A Comparative Analysis of Private
Health Insurance Provisions of H.R. 3962
and Senate-Passed H.R. 3590
Chris L. Peterson, Coordinator
Specialist in Health Care Financing
Hinda Chaikind
Specialist in Health Care Financing
Bernadette Fernandez
Analyst in Health Care Financing
Paulette C. Morgan
Specialist in Health Care Financing
Janemarie Mulvey
Specialist in Aging Policy
Mark Newsom
Analyst in Health Care Financing
Jon O. Shimabukuro
Legislative Attorney
January 8, 2010
Congressional Research Service
7-5700
www.crs.gov
R40981
CRS Report for Congress
Prepared for Members and Committees of Congress
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Summary
On November 7, 2009, the U.S. House of Representatives approved health insurance reform
legislation, H.R. 3962, the Affordable Health Care for America Act. On December 24, 2009, the
U.S. Senate passed its version of health insurance reform, the Patient Protection and Affordable
Care Act, in H.R. 3590, as amended by the Senate (hereafter referred to simply as H.R. 3590).
Individuals currently receiving health insurance through a large employer would likely see the
least direct impact from the bills. The largest changes would occur in the private health insurance
market for small businesses and for nongroup coverage (currently, insurance obtained directly
from an insurance company, broker or agent). The most substantial of these reforms would not
take effect until 2013 under H.R. 3962, and in 2014 under the Senate bill. At full implementation,
the required private health insurance market reforms should be fully in place, along with
subsidies to certain low- and moderate-income individuals ineligible for Medicaid. At full
implementation, the bills would require most individuals to obtain and, in the House bill, for
larger employers to offer and contribute toward health insurance. Although the Senate bill does
not have an explicit “employer mandate,” employers who do not offer coverage could face
substantial penalties.
Shortly after enactment of either of the bills, all private health insurance would be subject to some
new requirements. For example, health insurers could not offer coverage with unreasonable
annual or lifetime limits on benefit payouts, and they could not cancel (“rescind”) policies unless
the policyholder had committed fraud. Many other provisions are detailed in the report.
After full implementation, although prior coverage could generally continue without meeting new
requirements (at least for a period of time), new coverage would have to meet federal standards
stipulated in the bills—and different requirements may apply depending, for example, on whether
the coverage is nongroup or employment-based. The bills also call for an exchange available in
each state, through which individuals not enrolled in (or, primarily in the Senate bill, not eligible
for) other coverage, as well as small businesses, could choose from private health insurance
plans. In addition, under the House bill, individuals obtaining coverage through an exchange
could also choose a “public option” established by the Secretary of Health and Human Services
(HHS). The public option would be appropriated start-up funding, but would ultimately have to
be self-sustaining through the premiums charged. Payments to providers (doctors, hospitals)
would be established through negotiations with the Secretary. The Senate bill would not include a
public option. However, the Director of the Office of Personnel Management would enter into
contracts with health insurance issuers to offer at least two multi-state qualified health plans
(MSQHPs) through each exchange in each state to provide individual, or in the case of small
employers, group coverage. Both bills also provide start-up funding for cooperatives, which
would be new, member-run, nonprofit entities that could offer health insurance through
exchanges.
