Keep Our Sights on Affordability

Now that both the House and Senate have passed a version of health care reform, Congress must navigate one final step before any bill lands on President Obama’s desk.

A conference committee next month will combine the two plans into one bill. One element that will certainly loom large: Subsidies to help low- and middle-income families purchase health coverage.

Both the House and Senate plans establish a new insurance “exchange’’ that would offer a range of plans with different levels of premiums, benefits, and cost-sharing. Subsidies would be available for certain individuals and families to purchase coverage through that exchange. The amount of the subsidy would be tied to either the second-least-expensive plan or an average of the three lowest-cost plans available through the exchange. Those who opt for more expensive coverage would pay for the additional costs themselves.

Congressional Budget Office analyses of the two plans show that the House version would offer more assistance to lower-income families than the Senate version. In fact, while the Senate version does more to reduce costs for those with moderate incomes, it does so at the expense of those with lower incomes, as these two tables show.

Even without a public option – a government-run health insurance plan that would compete with private plans to keep premiums affordable – other aspects of the House bill also help to make the new requirement to have coverage more manageable for individuals and families. They include:

  • A more robust Medicaid expansion: Everyone, including nonelderly adults without children, would generally qualify for Medicaid – Medi-Cal in California – with incomes up to 150 percent of the poverty line, or an annual income of up to $16,245 in 2009. In the Senate version, the cut-off for Medicaid is 133 percent of the poverty line, or an annual income of up to $14,404. In California, 123,000 more people would be newly eligible under the House version than the Senate version of the bill.
  • A stronger employer mandate: The House version requires businesses to provide “qualifying insurance” coverage to employees and pay a substantial share toward premiums or pay a penalty equal to 8 percent of payroll. The Senate version encourages employers with more than 50 employees to purchase coverage, but the requirement is less prescriptive and the penalty far less severe, equal to $750 for each full-time worker if any of the firm’s employees obtain subsidized coverage through the exchange. To the extent that individuals can buy coverage through a “group,’’ such as an employer, it spreads the risk and cost of insurance and thus lowers premiums. The one caveat in the House version is that employees who are offered qualifying coverage through their employer must take that option, even if the coverage is inferior and costs are higher than the health plans available with subsidies. Workers who would have to pay more than 12 percent of their income toward their employer’s insurance, however, could receive subsidies to purchase coverage through the exchange.

The success of health reform – particularly a plan that requires everyone to have health insurance – hinges on the ability of families to pay for the health care they need without significant financial strain. Health care reform that proves unaffordable to families with low incomes could hinder health reform’s success.

As we have said and shown before, even without health expenses, a single adult in California would need to earn at least $24,760 to pay for basic needs such as housing, transportation, and food, not including health care. With or without a public option, any health reform that emerges from conference committee needs to contain adequate subsidies that will keep coverage affordable for millions of individuals and families.

— Hanh Kim Quach

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