New health care plan and your wallet
Sen. Baucus' health care reform proposal contains a number of measures that have the potential to affect Americans' bottom line.
NEW YORK (CNNMoney.com) -- The health reform debate is still far from the finish line, but Wednesday brought an important milestone: A key senator's highly-anticipated proposal echoing many of the reforms that President Obama is calling for.
"My bill is very, very similar to the framework that the president was talking about when he gave his message the other day. It's very similar," Senate Finance Committee Chairman Max Baucus, D-Mont., told reporters.
The proposal's price tag, according to the Senate Finance Committee, is $856 billion over 10 years. It would be paid for through cuts and savings from government health programs and through new taxes and fees on health industry players. Over 10 years, estimates are that the plan could reduce the deficit.
Both Democrats and Republicans have expressed consternation about different elements in the Baucus proposal. (Read full text of the Baucus proposal.).
Still, it is considered to have the best chances of passing once amended.
So what might it mean to your wallet?
Well, first of all, the summary of the proposal alone is 223 pages. So it's impossible to offer a comprehensive rendering of all the potential effects.
But here's a quick look at several key measures that could change how much individuals end up paying for health care.
Requirement to buy insurance: With some exceptions for very low-income individuals and those with religious objections, the Baucus proposal would require that individuals buy health insurance every year.
The penalty for not buying insurance would be a fine running as high as $3,800 a year for a family that makes more than 300% of the federal poverty level. For families that forgo coverage and make less than that, the fine would be $1,500. The fines for individuals would be, respectively, $950 and $750.
Here's some context for those fines: A survey from the Kaiser Family Foundation released Tuesday found that the average cost of premiums for employer-sponsored insurance topped $13,000 for family coverage, of which the worker paid $3,515. The average cost for an individual policy was $4,824, of which the worker paid $779.
State-based insurance exchanges: The Baucus proposal like other Democratic plans would create insurance exchanges -- or supermarkets -- where individuals could comparison shop for policies.
Insurers participating in the exchange would offer four levels of coverage -- bronze, silver, gold and platinum. All plans must provide a basic level of benefits, including coverage of preventive and primary care, maternity and newborn care, dental and vision care, and prescription drugs, among other areas.
Plus, plans in most instances must cover 100% of the cost for preventive care.
Insurers would not be permitted to cap the amount of benefits a policyholder receives.
And insurers selling plans directly to individuals -- whether on the exchange or not -- would not be allowed to deny anyone coverage based on a pre-existing condition or rescind a policy when premiums have been paid in full.
Health affordability tax credits: For Americans making between 100% and 400% of the federal poverty level, the Baucus proposal would subsidize premium costs for insurance purchased on state-based exchanges. The amount of the credit would be based on a sliding scale.
A person eligible for the affordability credit would pay his portion of the premium to the insurer and the federal government would pay the rest.
In addition, the proposal would subsidize out-of-pocket health costs for co-payments and deductibles for Americans making between 100% and 200% of poverty.
The subsidy provisions in general are less generous than in other plans put forth by Democrats, raising concerns among some that insurance could still prove costly for many.
"The plan would require premium contributions from low- and moderate-income individuals and families that are likely to be above what many of them can afford," said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities, in a statement.
He added, however, that he believes the Baucus proposal is a good starting point and that "it would be a great mistake to reject the plan and end up with nothing."
Standardization of Medicaid eligibility: The Baucus proposal will make Medicaid benefits available to anyone whose household income is at or below 133% of the federal poverty level.
That translates into $30,000 for a family of four or $14,400 for an individual. Currently, eligibility for Medicaid can vary by state, said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute.
States have been expressing concern that they won't be able to afford a Medicaid expansion. The proposal calls for the federal government to provide extra funding to states to compensate them for adding newly eligible Medicaid beneficiaries.
Taxes and fees on insurers: The Baucus proposal would pay for reform in part by imposing $349 billion worth of taxes and fees on insurers and other health industry players, such as pharmaceutical and medical equipment manufacturers.
The tax would be limited to insurers who provide high-cost insurance plans -- sometimes called "Cadillac plans."
It would be a 35% excise tax on insurers for plans that cost more than $8,000 a year for individual coverage and $21,000 for family coverage. The thresholds would be adjusted for inflation annually and would be set higher in the 17 highest-cost states for the first three years.
As with any business tax, the expectation is that insurers will pass that added cost along to consumers.
It's not clear whether insurers would spread the added cost to policyholders in all of their plans or only to those who buy the high-priced ones.
"Premiums are going up for somebody," Fronstin said.
Indeed, America's Health Insurance Plans, the insurance industry trade group, said as much in a statement following release of Baucus' proposal. "New taxes on health care coverage will have the opposite effect by making coverage less affordable for families and employers across the country."