Under the Senate bill, any participation in the exchange requires verifying citizenship or legal
residence status. Under H.R. 3962, such verification is only required for premium and costsharing subsidies. Under both bills, such subsidies would only be available through an exchange,
for qualifying low- to moderate-income individuals. Both bills would prohibit the subsidies from
paying any part of elective abortions. The House bill would also prohibit subsidies from going to
a plan that covers elective abortions. Besides the subsidies to individuals, small businesses would
be eligible for tax credits to help them pay toward their employees’ coverage. The Congressional
Budget Office (CBO) estimated the bills’ costs would be fully offset in both the 5- and 10-year
budget windows by increased excise taxes and other revenues and decreased spending.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Contents
Introduction ................................................................................................................................1
Reforms Prior to Full Implementation .........................................................................................4
Private Health Insurance Market Reforms at Full Implementation Date .......................................6
Essential Benefits........................................................................................................................7
Individual Mandate .....................................................................................................................8
Employer Mandate......................................................................................................................8
Small Business Tax Credit......................................................................................................... 10
Health Insurance Exchanges...................................................................................................... 12
Premium and Cost-Sharing Subsidies ........................................................................................ 13
Public Health Insurance Option/Multi-State Qualified Health Plans........................................... 16
Consumer Operated and Oriented Plan (CO-OP) Program......................................................... 17
Selected Revenue Provisions..................................................................................................... 19
Abortion ................................................................................................................................... 20
Verification of Immigration Status and Treatment of Noncitizens for Exchange Coverage
and Subsidies ......................................................................................................................... 22
Figures
Figure 1. Two Examples of Employer Penalties for Not Offering Coverage ............................... 11
Figure 2. Maximum Out-of-Pocket Premiums for Eligible Individuals, by Federal
Poverty Level......................................................................................................................... 15
Figure 3. Actuarial Values Reflective of Cost-Sharing Subsidies, by Federal Poverty
Level ..................................................................................................................................... 16
Tables
Table 1. Reforms Prior to Full Implementation .......................................................................... 24
Table 2. Private Health Insurance Market Reforms at Full Implementation Date........................ 42
Table 3.Essential Benefits ......................................................................................................... 58
Table 4. Individual Mandate...................................................................................................... 61
Table 5. Employer Mandate....................................................................................................... 64
Table 6. Small Business Tax Credit ........................................................................................... 68
Table 7. Health Insurance Exchanges ........................................................................................ 69
Table 8. Premium and Cost-Sharing Subsidies........................................................................... 74
Table 9. Public Health Insurance Option/Multi-State Qualified Health Plan ............................... 77
Table 10.Consumer Operated and Oriented Plan (CO-OP) Program........................................... 82
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Table 11. Selected Revenue Provisions...................................................................................... 85
Table 12. Abortion .................................................................................................................... 91
Table 13. Verification of Immigration Status and Treatment of Noncitizens for Exchange
Coverage and Subsidies ......................................................................................................... 94
Table 14. Other Provisions ........................................................................................................ 95
Contacts
Author Contact Information .................................................................................................... 104
Acknowledgments .................................................................................................................. 104
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Introduction
On November 7, 2009, the U.S. House of Representatives approved health insurance reform
legislation, H.R. 3962, the Affordable Health Care for America Act.1
Two Senate committees of jurisdiction also approved major health insurance reform legislation.
The Senate Health, Education, Labor and Pensions (HELP) Committee reported S. 1679,2 and the
Senate Finance Committee reported S. 1796.3 These bills were consolidated as S.Amdt. 2786,
further amended on the Senate floor, and passed in the Senate on December 24, 2009, as H.R.
3590, the Patient Protection and Affordable Care Act (hereafter simply referred to as H.R. 3590,
or the Senate bill).
This report compares many of the private health insurance provisions of H.R. 3962 and H.R.
3590. For each of the major private health insurance reforms, the report first gives a narrative
description of the context and current law, then describes where the House and Senate bills make
similar reforms and how their approaches differ. The narrative is then followed by more detailed
tables comparing these provisions under the following major topics, with the primary CRS
contact listed for each:
•
Table 1. Reforms prior to full implementation. Mark Newsom, 7-1686.
•
Table 2. Private health insurance market reforms at full implementation date.
Bernadette Fernandez, 7-0322.
•
Table 3. Essential benefits. Bernadette Fernandez, 7-0322.
•
Table 4. Individual mandate: the requirement on individuals to maintain health
insurance, with penalties and taxes for noncompliance. Hinda
Chaikind, 7-7569.
•
Table 5. Employer requirements to provide health insurance or potentially pay
penalties. Hinda Chaikind, 7-7569.
•
Table 6. Small business tax credit. Hinda Chaikind, 7-7569.
•
Table 7. Health insurance exchanges [Chris Peterson, 7-4681], through which the
following two items can only be offered:
•
Table 8. Premium and cost-sharing subsidies. Chris Peterson, 7-4681.
•
Table 9. Public health insurance option. Paulette Morgan, 7-7317;
Multi-state qualified health plans. Hinda Chaikind 7-7569.
•
Table 10. Cooperatives. Mark Newsom, 7-1686.
•
Table 11 Selected revenue provisions. Janemarie Mulvey, 7-6928.
