Insurance Provisions of Health Reform Bills: Implications for Coverage, Affordability, and Costs

This report analyzes the provisions of the health reform bills passed by the U.S. House of Representatives and Senate that seek to expand and improve health insurance coverage. It focuses on: the number of people who would likely gain coverage; under which program or plan they would be covered, and the consequences for federal financing; the estimated insurance premium and out-of-pocket costs for families; the consequences for employers; and the degree to which the reorganization and regulation of insurance markets has the potential to stimulate price competition and lower costs. Although there are some key differences between the bills’ approaches, both would significantly reform health insurance, providing coverage to more than 30 million uninsured Americans and substantially improving the affordability of coverage for small businesses and for people who now buy insurance on their own.

Executive Summary

The U.S. House of Representatives and Senate have passed major health reform bills. On November 7, the full House voted to pass H.R. 3962, The Affordable Health Care for America Act. On December 24, the full Senate voted to pass H.R. 3590, The Patient Protection and Affordable Care Act.

This report analyzes the provisions of the bills that seek to expand and improve health insurance coverage in the United States. It builds on an earlier report published by The Commonwealth Fund that explains the provisions of the congressional health reform bills in detail.

In this report, we focus on: the number of people who would likely gain coverage under the two bills; under which program or plan they would be covered and the consequences for federal financing; the estimated insurance premium and out-of-pocket costs for families; the consequences of the bills for employers; and the degree to which the reorganization and regulation of insurance markets in the bills has the potential to stimulate price competition and lower costs. A companion Commonwealth Fund report analyzes the bills' implications for health system reform.

Overall Approach of the Health Reform Bills

The House bill and the Senate bill both aim to provide near-universal health insurance coverage. They would do so by building on the strongest aspects of the insurance system—large-employer insurance, Medicaid, and the Children’s Health Insurance Program (CHIP)—and by regulating and reorganizing the individual and small group insurance markets, generally considered the weakest part of the system (Exhibit ES-1).

• The bills would establish new federal rules requiring insurance carriers in all markets to accept every individual and employer who applied for coverage (guaranteed issue) and prohibit rating based on health status.
• The bills would create a new health insurance exchange operated either at the national or state level in which eligible individuals and businesses could purchase health insurance, choosing between private and public health plans.
• Premium and cost-sharing subsidies would be available on a sliding scale to offset the costs of plans purchased through the exchange. An essential standard benefit package, with different levels of cost-sharing, would set a floor for plans offered through the exchange.

• Income eligibility for Medicaid and CHIP would be expanded up to 133 percent or 150 percent of the federal poverty level.
• Large employers would be required to either offer coverage or contribute to the cost of their employees' insurance. Small employers would be eligible for tax credits to offset the costs of insurance.
• Individuals would be required to have health insurance.

How Much Would the Proposals Cost the Federal Government?

The Congressional Budget Office (CBO) has estimated that the bills would reduce the federal deficit over the next 10 years by $138 billion (House) and $132 billion (Senate) (Exhibit ES-2). The estimated cost over 10 years of expanding and improving health insurance is $891 billion under the House bill and $763 billion under the Senate bill. Costs would be offset by contributions from employers, savings from health system reforms, and new revenues.

How Many People Would Gain Coverage?

In the absence of health reform, the CBO estimates that the number of uninsured Americans will rise to 54 million by 2019, from 46 million in 2008. The House and Senate proposals would lower that estimate substantially.

• The CBO estimates that the House bill would reduce the number of people without coverage by 36 million, leaving 18 million people without health insurance in 2019 (Exhibit ES-3).
• The Senate bill would reduce the number of people without insurance by about 31 million, leaving 23 million people uninsured in 2019.

• The CBO estimates that, under the House and Senate bills, employer-sponsored insurance would remain the primary source of insurance for most families, covering about 56 percent to 60 percent of the under-65 population in 2019.
• Small to mid-size companies purchasing coverage through the exchange would bring about 5 million to 9 million people into the exchanges under the Senate and House bills.
• Under both bills, the exchanges would provide a new source of coverage to an estimated 30 million people by 2019, by allowing either individuals or companies to purchase coverage in the exchanges.
• Under both bills, the number of people covered through the Medicaid program would increase by 15 million, from 35 million today to about 50 million by 2019.

via commonwealthfund.org