What's needed to make health care affordable on the Exchange? Merge the House and Senate bills
Posted on January 6th, 2010 by Jason Rosenbaum in Solutions that Work
 |
As the informal conference process moves forward, the premiums and out-of-pocket costs the uninsured, individuals, and small businesses will pay on the new health insurance Exchange is getting a lot of focus:
Congressional Democrats and President Barack Obama began work in earnest Tuesday on difficult issues still standing in the way of their national health care overhaul after months of tortuous debate. Topping the list: How to help Americans pay for insurance premiums.
At a White House meeting that stretched into Tuesday evening, the president and Democratic congressional leaders agreed on fast-track negotiations that would bypass the need for a formal conference to resolve differences between the House and Senate health care bills.
Obama "also stated his intention to work with leaders to strengthen affordability … beyond what is in the Senate bill," said a House leadership aide, who spoke on condition of anonymity because the meeting was private.
Affordability for people in the Exchange is a key issue. Along with making sure health care is affordable at work, not taxing health benefits, holding insurance companies accountable with strong regulations, and creating a public option, it's key to finishing health reform right.
To make health care affordable for the millions who will buy it on the Exchange, who are largely the most vulnerable populations - the uninsured, individuals, and small businesses - the affordability provisions from the House and Senate bills should be merged.
When people buy health insurance in the new Exchange, they will receive tax credits to help them afford health care premium and out-of-pocket costs. Those tax credits (or subsidies) vary based on income, so people who make more money receive less assistance.
Under the House bill, families who make less money (between about $18,000 and $36,000 per year) would pay on average only about 2% to 8% of their income (on a sliding scale, so families making $18,000 would pay 2%, families making $36,000 would pay 8%) for health care costs. That's not chump change, but that's very affordable compared to the Senate bill, where the same families would pay between about 9% to 13% of their income on average for health care costs.
For a family making $36,000 per year, paying almost $5,000 in premiums and out-of-pocket costs on average every year is not affordable. The House provisions are clearly better for people in that income range.
But for families who make more money (between about $64,000 and $73,000 per year), the Senate bill is better. These families would pay about 15% of their income, where under the House bill they would pay about 17% on average per year.
(For a full look at the numbers at various income levels, see the analysis here. [pdf])
To make health care affordable for everyone along the income scale, the House provisions for lower and middle income people and the Senate provisions for higher income people should be combined, so we end up with a scale of tax credits that works for everyone.
Of course, we need to fix more than affordability for people on the Exchange. Making sure employers pay for good health insurance, not taxing middle class benefits, strong regulations, and a national public option are key as well. These and other issues will get a look as we fight to finish reform right.