•
Table 12. Abortion. Jon Shimabukuro, 7-7990.
1
CRS Report R40885, Private Health Insurance Provisions of H.R. 3962.
CRS Report R40861, Private Health Insurance Provisions of S. 1679.
3
CRS Report R40918, Private Health Insurance Provisions of S. 1796, America’s Healthy Future Act of 2009.
2
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
•
Table 13. Verification of immigration status and treatment of noncitizens for
exchange coverage and subsidies. Ruth Wasem, 7-7342.
•
Table 14. Other provisions.
When possible, the tables were formatted to make comparisons easier between the bills and thus
may not follow the order of the legislative language. However, at the end of nearly every cell is
the specific bill reference of the provision described and, if applicable, the portion of current law
that is amended.
The first two tables (reforms prior to full implementation and private health insurance market
reforms) and the last table contain columns describing current law. However, the other tables do
not contain a current law column because little or no relevant current law exists. To the extent
some context or current law exists for these other topics, it is provided in the narrative.
In this report, “the Secretary” refers to the Secretary of Health and Human Services (HHS),
unless specified otherwise. Under H.R. 3962, “the Commissioner” refers to the Senate-confirmed
Commissioner of the Health Choices Administration, a new executive branch agency
(independent, similar to the Social Security Administration, SSA) who would establish standards
for certain health insurance plans, establish and operate the federal health insurance exchange
(though states would be permitted to create their own), and administer premium and cost-sharing
subsidies for qualifying individuals. Other terms and acronyms used throughout this report are the
following, with a description of how each applies to health insurance and financing under current
law:
4
•
ERISA: The Employee Retirement Income Security Act of 1974 provides for the
federal regulation of private-sector employee benefit plans. 4 Besides the
regulation of pension plans, ERISA also regulates welfare benefit plans that may
provide, among other things, medical, surgical and other health benefits. ERISA
applies to health benefit coverage offered through health insurance or other
arrangements (e.g., self-funded plans). In general, while ERISA regulates privatesector employee benefit plans and health insurance issuers providing group
health coverage, it does not cover governmental plans, church plans, or plans
with less than two participants.
•
IRC: The Internal Revenue Code of 1986 is the primary source of U.S. tax law,
pertaining to individuals, employers and others. The IRC regulates group health
plans, including church plans, but does not regulate health insurers.
•
PHSA: The Public Health Service Act includes many health related federal grant
programs, but it also regulates group health plans, health insurance issuers
providing group health coverage, coverage in the individual market, as well as
some governmental plans.
•
HIPAA: The Health Insurance Portability and Accountability Act of 1996 has
numerous provisions affecting private health insurance, insurers, and employerprovided plans. HIPAA was the first major federal law to make numerous
requirements specific to health insurance (e.g., restrictions on pre-existing
condition exclusions, guaranteed availability and renewability of plans for certain
CRS Report RL34443, Summary of the Employee Retirement Income Security Act (ERISA).
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
employers and individuals). HIPAA instituted its changes by amending ERISA,
the PHSA, and the IRC to create analogous requirements pertaining to preexisting conditions, for example, across the broadest spectrum of private health
coverage.
•
SSA: The Social Security Act contains the statutory requirements for certain
federal domestic social programs, including Medicare (Title XVIII), Medicaid
(Title XIX) and the Children’s Health Insurance Program (CHIP, Title XXI).
•
Group health insurance: Health insurance obtained by a group of people drawn
together by an employer or other organization, such as a trade union. To affect
group health insurance, federal law is typically amended in ERISA, the PHSA,
and the IRC.
•
Nongroup health insurance: Health insurance that individuals purchase not
through a group, but directly from an insurer or through an insurance broker or
agent. Sometimes referred to as “individual” or “individual market” insurance.
To affect nongroup health insurance, federal law is typically amended in the
PHSA.
•
Small group health insurance: Group health insurance typically obtained by firms
with between 2 and 50 workers, although some self-employed individuals are
considered “groups of one” for health insurance purposes in some states. To
affect small group health insurance, federal law is typically amended in ERISA,
the PHSA, and the IRC.
