Tuesday, July 28, 2009

Reading the Health Care Bill: Part I

HR 3200 – “America’s Affordable Health Choices Act of 2009”

A Review

Part I: Division A – “Affordable Health Care Choices”

Unlike President Obama, and most members of Congress, I am actually reading House Resolution 3200. I am commenting on relevant sections (see below) and pulling out the text the American public should be most concerned with. There are some provisions that provide “consumer protections” some of which may be beneficial, but all of which either already exist or will necessarily increase insurance premiums (or bankrupt insurers in the case of controlled premiums).

Just the Table of Contents is telling and contradictory. A recurring theme throughout the bill is a massive expansion of the Federal government which will be necessary just to administer the plan. President Obama once remarked that the Constitution of the United States of America was deficient because it was a document of negative rights (from the perspective of the government) which says what the government cannot do, not what it “Can or should do.” House Resolution 3200 attempts to “correct” that problem by listing what the government can do in sufficiently vague language as to minimize all those pesky “Can’t dos.”

Another interesting aspect of this bill is that it neither provides benefits nor penalizes “nonresident aliens,” a.k.a. illegal aliens. However, they are estimated to represent up to 10 million of the 47 million uninsured number being batted about by our politicians. Therefore, they bill doesn’t provide coverage for the numbers advertised; neither does it offer any solutions for the major source of rising health care costs: illegal aliens utilizing our emergency rooms with no intent, or ability, to repay the costs.

You get to keep your existing insurance, right? Think again - only for 5 years, only if you are currently enrolled, and only if none of the provisions in your policy change (such as premium, deductible, co-insurance, etc.).


(a) Grandfathered Health Insurance Coverage Defined- Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this division, the term ‘grandfathered health insurance coverage’ means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met:CommentsClose CommentsPermalink

(1) LIMITATION ON NEW ENROLLMENT-CommentsClose CommentsPermalink


(A) IN GENERAL- Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.CommentsClose CommentsPermalink

(B) DEPENDENT COVERAGE PERMITTED- Subparagraph (A) shall not affect the subsequent enrollment of a dependent of an individual who is covered as of such first day.CommentsClose CommentsPermalink

(2) LIMITATION ON CHANGES IN TERMS OR CONDITIONS- Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1.CommentsClose CommentsPermalink


(3) RESTRICTIONS ON PREMIUM INCREASES- The issuer cannot vary the percentage increase in the premium for a risk group of enrollees in specific grandfathered health insurance coverage without changing the premium for all enrollees in the same risk group at the same rate, as specified by the Commissioner.

Section 102(b)(1)(A) IN GENERAL- The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before the first day of Y1 must meet the same requirements as apply to a qualified health benefits plan under section 101, including the essential benefit package requirement under section 121.

This sounds great, but keep in mind this will drive health insurance premiums through the roof:



A qualified health benefits plan may not impose any pre-existing condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any health status-related factors (as defined in section 2791(d)(9) of the Public Health Service Act) in relation to the individual or dependent.CommentsClose CommentsPermalink

This section, specifically subparagraph (b), would result in the elimination of lower-cost employer based self-insurance plans. The vague language gives the Commissioner sole discretion to terminate an employer’s self-insurance program. The affected employer, and by association its employees, would then be required to buy a “qualified” health plan.

Subparagaph (a)(1) will adversely affect younger insured because it mandates a maximum age-based rating disparity of 2 to 1 – meaning: the insurance costs will have to be more evenly spread across the age spectrum even though older insured are more costly.


In the off change anyone still doesn’t think this is Socialism, section 116 will help refute that idea for you. Under this section, the government gets to decide how much profit insurers make, including deeming what profit ratio is acceptable and adequate.


(a) In General- A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.CommentsClose CommentsPermalink

(b) Building on Interim Rules- In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services.

Section 122 further delineates requirements that will necessarily raise premiums, or destroy health insurers if premiums are set by the government. Specifically, subparagraph (a)(3) which eliminates any annual or lifetime limit on coverage. Also, subparagraph (c)(1) precludes cost-sharing (i.e. co-pays or co-insurance) on preventive medicine.


