H.R. 3200 (Dingell)

Individual requirements (mandate)

The bill would establish a tax on individuals who fail to obtain acceptable health care coverage. The tax would equal 2.5% of the difference between the individual’s modified AGI and the threshold amount below which a person is not required to file income tax returns, up to a maximum equal to the national average premium for an individual or family under the basic plan. (See “Benefits” below.)

Acceptable health coverage would include a qualified health benefits plan (i.e., one that meets the bill’s requirements relating to benefits and other standards), Medicare, Medicaid, military, VA coverage, and grandfathered coverage (see “Treatment of existing insurance coverage” below).

Exceptions to the individual mandate would apply for dependents, certain individuals living outside the US and for specified religious conscience reasons. Effective for taxable years after 12/31/2012.

Employer requirements (mandate)

Employers would have to offer and contribute to employee coverage or pay an excise tax equal to 8% of wages. A tax would not be assessed for firms with annual employer payroll at or below $250,000 and would be reduced for those employers with payrolls between $250,000 and $400,000. The tax would apply after 12/31/2012.

Employers could make separate elections to “pay” or “play” with respect to full-time and part-time employees and with respect to separate lines of business.

Beginning in Year 2, if an employee declined employer- offered coverage and obtained coverage from the Exchange (see “Pooling Provisions” below), the employer would be required to make a contribution to the Exchange equal to what would have been paid for that employee if the employer had not elected to offer coverage.

To meet the requirement to offer and contribute, electing employers would have to offer coverage under a qualified health benefits plan (or an employer-based health plan during the 5 year grace period that begins with year 1 (2013) and pay, for full-time employees, at least 72.5% of the premium for the lowest cost qualified plan offered by the employer in the case of individual coverage and 65% in the case of family coverage. (For coverage provided through the Exchange, the percentage would apply to a reference premium.) For part-time employees, a proportion of the full-time employee contribution would apply based on weekly hours.

Treatment of existing insurance coverage (“grandfathered coverage”)

Individual coverage. Individuals previously already enrolled in insurance bought through the individual (non-group) market prior to enactment could keep that coverage. Dependents could be added to it. Such coverage would not have to meet the new insurance and benefit requirements of the bill so long as the insurer did not change the terms or conditions of the policy or vary the percentage increase in the premium for its enrollees without changing the premium for all enrollees in the same group at the same rate.

Employment-Based Health Plans. Individuals enrolled in employment-based plans could keep their existing coverage and that coverage would not have to comply with the insurance or benefit requirements of the bill for a 5-year grace period (beginning 2013). Upon expiration of the grace period, the employment based plan would have to meet the bill’s applicable requirements, including those relating to the benefit package offered to employees. The plan would be considered acceptable coverage during the 5-year grace period for purposes of meeting the employer and individual mandates.

Expansion of public programs

The bill would expand Medicaid eligibility for all those with incomes not exceeding 133 1/3% of FPL, with 100% federal match for the expansion population. Effective on the first day of Year 1 (2013).

Non-traditional Medicaid individuals would be eligible to choose between enrolling through the Exchange or into Medicaid if during the 6 months before becoming Medicaid eligible, they were enrolled in a qualified health benefits plan, grandfathered coverage or a group (employer) health plan.

States could not have Medicaid and CHIP eligibility standards, methodologies and procedures that are more restrictive than those in effect on 6/16/2009.

Children with CHIP coverage would become eligible for coverage under the Exchange once the Commissioner of the Health Choices Administration (see” Governance” below) determined that the Exchange had the capacity to support CHIP eligible individuals and the Secretary determined that the Exchange, the state and employers had procedures in place to ensure the timely transition of CHIP enrollees to the Exchange.

A new public insurance plan would be offered through the Health Insurance Exchange (see “Pooling mechanism” below).

Subsidies to individuals

Premium subsidy (affordability premium credits). Individuals and families with income under 400% of FPL enrolled in an Exchange plan would be eligible for both premium and cost sharing credits. Undocumented aliens would not be eligible for these credits.

