A nun, a bishop, and Doug Elmendorf (director of the Congressional Budget Office) walked into a bar just after the House Rules Committee released the 153-page text of H.R. 4872, the Health Care and Education Affordability Reconciliation Act of 2010, which makes budgetary changes to the already passed H.R. 3590, the Patient Protection and Affordable Care Act passed by the Senate in December 2009.
The Bishop, after ordering a double, spoke first: “The Senate bill expands federal funding and the role of the federal government in the provision of abortion procedures….In so doing, it forces all of us to become involved in an act that profoundly violates the conscience of many, the deliberate destruction of unwanted members of the human family still waiting to be born."
The nun, who had a small sherry, was undeterred by the Bishop’s lofty position, and she replied, “The Senate bill will not provide taxpayer funding for elective abortions. It will uphold longstanding conscience protections and it will make historic new investments – $250 million – in support of pregnant women. This is the REAL pro-life stance, and we as Catholics are all for it.”
Mr. Elmendorf, who had a ginger ale, did not address the abortion issue but noted that the proposed legislation would reduce the federal deficit by $138 billion over ten years.
The nun picked up the tab and left for the local homeless shelter. The bishop left to attend a conference with other clergy to discuss policy issues. Mr. Elmendorf had an appointment to testify before the Congress on the cost of health care reform.
Now What?
The House, which has scheduled a vote on health reform for Sunday March 21, is likely to use a “deem and pass” strategy, through which passage of the reconciliation bill will also be deemed to be passage of the Senate legislation. If the legislation passes the House, the Senate bill would be sent to President Barack Obama for his signature and the reconciliation bill would go to the Senate for a vote.
Among the provisions in H.R. 4872 that are of interest to employer-based plans are the following:
Sec. 1001. Affordability. Changes the financing for premiums and cost sharing for individuals with incomes up to 400% of the federal poverty level. The bill improves tax credits to make premiums more affordable as a percent of income; and improves support for cost sharing, focusing on those with incomes below 250% of the federal poverty level. Starting in 2019, the bill constrains the growth in tax credits if premiums are growing faster than the consumer price index, unless spending is more than 10% below current Congressional Budget Office projections.
Sec. 1002. Individual responsibility. Modifies the assessment that individuals who choose to remain uninsured pay in three ways: (a) exempts the income below the filing threshold, (b) lowers the flat payment from $495 to $325 in 2015 and from $750 to $695 in 2016 and (c) raises the percent of income that is an alternative payment amount from 0.5 to 1.0% in 2014, 1.0 to 2.0% in 2015, and 2.0 to 2.5% for 2016 and subsequent years to make the assessment more progressive.
Sec. 1003. Employer responsibility. Improves the transition to the employer responsibility policy for employers with 50 or more full-time equivalent workers by subtracting the first 30 full time employees from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount). The provision also changes the applicable payment amount for firms with more than 50 full-time workers that do not offer coverage to $2,000 per full-time employee. It also eliminates the assessment for workers in a waiting period, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.
Sec. 1005. Implementation funding. Provides $1 billion to the Secretary of Health and Human Services to finance the administrative costs of implementing health insurance reform.
Sec. 1004. Income definitions. The provision extends the exclusion from gross income for employer provided health coverage for adult children up to age 26.
Sec. 1101. Closing the Medicare prescription drug “donut hole”. Provides a $250 rebate for all Medicare Part D enrollees who enter the donut hole in 2010. Builds on pharmaceutical manufacturers' 50% discount on brand-name drugs beginning in 2011 to completely close the donut hole with 75% discounts on brand-name and generic drugs by 2020.
Sec. 1103. Savings from limits on MA plan administrative costs. Provides that Medicare Advantage plans spend at least 85% of revenue on medical costs or activities that improve quality of care, rather than profit and overhead.
Sec. 1401. High-cost plan excise tax. Reduces the revenue collected by the tax by 80%. This is achieved by: delaying the application of the tax until 2018, which gives the plans time to implement and realize the cost savings of reform; increasing the dollar thresholds to $10,200 for single coverage and $27,500 for family coverage ($11,850 and $30,950 for retirees and employees in high risk professions); excluding stand-alone dental and vision plans from the tax; and permitting an employer to reduce the cost of the coverage when applying the tax if the employer’s age and gender demographics are not representative of the age and gender demographics of a national risk pool.
Sec. 1402. Medicare tax. Modifies the tax to include net investment income in the taxable base. Currently, the Medicare tax does not apply to net investment income. The Medicare tax on net investment income does not apply if modified adjusted gross income is less than $250,000 in the case of a joint return, or $200,000 in the case of a single return. Net investment income is interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income is reduced by properly allocable deductions to such income.
Sec. 1403. Delay of the annual limitation on contributions to a health FSA. Delays the proposed $2,500 annual contribution by two years until 2013.
Sec. 1406. Health insurance providers. Delays the industry fee by three years to 2014 and modifies the annual industry fee for revenue neutrality. In the case of tax-exempt insurance providers, provides that only 50% of their net premiums that relate to their tax-exempt status are taken into account in calculating the fee. Provides exemptions for voluntary employee benefit associations (VEBAs) and nonprofit providers more than 80% of whose revenues is received from Social Security Act programs that target low income, elderly, or disabled populations.
CBO Preliminary Estimates
The federal government will provide up to $6,000 per year in subsidies for each eligible individual in health insurance exchanges established under health reform, according to a yesterday’s preliminary estimate by the Congressional Budget Office of the of the combined direct spending and revenue effects of H.R. 4872 and H.R. 3590.
According to the CBO, enacting both pieces of legislation, H.R. 3590 and the reconciliation proposal, would produce a net reduction in federal deficits of $138 billion over the 2010–2019 period as result of changes in direct spending and revenue. The proposal also would result in a increase of 32 million individuals covered by health insurance. The CBO estimates that by 2019 an additional 16 million individuals will be covered by Medicaid and the Children’s Health Insurance Program, 24 million will gain coverage through exchanges, 4 million fewer will be covered through employer plans, and 5 million fewer will be covered through individual plans
The health coverage provisions alone would cost $794 billion over a ten-year period, which would be offset by $913 billion in various revenue provisions, to produce a deficit reduction of $119 billion.
The average annual subsidy provided under a health insurance exchange in the combined legislation will be $5,200 in 2015, the first year of the subsidy, and is predicted to grow to $6,000 by 2019.
The CBO estimate also includes reconciliation amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education. These education amendments are predicted to reduce the deficit by $20 billion over a 10-year period.
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