It gets better. The Health Advisory Committee, described in section 123, will get to decide what you can and cannot be treated for. The following excepts are the key points from section 123:

(a) Establishment -

(1) IN GENERAL- There is established a private-public advisory committee which shall be a panel of medical and other experts to be known as the Health Benefits Advisory Committee to recommend covered benefits and essential, enhanced, and premium plans.CommentsClose CommentsPermalink

(2) CHAIR- The Surgeon General shall be a member and the chair of the Health Benefits Advisory Committee.CommentsClose CommentsPermalink


(3) MEMBERSHIP- The Health Benefits Advisory Committee shall be composed of the following members, in addition to the Surgeon General:CommentsClose CommentsPermalink

(A) 9 members who are not Federal employees or officers and who are appointed by the President.CommentsClose CommentsPermalink

(B) 9 members who are not Federal employees or officers and who are appointed by the Comptroller General of the United States in a manner similar to the manner in which the Comptroller General appoints members to the Medicare Payment Advisory Commission under section 1805(c) of the Social Security Act.CommentsClose CommentsPermalink

(C) Such even number of members (not to exceed 8) who are Federal employees and officers, as the President may appoint.CommentsClose CommentsPermalink

Such initial appointments shall be made not later than 60 days after the date of the enactment of this Act.CommentsClose CommentsPermalink


(4) TERMS- Each member of the Health Benefits Advisory Committee shall serve a 3-year term on the Committee, except that the terms of the initial members shall be adjusted in order to provide for a staggered term of appointment for all such members.CommentsClose CommentsPermalink

(5) PARTICIPATION- The membership of the Health Benefits Advisory Committee shall at least reflect providers, consumer representatives, employers, labor, health insurance issuers, experts in health care financing and delivery, experts in racial and ethnic disparities, experts in care for those with disabilities, representatives of relevant governmental agencies. and at least one practicing physician or other health professional and an expert on children’s health and shall represent a balance among various sectors of the health care system so that no single sector unduly influences the recommendations of such Committee.CommentsClose CommentsPermalink

(b) Duties-CommentsClose CommentsPermalink

(1) RECOMMENDATIONS ON BENEFIT STANDARDS- The Health Benefits Advisory Committee shall recommend to the Secretary of Health and Human Services (in this subtitle referred to as the ‘Secretary’) benefit standards (as defined in paragraph (4)), and periodic updates to such standards. In developing such recommendations, the Committee shall take into account innovation in health care and consider how such standards could reduce health disparities.CommentsClose CommentsPermalink

The “Health Choices Commissioner” will be the government czar that gets to decide what you can and cannot be treated for. The Commissioner is responsible for defining the “Qualified Health Benefit Plans.” You may think, “I’ll just stick with my current employer sponsored plan,” but remember those will be phased out in at least 5 years after which time all insurance plans will have to be “qualified.”


(a) Duties- The Commissioner is responsible for carrying out the following functions under this division:CommentsClose CommentsPermalink

(1) QUALIFIED PLAN STANDARDS- The establishment of qualified health benefits plan standards under this title, including the enforcement of such standards in coordination with State insurance regulators and the Secretaries of Labor and the Treasury.CommentsClose CommentsPermalink

(2) HEALTH INSURANCE EXCHANGE- The establishment and operation of a Health Insurance Exchange under subtitle A of title II.CommentsClose CommentsPermalink

(3) INDIVIDUAL AFFORDABILITY CREDITS- The administration of individual affordability credits under subtitle C of title II, including determination of eligibility for such credits.CommentsClose CommentsPermalink

(4) ADDITIONAL FUNCTIONS- Such additional functions as may be specified in this division.CommentsClose CommentsPermalink

b) Promoting Accountability-CommentsClose CommentsPermalink

(2) COMPLIANCE EXAMINATION AND AUDITS-CommentsClose CommentsPermalink


(A) IN GENERAL- The commissioner shall, in coordination with States, conduct audits of qualified health benefits plan compliance with Federal requirements. Such audits may include random compliance audits and targeted audits in response to complaints or other suspected non-compliance.CommentsClose CommentsPermalink


(B) RECOUPMENT OF COSTS IN CONNECTION WITH EXAMINATION AND AUDITS- The Commissioner is authorized to recoup from qualified health benefits plans reimbursement for the costs of such examinations and audit of such QHBP offering entities.CommentsClose CommentsPermalink

Section 143 sounds pretty, but it means that everyone across the country will have the same, generic health plan. My state, Colorado, has the lowest obesity level in the country and a very active outdoor culture. Our health care needs are not going to be the same as another state with a sedentary, obese culture. In addition, the wealthier states will have different needs compared to the poor states.