In general, a subsidy would not be available to a full time employee who was offered employer coverage meeting the requirements of the employer mandate. However, beginning in Year 2 (2014), such individuals would be eligible for the subsidy if the cost of the offered coverage exceeded 11% of their income. [Note: Because individuals would have to be enrolled in an Exchange plan to receive the credits, these employees would have to turn down the offer of employer coverage and enroll in a plan through the Exchange.]

For the first two years, subsidies could only be applied to basic coverage; after that, individuals could enroll in more costly plans and pay the difference.

The affordability premium credits would be equal to the amount by which the individual’s plan premium (or reference premium amount, if lower) exceeded an individual’s affordable premium amount. The reference premium amount would equal the average of the 3 lowest-cost basic plans in the area. The affordable premium amount would be based on a percentage of income on a sliding scale (from initial percentage to final percentage) by income tier as shown below. Incomes below 133% of FPL are considered to be included in the lowest income tier. (See table below.)

Affordability cost sharing credit. This credit would reduce the basic plan out-of-pocket limit and cost sharing amounts for eligible individuals and families. The Commissioner of the Health Choices Administration (see “Governance” below) would specify a reduction in cost sharing amounts and the annual cost sharing limit so that the actuarial value of the coverage, including the reduced cost sharing amounts and out of pocket limit, met the percentages of the full actuarial value with no cost sharing. (See table below.)

Individuals would apply for eligibility for the credits through the Exchange or other entity designated by the Commissioner. Income determinations would be based on the most recent tax year.

Subsidies to small employers

Certain employers with no more than 25 employees would be eligible for a tax credit to help them pay for qualified health insurance for their employees. The credit would be equal to 50% of the cost of coverage for employers with average compensation up to $20,000 and no more than $40,000. The credit would be simultaneously reduced on a sliding scale for firms with more than 10 employees. The credit would be allowed for employees with at least $5,000 but no more than $80,000 in compensation (these thresholds would be indexed for annual inflation to the CPI). Effective for taxable years after 12/31/2012.

Insurance reforms

The bill would require private insurance sold in the individual and group market to meet certain requirements. These requirements would generally prohibit preexisting condition exclusions, require that insurers accept all applicants and provide for guaranteed renewals, and meet minimum medical loss ratio standards. In addition, insurers could not vary premiums for an individual’s or group’s risk factors other than for geography, family enrollment size and age (the premium for the most expensive age category could be no more than twice the premium for the least expensive age category). Qualified health plans (including self-insured employment-based plans) would be prohibited from imposing lifetime or annual limits or discriminating in the provision of benefits on the basis of health status-related factors.

The bill would also establish uniform marketing standards, require fair grievance and appeals mechanisms, and prohibit insurers from rescinding coverage except in cases of fraud. In addition, it calls for the adoption of standards for financial and administrative transactions (such as in insurance claims transactions) to promote administrative simplification.

All qualified health benefit plans would have to provide the essential benefits package (see “Benefits” below).

Benefits

Qualified health benefit plans, including those sold through the Health Insurance Exchange, would have to provide the essential benefits package providing a comprehensive set of services (hospital, physician, prescription drug, etc.), cover 70% of the actuarial value of the covered benefits, limit annual out-of-pocket costs to $5,000 individual and $10,000 family (indexed for inflation) and be equivalent to prevailing employer-sponsored coverage. (Note that these requirements would not apply to grandfathered coverage.) The Health Benefits Advisory Committee, a public-private entity chaired by the Surgeon General, would be established to make recommendations on specific services to be covered by the essential benefits package as well as cost-sharing levels. The Committee would make recommendations to the Secretary for benefit standards within one year of enactment. It would also periodically recommend updates to such standards, taking into account innovation in health care and consider how such standards could reduce disparities.

Within 45 days of receiving the recommended standards, the Secretary would have to decide whether or not to propose their adoption. If the latter, then the Secretary would notify the Committee of the reasons, giving it the opportunity to modify and submit new recommendations on a timely basis.