•
Self-insured health plans: A self-insured health plan is an employee benefit plan
under which an employer provides health benefits directly to plan participants, as
opposed to offering benefits through health insurance. Because self-insured plans
do not provide benefits though an insurer, they cannot be regulated by the states
(due to ERISA preemption). These plans are sometimes referred to as “selffunded plans.” (Many employers with self-funded plans use insurers, for a fee,
solely to assist with the administration of the health plan benefits—for example,
to pay doctors and hospitals the insurer’s negotiated rates—but the employer
bears the financial risk.) To affect self-insured plans, federal law is typically
amended in ERISA, the PHSA, and the IRC.
•
Health insurance issuer: Under ERISA and the PHSA, a health insurance issuer is
an insurance company, service, or organization that is licensed to engage in the
business of insurance in a state and is subject to state laws that regulate
insurance. This term does not include self-insured plans.
•
Group health plans: A term general enough to include self-insured plans.
•
NAIC: The National Association of [state] Insurance Commissioners.
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Reforms Prior to Full Implementation
Health insurance reform is a major issue in the 111th Congress, driven predominantly by longterm and growing concerns around access, cost, and quality of care.5 The practices of some health
insurance companies have been cited as meriting immediate reform, such as unreasonable annual
or lifetime limits,6 rescissions,7 and discrimination against individuals with pre-existing
conditions.8 The cost, reflected in rising health insurance premiums, and the quality of care have
also been noted as significant concerns requiring immediate attention.9 These issues and other
items are featured in the immediate reform sections of both bills.
Some Common Features Between the Bills
As detailed in Table 1, both bills have provisions for immediate reforms that are either intended
to be permanent (e.g., prohibition on rescissions) or are temporary programs before the main
reforms take effect (e.g., high-risk pool program run by the Secretary). Both bills deal with the
aforementioned concerns around abusive health insurance practices and would include:
•
Restrictions on annual or lifetime limits on benefits for group or individual health
plans.
•
Prohibiting the practice of rescissions unless the member or policyholder has
committed fraud.
•
Creating a high-risk pool program for individuals with pre-existing conditions.
Both bills would also attempt to address cost issues involving health insurance premiums by
requiring rebates when non-claims costs exceed a defined percentage. Health insurers would also
have to publicly report financial data around their usage of premiums for coverage of services
versus administrative costs, and would have to provide justification for premium rate increases.
Other provisions would extend coverage in the group and individual markets to certain currently
ineligible dependents, and would create a reinsurance program to assist employer plans with the
cost of providing benefits to retirees who are 55 and older.
5
For an in-depth review of health reform issues see CRS Report R40517, Health Care Reform: An Introduction.
Annual or lifetime limits refer to the maximum dollar amount that a health plan will pay toward individuals’ covered
health care expenses.
7
Rescission refers to the practice of health insurance companies dropping coverage, sometimes after a member or
policyholder has become very sick and has filed claims for a substantial amount. Generally, in these cases the insurer
carefully reviews the member or policyholder’s application for coverage, and cites a discrepancy that permits canceling
the contract. Rescission applies not only at the time of cancellation but for the entire period the policy was in effect,
leaving the previously-enrolled individual financially responsible for all medical services received as if she was never
covered.
8
U.S. Congress, House Committee on Ways and Means, hearing on Health Reform in the 21st Century, 111th
Congress, 1st Session, April 22, 2009 (Washington: GPO, 2009). U.S. Congress, House Committee on Education and
Labor, hearing on Ways to Reduce the Cost of Health Insurance for Employers, Employees, and their Families, 111th
Congress, 1st Session, April 23, 2009 (Washington: GPO, 2009).
9
“American’s Health Future Act of 2009,” S.Rept. 111-89, Committee on Finance.
6
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Some Differences
In general, the implementation dates prior to full implementation differ between the bills—with
most of the House provisions taking effect for plan years beginning with 2010, and in the Senate
bill for plan years beginning on or after the date that is six months after enactment. As detailed in
Table 1, there are also several provisions in one bill, but not in the other. Only H.R. 3962 has
immediate provisions that would reduce the look-back and exclusions periods for pre-existing
conditions, define domestic violence as not being considered a pre-existing condition, prohibit
plans from denying or delaying treatment for children with deformities, establish wellness
program grants, and extend coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA) until the exchange is operational in 2013. Only the Senate bill would, for
example, do the following:
•
Group health plans and health insurance issuers would be required to provide
coverage for preventive health services.