Think the cost of this program will be manageable? Yea…not so much. Section 164 reimburses employer based plans for retirees. This is a blatant bailout for companies that, typically through collective bargaining agreements, bit off more than they could chew – think Ford, Chrysler, GM.


(a) Establishment-CommentsClose CommentsPermalink

(1) IN GENERAL- Not later than 90 days after the date of the enactment of this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this section referred to as the ‘reinsurance program’) to provide reimbursement to assist participating employment-based plans with the cost of providing health benefits to retirees and to eligible spouses, surviving spouses and dependents of such retirees.CommentsClose CommentsPermalink

Maybe this part is intended as a clever joke…subparagraph (d)(1)(A) calls for the establishment of a “Retiree Reserve Trust Fund” that will be used to fund the retiree reinsurance program. Hmm…where have I heard of other such trust funds…that’s right, Social Security and Medicare. Ultimately, those trust funds are used to finance the government’s runaway deficit spending; the only thing in those funds are Treasuries that must be repaid with money that doesn’t exist.

(d) Retiree Reserve Trust Fund-CommentsClose CommentsPermalink

(1) ESTABLISHMENT-CommentsClose CommentsPermalink

(A) IN GENERAL- There is established in the Treasury of the United States a trust fund to be known as the ‘Retiree Reserve Trust Fund’ (referred to in this section as the ‘Trust Fund’), that shall consist of such amounts as may be appropriated or credited to the Trust Fund as provided for in this subsection to enable the Secretary to carry out the reinsurance program. Such amounts shall remain available until expended.CommentsClose CommentsPermalink

The Health Exchange seems like the only reasonable part of this bill. It has been widely touted as a marketplace where Americans can shop for competitive health insurance. There are two significant drawbacks delineated in section 202: (1) the plans offered have to meet the government guidelines as a “qualified” plan and (2) only people without existing coverage are able to “shop” the exchange.


(a) Access to Coverage- In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or other acceptable coverage.

Government control makes another appearance in section 203 regarding the Exchange-participating plans:



(a) In General- The Commissioner shall specify the benefits to be made available under Exchange-participating health benefits plans during each plan year, consistent with subtitle C of title I and this section.CommentsClose CommentsPermalink

And per subparagraph (c)(2)(B) the cost-sharing varies based upon your income level, as if the wealth redistribution through progressive taxation wasn’t enough.

(B) TIERED COST-SHARING FOR AFFORDABLE CREDIT ELIGIBLE INDIVIDUALS- In the case of an affordable credit eligible individual (as defined in section 242(a)(1)) enrolled in an Exchange-participating health benefits plan, the benefits under a basic plan are modified to provide for the reduced cost-sharing for the income tier applicable to the individual under section 244(c).CommentsClose CommentsPermalink

If you don’t want to enroll, don’t worry, the government will do it for you:


(b) Enrollment Process-CommentsClose CommentsPermalink


(A) IN GENERAL- The Commissioner shall provide for a process under which individuals who are Exchange-eligible individuals described in subparagraph (B) are automatically enrolled under an appropriate Exchange-participating health benefits plan. Such process may involve a random assignment or some other form of assignment that takes into account the health care providers used by the individual involved or such other relevant factors as the Commissioner may specify.

Another “Trust Fund!” This is the “Health Insurance Exchange Trust Fund” to be established to fund this monstrosity of a bill. Section 207 describes the sources of its funding; note that it is not limited to taxes dedicated to this government program, i.e. the Congress can (and will have to) allocate funds out of the General Fund.


