest.

The issue is whether those credits would be large enough, or whether uninsured people would be required to buy coverage they could not afford.

"If middle-class people have to pay more than they're paying today . . . I don't think that is going to pass the smell test as being affordable," said Sen. Ron Wyden, D-Ore., one of the sharpest critics of the Baucus draft's affordability.

Wyden and other lawmakers have argued that, under Baucus' bill, the subsidies provided by the government would be too small, and that the mandate would require low- and moderate-income people to spend more than they can afford.

The subsidies and mandates would not begin until 2013. Then, consumers making between 250 percent and 300 percent of the federal poverty level would be expected to contribute up to $4,100 per year toward the premium for a family insurance plan, according to Democratic Finance Committee aides.

Other estimates say the Baucus draft would force people to spend much more than that. One analysis by the Center for Budget and Policy Priorities said a family of three making 250 percent of the federal poverty level would have to pay $4,806 out of their own pocket each year.

Critics say that would be too much. But if insurance rates keep going up as they have over the past decade, people getting the tax credit to buy coverage on the exchange could end up paying less in premiums than those getting coverage through their work.

In 2009, the average consumer cost of a family insurance plan was $3,515, according to the Kaiser Family Foundation. It is notoriously difficult to predict how much premiums will rise year to year, say experts, but between 1999 and 2009 the amount consumers paid for insurance through their workplace went up by about $200 each year.

Assuming costs rise almost as quickly over the next four years, when the tax credits become available the average cost to a worker getting insurance through their company would be about $4,300 a year—about $200 more than what people getting subsidies from the government would be expected to pay.

Other proposals in the draft have raised affordability criticisms as well.

Under the proposed insurance market changes, insurers would be able to vary premiums by a factor of five, based on age—leaving older people with significantly more expensive premiums.

From a consumer's perspective, even limiting that ratio to 5-to-1 would be better than the current situation, where states set the rules and most have no limits on how much insurers can vary premiums on the individual market.

But with a mandate that would force people to buy coverage, consumer advocates argue that the age-based premium rules still allow older Americans to pay too much.

"That by itself is the biggest factor in putting health insurance out of reach for many in that age group," said John Rother, chief lobbyist for AARP. "What we're talking about here are not poor people but rather modest-income people in 300 [percent] to 500 percent of poverty range. . . . We're concerned that many people would not be able to afford it."

Alex Wayne contributed to this story.

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