The Secretary would be required to adopt an initial set of benefit standards within 18 months of enactment. Such standards could not be inconsistent with the essential benefit requirements described above.

Pooling mechanism

The bill would establish a Health Insurance Exchange to facilitate access by individuals and employers to qualified health benefit plans offered by private insurers. The Exchange would facilitate the sale of qualified health plans by private insurers in competition with one another and with a public insurance option to Exchange-eligible individuals and employer groups. It would also facilitate the provision of premium and cost-sharing subsidies to eligible low income individuals and families. The Exchange would be under the direction of the Commissioner of the Health Choices Administration (see “Governance” below).

State option. Upon approval by the Commissioner, a state (or group of states) could operate an exchange for that state or states instead of the national Exchange. The Commissioner could only approve a state-based exchange if it had the capacity to carry out Exchange functions and there was no more than one Exchange operating with respect to any one state. Additional requirements could be imposed. A state would have to provide assurances that a state exchange would not result in any net increase in expenditures to the federal government. If a state terminated an exchange, the national one would operate instead. The bill would provide matching federal grants to a state to operate the exchange.

Pooling mechanism eligibility requirements

Individuals would be eligible to obtain coverage through the Exchange unless they were enrolled in another qualified health plan (e.g., an employer-based plan that met the bill’s requirements or other acceptable coverage (i.e., grand-fathered coverage; Medicare, Medicaid, TriCARE, VA; or other coverage (e.g., state high risk pool), as the Commissioner in coordination with the Treasury Secretary might recognize). Part-time employees could enroll in the Exchange (and would have to do so to get the premium subsidy). Similarly, full-time employees of employers offering coverage with a premium contribution rate equal to 11% or more of family income would be eligible for the premium subsidy but only by buying their coverage through the Exchange.)

The bill would phase in eligibility to obtain coverage through the Exchange:

• Year 1(2013): uninsured individuals and employers with 10 or fewer employees. Certain “Non-traditional Medicaid individuals” would also be eligible if they were enrolled in a qualified plan, grandfathered coverage or group health plan during the 6 months before becoming a non-traditional Medicaid eligible individual. (These individuals could choose Medicaid.)
• Year 2: employers with fewer than 20 employees.
• Y3 and subsequent years: larger employers as permitted by the Commissioner of the Health Choices Administration (see “Governance” below).

An employer eligible to participate in the Exchange could meet the play-or-pay requirement by offering employees the option of enrolling in coverage through the Exchange. Any employee of such employer could choose among the plans offered through the Exchange (that choice would apply with respect to family coverage).

Requirements on pooling mechanism
The Commissioner of the Health Choices Administration would be required to: establish standards for bids from and negotiate and enter into contracts with insurers for offering of health benefit plans through the Exchange, with different levels of benefits (see below) and including with respect to oversight and enforcement; facilitate outreach and enrollment in such plans of Exchange-eligible individuals and employers and conduct such activities related to the Exchange as required, including operation of a risk pooling mechanism and consumer protections.

Benefit requirements
An insurer offering coverage through the Exchange would have to offer one basic plan for each service area. The plan could, in addition, offer one enhanced plan for each service area; if it offered an enhanced plan, it could offer one premium plan for such area; and if it offered a premium plan, it could offer one or more premium-plus plans for the area.

A basic plan would have to include the essential benefits package and, for affordable credit eligible individuals, offer the required reduced cost-sharing for the applicable income tier. The enhanced plan would have to offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing such that the benefits approximate 85% of the actuarial value of the reference benefits package and the premium plan, 95% of the actuarial value. A premium plus plan is one that provides benefits such as oral health and vision care, in addition to the basic benefits, as approved by the Commissioner. The portion of premium attributable to these additional benefits would have to be specified separately.

The Commissioner would be required to establish a permissible range of variation of cost-sharing for the basic, enhanced and premium plans except with respect to benefits under the essential benefit package for which cost sharing could not be imposed (e.g., preventive services). Such variation could not exceed 10% with respect to each benefit category.