(c) Transfers to Trust Fund-CommentsClose CommentsPermalink

(1) DEDICATED PAYMENTS- There is hereby appropriated to the Trust Fund amounts equivalent to the following:CommentsClose CommentsPermalink


(A) TAXES ON INDIVIDUALS NOT OBTAINING ACCEPTABLE COVERAGE- The amounts received in the Treasury under section 59B of the Internal Revenue Code of 1986 (relating to requirement of health insurance coverage for individuals).CommentsClose CommentsPermalink

(B) EMPLOYMENT TAXES ON EMPLOYERS NOT PROVIDING ACCEPTABLE COVERAGE- The amounts received in the Treasury under section 3111(c) of the Internal Revenue Code of 1986 (relating to employers electing to not provide health benefits).CommentsClose CommentsPermalink

(C) EXCISE TAX ON FAILURES TO MEET CERTAIN HEALTH COVERAGE REQUIREMENTS- The amounts received in the Treasury under section 4980H(b) (relating to excise tax with respect to failure to meet health coverage participation requirements).CommentsClose CommentsPermalink

(2) APPROPRIATIONS TO COVER GOVERNMENT CONTRIBUTIONS- There are hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, to the Trust Fund, an amount equivalent to the amount of payments made from the Trust Fund under subsection (b) plus such amounts as are necessary reduced by the amounts deposited under paragraph (1).CommentsClose CommentsPermalink

Read the following as, “A Federal health insurance option shall be established to ensure private sector health plans are eliminated thereby appropriating all power to the government.”

Subtitle B--Public Health Insurance OptionCommentsClose CommentsPermalink



(a) Establishment- For years beginning with Y1, the Secretary of Health and Human Services (in this subtitle referred to as the ‘Secretary’) shall provide for the offering of an Exchange-participating health benefits plan (in this division referred to as the ‘public health insurance option’) that ensures choice, competition, and stability of affordable, high quality coverage throughout the United States in accordance with this subtitle. In designing the option, the Secretary’s primary responsibility is to create a low-cost plan without comprimising [sic] quality or access to care.CommentsClose CommentsPermalink

While the government will mandate a particular loss ratio for private plans, the public option gets to maintain a “Contingency Margin” that is unrelated to the loss ratio proscribed to the private plans.


(a) Establishment of Premiums-CommentsClose CommentsPermalink

(2) CONTINGENCY MARGIN- In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin

Fortunately, the free market gets to determine the rates the government option will pay for services rendered…oh wait, I got that wrong…the government gets to decide. But they’re going to use Medicare rates as a starting point; no one is complaining about that, right?:


(a) Rates Established by Secretary-CommentsClose CommentsPermalink

(1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224.CommentsClose CommentsPermalink

(2) INITIAL PAYMENT RULES-CommentsClose CommentsPermalink

(A) IN GENERAL- Except as provided in subparagraph (B) and subsection (b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates under this section for services and providers described in paragraph (1) on the payment rates for similar services and providers under parts A and B of Medicare.CommentsClose CommentsPermalink

I guess if no one was complaining and there were enough physicians accepting Medicare they wouldn’t have included subparagraph (b)(1)(A):

(b) Incentives for Participating Providers-CommentsClose CommentsPermalink

(1) INITIAL INCENTIVE PERIOD-CommentsClose CommentsPermalink

(A) IN GENERAL- The Secretary shall provide, in the case of services described in subparagraph (B) furnished during Y1, Y2, and Y3, for payment rates that are 5 percent greater than the rates established under subsection (a).CommentsClose CommentsPermalink

But not to worry, the government is going to make sure they don’t pay too much:

(d) Construction- Nothing in this subtitle shall be construed as limiting the Secretary’s authority to correct for payments that are excessive or deficient, taking into account the provisions of section 221(a) and the amounts paid for similar health care providers and services under other Exchange-participating health benefits plans.

Section 224 provides for “Innovative Payments.” This is Politician-speak for “redistribution.”


(a) In General- For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.CommentsClose CommentsPermalink

(b) Requirements for Innovative Payments- The Secretary shall design and implement the payment mechanisms and policies under this section in a manner that--CommentsClose CommentsPermalink

(1) seeks to--CommentsClose CommentsPermalink

(A) improve health outcomes;CommentsClose CommentsPermalink

(B) reduce health disparities (including racial, ethnic, and other disparities);CommentsClose CommentsPermalink

(C) provide efficent and affordable care;CommentsClose CommentsPermalink

(D) address geographic variation in the provision of health services; orCommentsClose CommentsPermalink

(E) prevent or manage chronic illness; andCommentsClose CommentsPermalink

(2) promotes care that is integrated, patient-centered, quality, and efficient.CommentsClose CommentsPermalink

(c) Encouraging the Use of High Value Services- To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value.CommentsClose CommentsPermalink

(d) Non-uniformity Permitted- Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and medical homes) under the public health insurance option for different geographic areas.CommentsClose CommentsPermalink

The bill further requires employers to either pay for part of an employee’s medical insurance if offered through the company, or pay a tax of 8% of the employee’s annual salary to the Health Choices Commissioner. There is a graduated tax rate for business with annual payrolls of less than $400,000.