•
The Secretary would be required to develop standards for plans in the group and
individual markets for providing their enrollees with a summary of benefits and
coverage.
•
Sponsors of group health plans (other than a self-insured plan) would be
prohibited from establishing eligibility rules based on the salary of the employee.
•
The Secretary would be required to develop regulations for the group and
individual markets governing acceptable provider reimbursement structures that
improve quality of care.
•
Hospitals would be required to establish a list of standard charges for items and
services in accordance with guidelines published by the Secretary.
•
Group and individual plans would be required to have an effective appeals
process as part of an immediate reform.
•
Grants would be provided to states to establish supports to assist consumers with
filing complaints and appeals regarding enrollment, and to resolve problems with
obtaining premium credits.
•
The plan or issuer would be required to permit the designation of any
participating primary care provider or pediatrician who is available to accept the
individual.
•
If a group health plan or health insurance issuer covers emergency services they
would be required to cover those services without the need for any prior
authorization and without the imposition of coverage limitations irrespective of
the provider’s contractual status with the plan.
•
Centers established to collect medical reimbursement data would be required to
develop, and make publicly available, fee schedules and other database tools that
fairly and accurately reflect market rates for medical services.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Private Health Insurance Market Reforms at Full
Implementation Date
States are the primary regulators of the private health insurance market, though some federal
regulation applies, mostly affecting employer-sponsored health insurance.
Both bills would establish new federal standards and requirements applicable to the private
market, with the aim of increasing consumer access to health insurance, especially for persons
with pre-existing health conditions and for other higher-risk groups. These standards and
requirements relate to the offer, issuance, and renewal of insurance, applicable consumer
protections, and costs borne by consumers, employers, and health plans. The effective date of
these provisions is considered the “full implementation date,” when exchanges must be available,
premium subsidies are available to certain individuals, and mandatory Medicaid expansions must
be instituted—under H.R. 3962, January 1, 2013, and under the Senate bill, January 1, 2014.
Some Common Features Between the Bills
As detailed in Table 2, both bills would establish federal market reforms, including a prohibition
on coverage exclusions for pre-existing health conditions, guaranteed issue and renewability of
insurance, rating restrictions, nondiscrimination based on health factors, and other issues.
Nonetheless, both bills would allow for the application of state law to the private market, as long
as such laws do not interfere with the application of the federal reforms. Both bills would
establish consumer protections that impact the adequacy of provider networks, marketing
practices of health insurers, grievance and appeals processes, and disclosure of plan information.
Both bills would allow states to form compacts to facilitate the sale and purchase of health plans
across state lines.
Some Differences
Under H.R. 3962, the effective date for most of these provisions would be January 1, 2013; under
the Senate bill, the effective date would be January 1, 2014. Many of the market reforms
specified in the Senate bill would amend Title XXVII of the Public Health Service Act. H.R.
3962 would not amend an existing statute for purposes of reforming the private market.
While each bill would establish a type of qualified plan that meets new federal standards, H.R.
3962 would require more plans to meet the qualified plan requirements than the Senate bill (see
Table 2). Under H.R. 3962, all private health plans would eventually be subject to the qualified
plan rules, except for grandfathered individual health insurance plans. The Senate bill would
require only plans offered through the exchange to be qualified plans. The Senate bill would also
provide an innovation waiver for states with respect to requirements relating to qualified health
plans (QHPs), exchanges, cost-sharing reductions, tax credits, the individual responsibility
requirement, and shared responsibility for employers.
While both bills include consumer protections (e.g., establishing processes to appeal coverage
determinations, and providing consumers with plan information and assistance), many such
protections under the Senate bill would become effective prior to full implementation of the
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private market provisions. In contrast, H.R. 3962 would make effective its consumer protections
at full implementation.
The Senate bill would establish a few programs to address the distribution of risk borne by health
plans: reinsurance, risk corridors, and risk adjustment. In general, these programs would provide
higher or extra payments to plans that experience greater claims relative to other plans, in order to
encourage the offer to and enrollment of high-risk individuals. The Senate bill also would
establish an option for states to contract to private plans to provide a basic health plan for lowincome individuals not eligible for Medicaid.
