How the health reform bill would affect you

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The House contender for a new health reform law is a done deal, while Senate Democrats have moved its version of a bill to the Senate floor. Once the final Senate bill passes, the next step is to reconcile the differences between the two bills, followed by the voting of both chambers on the compromise legislation. If it passes, it will head to President Barack Obama’s desk for his signature.

Every health care consumer, whether insured or uninsured, has a stake in the outcome of this process.

“Some people say, ‘I have good insurance today, so how does this affect me?’ The problem is that many of us have good insurance through our jobs,” says Stuart Altman, professor of national health policy at Brandeis University. “Then all of a sudden you lose your job, and you’re caught in the same situation as everybody else (without insurance). You have to shop around for a policy.”

Here’s a nuts-and-bolts review of how key provisions of the House bill would impact the way consumers purchase health insurance, what it costs and how they pay for it.

Who gets coverage

At an estimated cost of $1.05 trillion over 10 years, the House bill is expected to result in insurance coverage for about 96 percent of legal U.S. residents under age 65 by 2019, compared to the current level of 83 percent, according to analysis by the Congressional Budget Office.

Everyone would be required to have health insurance, except those who have religious objections, those who successfully apply for financial hardship waivers and those whose incomes fall below the threshold for filing income taxes — the 2009 threshold is $9,350 for singles, $18,700 for couples. The bill would impose a tax penalty of up to 2.5 percent of income on anyone else without insurance.

Employers with annual payrolls of $500,000 or more would be required to provide health insurance to workers or else pay a tax penalty of up to 8 percent of payroll. The assessment is reduced for those with payrolls between $500,000 and $750,000.

Changes to benefit consumers

Insurance company denials of coverage based on pre-existing conditions would be history. Rescission of benefits for undisclosed medical conditions, except in cases of fraud, would also be eliminated.

“This is a practice that happens mostly in the individual market, where an individual appears to be healthy and then gets a diagnosis of, say, cancer,” says Jennifer Libster, senior research associate at the Georgetown University Health Policy Institute. “The insurance company, rather than increasing their premiums, will revoke the contract under the presumption that this was an act of fraud on the part of the consumer. That will no longer be permitted.”

The bill also bans charging higher premiums for women than men and limits the age rating ratio to 2:1, so older customers could not be charged more than twice what younger ones pay.

Libster and Altman agree that while other parts of the bill have attracted more attention, it’s these market reforms that would have the most dramatic effect on the greatest number of consumers.

Structure of the plan

The House bill would create a National Health Insurance Exchange where individuals and small employers would compare and purchase insurance plans. The Exchange could be opened to large employers at a later date.

All plans offered through the Exchange would include an essential benefits package defined by a panel of health experts, and they would be standardized to fit under basic, enhanced and premium categories. Insurance plans sold outside the Exchange, except certain existing plans that would be grandfathered in, would also have to provide at least the essential benefits package.

No provision of this bill has generated more buzz or heat than the inclusion of a government-run plan in the proposed Exchange. Popularly known as the public option, this plan would be administered by the Department of Health and Human Services, which would negotiate the rates paid to doctors and other health care providers. The rationale behind the public option is to increase market competition and generate a downward pressure on insurance costs, proponents say.

“We have states that have one or two carriers in the marketplace, and there’s no real competition,” Libster says. “A public plan will create additional options for people in these smaller market states. In addition, it will create competition in the larger markets because you will have an insurance carrier that’s not operating for profit and will be operating, in theory, more to provide health benefits to people without thinking about the bottom line first.”

Only those without access to employer-sponsored coverage or other public plans such as Medicare, Medicaid or veterans health benefits would be eligible to select the public option.

Help for lower income consumers

People with incomes at 400 percent of the federal poverty level ($88,000 for a family of four) or below would get subsidies to help them buy insurance. Set on a sliding scale, these government-sponsored premium credits would limit the percentage of income used to pay for insurance. Those earning 133 percent to 150 percent of the federal poverty level, or FPL, would pay no more than 1.5 percent to 3 percent of their income for health insurance; those earning 350 percent to 400 percent of FPL would pay no more than 12 percent of income. This provision would primarily affect people buying their own individual or family coverage through the Exchange, although those with access to employer-based coverage would also be eligible for the subsidy if their share of the premium cost exceeded 12 percent of their income.

The bill caps out-of-pocket costs for medical care at $5,000 for individuals and $10,000 for families with incomes up to 400 percent of FPL.

Cost to higher income consumers

To help pay for its reform measures, the House bill would implement an additional 5.4 percent income tax on individuals earning more than $500,000 a year and couples earning more than $1 million.

It would impose new restrictions on flexible spending accounts, limiting contributions to $2,500 a year and banning their use for over-the-counter medications.

For a more extensive overview of this bill, the Kaiser Family Foundation’s Web site offers a summary.