House Ways & Means Committee Approves Health Reform Bill

Date: July 17, 2009

In the wee hours of pre-dawn Friday, July 17, the House Ways & Means Committee approved H.R.3200, the "America's Affordable Health Choices Act of 2009," by a 23 to 18 vote. Two other House committees--Education & Labor, and Energy & Commerce--are also marking up the measure. The House Rules Committee will combine the work of the three committees into one bill that will go to the House floor, probably late in the week of July 20, or during the week of July 27.

For a summary of the Ways & Means-approved bill, click here.

Generally, H.R.3200 as approved by the Ways & Means Committee:

  • Includes an employer mandate, with employers who do not offer and pay most of the premium for health insurance on their employees subject to an eight percent of payroll tax
  • Includes an individual mandate, with fines for individuals who do not purchase health insurance
  • Creates a national exchange (although it permits states to set up their own exchanges) through which both a public health insurance plan and an unlimited number of private insurance plans could be purchased--initially, only individuals without access to employer-provided health insurance and small businesses could purchase their insurance through an exchange.
  • Creates a public plan that is not subject to all the same rules (e.g., state premium tax liability) as private plans
  • Imposes insurance reforms, including:
    • Prohibition against pre-existing conditions
    • Prohibition against use of health status or history in setting premiums
    • Prohibition against annual or lifetime benefit caps
    • Community rating (only age, family size and geography would be permissible premium variables)
    • Required guaranteed issue/renewability
  • Offsets the $1+ trillion cost of the reform bill by Medicare program savings (including substantial cuts in Medicare Advantage), and a new surtax on high-income Americans (1 percent on family income of $350,000 to $500,000; 1.5 percent on family income of $500,000 to $1 million; and 5.4 percent on family income in excess of $1 million).
  • Restricts use of FSA/HSA/HRA funds used to buy medicine to prescription drugs.  Thus, under this change, people would no longer be able to buy over-the-counter medicines (e.g., aspirin) on a tax-free basis with their FSA/HSA/HRA funds.

Senate-side, negotiations continue, both among members of the Senate Finance Committee, and among a small bipartisan group of seven Senators who are trying to craft a bipartisan plan. Insiders say it will be next week before Senators achieve consensus, but they anticipate that they will come to an agreement.

There are a number of thorny issues in the Senate negotiations: one is the revenue to pay for the cost of health reform. Senators (and House members) were told on July 16 by the Congressional Budget Office (CBO) that a cap on tax-free employer-provided health insurance is necessary to "bend the cost curve"--i.e., achieve the health care cost controls required to win Congressional approval of the reform plan. However, there is a great deal of opposition (especially among Democrats) to a health insurance tax cap.

Currently, the both the Finance Committee and the small bipartisan group are examining other forms of offsetting revenue, including a cap on the amount of money that can be contributed to FSAs, HSAs and HRAs. Cap proposals have ranged from $2000/year to $5,000/year (indexed). Insiders tell us that the situation is extremely fluid; it is unclear whether Senators will agree to a health insurance tax cap that would include contributions to FSAs, HSAs and HRAs, or whether there will be a separate cap on FSAs/HRAs/HSAs--or whether instead the Senate (like the House) will look at an alternative (like the surtax on the wealthy) to finance health reform.