Requirements on health insurance issuers selling to the pooling mechanism
A participating insurer would have to be licensed under state law for each state in which it was offering coverage; report specific information; provide for implementation of the affordability credits; accept all enrollments, subject to exceptions (capacity limitations) consistent with the insurance and other requirements specified above; participate in the pooling mechanism; contract with essential community providers (as specifically defined), provide for culturally and linguistically appropriate communication and health services and meet other requirements which may include standards to ensure that the entity not use coercive practices to force providers not to contract with other entities offering coverage through the Exchange.

Public option. The public option would have to comply with the requirements applicable to Exchange-participating plans, including those related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing. The public option would offer basic, enhanced and premium plans and possibly premium-plus plans. Providers of services would be paid Medicare payment rates for Years 1, 2, and 3 (with a different update used for physician fees) except that physicians who participate in both Medicare and the public option would receive a 5% bonus payment. Payments in subsequent years would be adjusted by the Secretary to promote payment accuracy and access to services.

Governance
The bill would establish, as an independent agency in the executive branch, a Health Choices Administration, headed by a Commissioner appointed by the President with advice and consent of the Senate. The Commissioner would be responsible for:

• Establishing qualified health benefits plan standards, including enforcement in coordination with state insurance regulators and the Secretaries of Labor and Treasury;
• Establishing and operating the Health Insurance Exchange;
• Administration of the individual affordability credits (subsidies); and
• Additional functions specified in the bill.

The Commissioner would be required to undertake activities to promote accountability of insurers offering qualified health benefits plans in meeting federal requirements, regardless of whether those plans were offered inside or outside of the Exchange. The Commissioner would be given authority to sanction non-complying plans (in coordination with state regulators and Labor and Treasury). Such sanctions could include civil money penalties, suspension of enrollment, and termination of plan for repeated failures.

The Commissioner would be required to issue regulations for administration of Exchange and affordability credits including use of federal and a consumer ombudsman to receive complaints, grievances, and requests for information submitted by individuals and provide other assistance as specified.

Governance reinsurance for retirees
Requires within 90 days of enactment the Secretary to establish a temporary reinsurance program to provide reimbursement to assist employment-based plans with the cost of providing health benefits to retirees (55 years of age or older, not eligible for Medicare and not an active employee and to eligible spouses, surviving spouses, and dependents).

The Secretary would be required to reimburse valid claims for 80% of that portion of the costs that exceed $15,000 but is less than $90,000. Such amounts would be adjusted annually based on the medical care component of the CPI. The payments to the employers would have to be used to lower costs borne directly by participants and beneficiaries for health benefits provided under the plan in the form of premiums, and cost-sharing. An amount not to exceed $10 billion would be appropriated for the reinsurance program.

Role of the states
States would be required to enroll newly eligible Medicaid beneficiaries into the state Medicaid programs, maintain Medicaid and CHIP eligibility standards, methodologies, or procedures that were in place as of June 16, 2009 as a condition of receiving federal Medicaid or CHIP matching payments; and enter into a Memorandum of Understanding with the Health Insurance Exchange to coordinate enrollment of individuals in Exchange-participating health plans and under the state’s Medicaid program.

State mandated benefits would apply only to the extent that states pay for any premium increases resulting to the insurance provided to affordable credit enrollees as a result of the additional benefits.

The bill also includes numerous changes to the Medicaid program.

Financing
The bill would largely finance expanded coverage through savings from Medicare and Medicaid and a tax surcharge imposed on families with incomes above $350,000 and individuals with incomes above $280,000. The surcharge would be equal to 1% for families with modified adjusted gross income between $350,000 and $500,000; 1.5% for families with modified adjusted gross income between $500,000 and $1,000,000; and 5.4% for families with modified adjusted gross income greater than $1,000,000. These surcharge percentages could be reduced if federal health reform achieved greater than expected savings.