President Obama has unveiled a health bill proposal that could give federal regulators the authority to regulate health insurance rates.
The rate regulation provision is part of a proposal that the Obama administration has drafted in an effort to “bridge the gap” between the House and Senate health bills. A copy of the proposal is available here.
“A new Health Insurance Rate Authority will be created to provide needed oversight at the federal level and help States determine how rate review will be enforced and monitor insurance market behavior,” Obama administration officials write in a proposal summary.
If a proposed rate increase were unreasonable and unjustified, the government could make a health insurer lower premiums, provide rebates, or take other actions to make premiums affordable, officials write.
In addition to the federal rate regulation provision, the administration proposal includes commercial health coverage provisions that would:
- Require that individuals have health insurance or pay a penalty.
- Create a system of health insurance distribution exchanges. (An administration official who requested anonymity says the proposal exchange provisions are similar to the exchange provisions in the Senate health bill, H.R. 3950.)
- Keep the proposed “Cadillac tax” on insurers that sell high-cost health plans, but shift the effective date to 2018, from 2013, to provide more time for high-cost plans to become more efficient. The initial amount of premiums would be exempt from the tax would increase to $10,200, from $8,500 for individuals, and to $27,500, from $23,000, for families. The initial amounts would be indexed after the first year at a rate equal to the general inflation rate plus 1 percentage point.
- Provide $40 billion in small business health coverage tax credits.
- Make employers with 50 or more employees responsible for helping to pay for employees’ health coverage. The Obama administration draft would not impose a direct coverage mandate on affected employers, but it would require them to help defray the cost if employees were getting subsidized health coverage through a public program. “Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” officials write.
- Let people who like their current coverage keep it — but impose new restrictions on the “grandfathered plans.” Starting within months after the provision took effect, the grandfathered plans would have to cover adult dependents up to age 26, stop pushing for rescissions, adopt a strong appeals process, and undergo annual state rate reviews. Once the exchanges started up in 2014, grandfathered plans would have to eliminate annual and lifetime coverage limits, pre-existing condition exclusions, and efforts to discriminate in favor of highly compensated individuals. Starting in 2018, the grandfathered plans would have to cover “proven preventive services” with no cost sharing.
Obama administration proposal provisions that would affect the Medicare market and other senior products markets would:
- Enact a version of the Community Living Assistance Services and Supports Act. The CLASS Act provision would create a worker-funded long term care benefits program. Many critics in the insurance industry, and the chief actuary at the Centers for Medicare and Medicaid Services, have argued that earlier versions of the CLASS Act, including one in the Senate health bill, would create an unsustainable program. Administration officials say the new version of the act includes changes that will improve the proposed program’s financial stability.
- Close the Medicare Part D prescription drug program “donut hole.”(The donut hole is the coverage gap that starts where Part D coverage for routine prescription expenses ends and catastrophic coverage begins. Today, routine Part D coverage ends after a beneficiary spends $2,830 on covered drugs, and catastrophic coverage kicks in when the beneficiary spends $4,550 on covered drugs.)
- Keep many of the Medicare Advantage program cost-cutting provisions from the House and Senate health bills. The Obama administration would create a set of benchmark payments at different percentages of the current average fee-for-service costs in an area. The proposal “phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” officials write in the proposal summary.The new payment system would provide bonuses for quality and enrollee satisfaction, and it would punish plans that are unable to justify unusually rapid increases in provider payments.
Revenue provisions in the proposal would:
- Place a 2.9% assessment on income from interest, dividends, annuities, royalties and rents for individuals earning more than $200,000 or families making more than $250,000.
- Apply the proposed 2.9% assessment to capital gains. That would push the rate to 22.9% in 2011, up from 15% currently and 20% scheduled to take effect next year
- Increase the Medicare payroll tax on the highest earners. This increase is also part of the Senate health bill.
The America’s Health Insurance Plans, Washington, is defending the need for health insurance rate increases, especially in the individual market and the small group market.
“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” AHIP spokesman Robert Zirkelbach says.
“In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs,” Zirkelbach says. “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”