<nobr>Nov 9, 2009</nobr>

House Approves $1 Trillion Health Care Reform Bill as ERIC Registers Opposition

In an unusual Saturday session, the U.S. House of Representatives debated a healthcare reform measure for several tumultuous hours this past weekend. After a seemingly unending series of contentious statements and a narrow maneuver through an anti-abortion thicket, the chamber approved H.R. 3962, the "Affordable Health Care for America Act" by a vote of 220 to 215. In the end, the $1.055 trillion bill was opposed by 39 Democrats; one lone Republican supported the measure.

With completion of the House vote, attention will now turn back to the Senate, where Majority Leader Harry Reid (D-NV) awaits an estimate of the bill's cost from the Congressional Budget Office. This score is expected in the next few days, providing Senator Reid with the final information he will need concerning whether additional adjustments to the bill (e.g., greater subsidies for low-income individuals) can be made without pushing the final tab for the bill over the $900 billion line drawn by President Obama.

Debate in the Senate will be a much more prolonged affair than in the House, where the majority party generally can rule with an iron hand -- unless, as was evidenced on Saturday, they are stymied by intraparty warfare. The House took up only two amendments -- one concerning abortion funding, and one on a Republican substitute healthcare reform measure. The Senate debate should be rife with amendments and is likely to last well into December, if not beyond. Passage in the Senate, if it occurs, will set the stage for the final showdown: the conference report to reconcile the House and Senate healthcare reform measures.

The House Bill: The bill approved by the House on Saturday is in most respects unchanged from the bill introduced in the chamber some 10 days ago -- at least with respect to the matters concerning large employers.

The House bill contains a provision (the so-called "Tierney amendment") under which employers would be prohibited from reducing retirees' health benefits after those retires had retired unless the reduction were also made to benefits for active participants. The Senate bill does not currently include a similar provision although there is growing concern that the Tierney provision could survive the ultimate House-Senate conference agreement.

The bill also includes a "pay-or-play" employer mandate under which employers would be required to contribute at least 72.5% of premiums for workers (65% for family coverage) or contribute 8% of payroll to a public fund. (If this coverage were "unaffordable" for employees, they could seek subsidized coverage in the exchange, and the employer would need to make an offsetting contribution.)

The bill would permit the purchase of insurance from a "public plan"; rates paid to providers would be negotiated rather than based on Medicare prices. Representative John Shadegg (R-AZ) ultimately was not successful in amending the House bill to unravel the doctrine of ERISA preemption.

Like the Senate measures, H.R. 3962 would mandate that individuals purchase insurance and would set up an exchange system in each state to facilitate the marketing and purchase of plans to individuals and small employers. Large employers generally would not be permitted to enter the exchanges for the first five years, although a newly created "Health Insurance Commissioner" could decide later to allow them into the system.

The bill calls for a number of reforms to the insurance market, including a prohibition on exclusions for pre-existing conditions and a requirement that policies for older individuals be no more than twice the amount charged younger people.

Other major elements of the bill of interest to employers are as follows. H.R. 3962 would:

• create a temporary reinsurance program to help offset the costs of employers that provide health benefits for retirees age 55-64;


• begin to close the doughnut hole in Medicare Part D by decreasing the hole by $500 per year starting in 2010 and ending the gap altogether in 2019;


• provide a 50% brand-name drug discount for Part D enrollees;


• permit the HHS secretary to negotiate the price paid by Medicare for prescription drugs;


• create a pathway at the FDA to license biogeneric drugs; brand-name drugs would be given a 12-year period of exclusivity;


• require plans to permit dependents to remain on their parent's insurance policy through age 26;


• permit individuals to remain on COBRA until the exchange is up and running;


• require insurers to spend 85% of premium dollars on medical care until the bill's insurance reforms were implemented;


• prohibit insurance companies from placing lifetime caps on coverage; and


• prior to 2013, shorten the time that plans could look back for pre-existing conditions from six months to 30 days and the time that plans could exclude coverage of certain benefits from 12 months to three months.

The bill would in part be financed by imposing a 5.4% tax surcharge on individuals with modified adjusted gross income exceeding $500,000 and couples with income exceeding $1 million (these amounts would not be indexed for inflation). The bill would also eliminate the nontaxable reimbursement of over-the-counter drugs from HSAs, HRAs, and health FSAs. Contributions to health FSAs would be limited to $2,500 (indexed to CPI). The penalty for non-health-related distributions from HSAs would be increased from 10% to 20%. The tax deduction for employers who receive a government subsidy for providing retiree prescription drug coverage would be eliminated. The bill would also add a provision that would give tax parity for employer-provided coverage for domestic partners and other non-dependents.

ERIC Action: On November 4, ERIC and over 300 other organizations sent a letter to House Speaker Nancy Pelosi (D-CA) and Minority Leader John Boehner (R-OH) expressing opposition to H.R. 3962. The letter emphasizes the lack of cost controls in the measure and also cites significant concerns with the manner in which the new legislation addresses the topics of ERISA, employer mandates, the public plan option, and a minimum benefit package. On Friday, November 6, ERIC sent an additional letter to the House opposing an effort by Representative Shadegg to curtail ERISA preemption.

Questions or comments on health reform should be addressed to either Gretchen Young (gyoung@eric.org) or Adam Solander (asolander@eric.org).

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Link to H.R. 3962 and Related Summaries

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