(a) In General- A contribution is made in accordance with this section with respect to an employee if such contribution is equal to an amount equal to 8 percent of the average wages paid by the employer during the period of enrollment (determined by taking into account all employees of the employer and in such manner as the Commissioner provides, including rules providing for the appropriate aggregation of related employers). Any such contribution--CommentsClose CommentsPermalink

(1) shall be paid to the Health Choices Commissioner for deposit into the Health Insurance Exchange Trust Fund, andCommentsClose CommentsPermalink

(2) shall not be applied against the premium of the employee under the Exchange-participating health benefits plan in which the employee is enrolled.CommentsClose CommentsPermalink

Evidently, employers have to make their privately funded insurance offerings reasonably attractive – no idea what that means or how it would be assessed.


The Health Choices Commissioner (in coordination with the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury) shall have authority to set standards for determining whether employers or insurers are undertaking any actions to affect the risk pool within the Health Insurance Exchange by inducing individuals to decline coverage under a qualified health benefits plan (or current employment-based health plan (within the meaning of section 102(b))) offered by the employer and instead to enroll in an Exchange-participating health benefits plan. An employer violating such standards shall be treated as not meeting the requirements of this section.CommentsClose CommentsPermalink

What better way to insure those 47 million uninsured “Americans” than by mandating they buy insurance?



‘(a) Tax Imposed- In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed a tax equal to 2.5 percent of the excess of--CommentsClose CommentsPermalink

‘(1) the taxpayer’s modified adjusted gross income for the taxable year, overCommentsClose CommentsPermalink

‘(2) the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.CommentsClose CommentsPermalink

Additional tax on businesses failing to meet the government’s participation requirements is described:

‘(b) Excise Tax With Respect to Failure To Meet Health Coverage Participation Requirements-CommentsClose CommentsPermalink

‘(1) IN GENERAL- In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee to whom such election applies, there is hereby imposed on each such failure with respect to each such employee a tax of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.CommentsClose CommentsPermalink

Don’t forget the individual wealth redistribution outlined in section 441 with the proposed modifications to the Internal Revenue Code of 1986:


‘(a) General Rule- In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to--CommentsClose CommentsPermalink

‘(1) 1 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $350,000 but does not exceed $500,000,CommentsClose CommentsPermalink

‘(2) 1.5 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $500,000 but does not exceed $1,000,000, andCommentsClose CommentsPermalink

‘(3) 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000.CommentsClose CommentsPermalink

The amounts in paragraph (1) and (2) go up to 2 percent and 3 percent, respectively, in 2012. These escalations are redacted if certain cost savings targets are met. Those savings will be objectively measured (sarcasm):

3) DETERMINATION OF FEDERAL HEALTH REFORM SAVINGS- Not later than December 1, 2012, the Director of the Office of Management and Budget shall--CommentsClose CommentsPermalink

‘(A) determine, on the basis of the study conducted under paragraph (4), the aggregate reductions in Federal expenditures which have been achieved as a result of the provisions of, and amendments made by, division B of the America’s Affordable Health Choices Act of 2009 during the period beginning on October 1, 2009, and ending with the latest date with respect to which the Director has sufficient data to make such determination, andCommentsClose CommentsPermalink

‘(B) estimate, on the basis of such study and the determination under subparagraph (A), the aggregate reductions in Federal expenditures which will be achieved as a result of such provisions and amendments during so much of the period beginning with fiscal year 2010 and ending with fiscal year 2019 as is not taken into account under subparagraph (A).CommentsClose CommentsPermalink

I’m not a tax expert but, Sections 452 and 453 appear to be about elimination of tax “loopholes” that allow individuals and corporations to off-shore transactions to reduce their U.S. tax liability. While this may be appealing to those who think corporations and the wealthy are evil, it will be met with retaliatory legislation from foreign governments; thereby negating any perceived benefit to our government’s revenue. Other than making sure corporations and individuals are taxed more, these section really have nothing to do with Health Care.

1 comment:

  1. Thank you so much for offering up some explaination that cuts to the chase of the Health Care Bill.