Essential Benefits
While there are a handful of federal benefit mandates for health insurance that apply to group
coverage, there are more than 2,000 cumulative benefit mandates imposed by the states. For
example, federal law requires that group health plans and insurers that cover maternity care also
cover minimum hospital stays for the maternity care, and if plans cover mastectomies they also
must offer reconstructive breast surgery. States have adopted mandates requiring coverage of
certain benefits (e.g., mammograms), health care providers (e.g., pharmacists), and populations
(e.g., adopted children).
Each bill specifies categories of benefits that must be covered under qualified plans, including
exchange plans. Also, each bill imposes cost-sharing limits, out-of-pocket spending limits, and
special rules regarding annual and lifetime limits that are applicable to essential benefits.
Some Common Features Between the Bills
As detailed in Table 3, both bills would define benefit packages that would be provided by
qualified plans. Such benefit packages would specify coverage for certain categories of essential
benefits, and impose rules regarding cost-sharing, benefit limits, and actuarial values based on
essential benefits.
Both bills would require the Secretary to adopt or specify essential benefits, based on broad
categories of benefits listed in the bills. Most of the categories listed are the same in both bills:
hospitalizations, outpatient/ambulatory services, prescription drugs, rehabilitation, mental health
care, substance use disorder services, preventive services, maternity care, and pediatric care.
Some Differences
The Senate bill would specify maximum deductible amounts applicable to the essential health
benefits package offered by small group plans, and would prohibit application of a deductible on
preventive services (see Table 3). In contrast, H.R. 3962 would prohibit any cost-sharing on
certain preventive services and vaccines recommended by specified federal entities.
While both bills would impose out-of-pocket spending limits, they specify the limits using
different methods. H.R. 3962 would establish out-of-pocket limits for individual and family
coverage during the first year of full implementation, then adjust them annually for inflation. The
Senate bill, in contrast, would use the amounts specified in the tax code applicable to certain
high-deductible health plans in those years.
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H.R. 3962 would prohibit the application of an annual limit on essential benefits. The Senate bill
would prohibit “restricted” annual limits from applying to essential benefits.
Individual Mandate
Currently federal law does not require individuals to have health insurance. Massachusetts, for
example, requires certain individuals to have health insurance. The state imposes a penalty for
each month individuals are without insurance, equal to 50% of the lowest premium for which
they would have qualified, to be collected through withholding of state income tax refunds (with
some exemptions allowed).
Most people in the United States have employer-sponsored health insurance. In 2008, 60% of the
U.S. population had employment-based health insurance. Other individuals may choose to obtain
coverage on their own in the nongroup market. Still others qualify for health coverage through
Medicare, Medicaid and other government programs.
Some Common Features Between the Bills
As detailed in Table 4, both bills would mandate most individuals to have health insurance, with
penalties for noncompliance for the first year of full implementation. Both bills would provide
qualified low-income individuals with subsidies to help pay for the costs of their premiums and
cost-sharing, while exempting other individuals such as non-resident aliens, individuals living
and working outside of the United States, individuals residing in possessions of the United States,
those with qualified religious exemptions, and others granted an exemption by the Secretary.
Some Differences
As detailed in Table 4, the penalty for non-compliance is different in the bills. The House bill
would impose a potentially larger penalty, tied to the lesser of (1) 2.5% of the taxpayer’s modified
adjusted gross income (MAGI) over the amount of income required to file a tax return, and (2)
the national average premium for applicable single or family coverage. The Senate bill would
impose a penalty, when fully phased in (2016), of no more than $750 for the year for each
individual, or up to 300% of the individual amount for the total for a family, indexed for inflation.
Employer Mandate
There is currently no federal requirement that employers offer health benefits. However, as noted
above, many employers choose to provide health insurance as part of the total compensation
package for their employees and, in many cases, their dependents. While ERISA does not require
an employer to offer health benefits, it does mandate compliance with certain requirements if an
employer chooses to offer health benefits, such as compliance with plan fiduciary standards,
reporting and disclosure requirements, and procedures for appealing denied benefit claims.
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Some Common Features Between the Bills
As detailed in Table 5, both bills impose requirements on employers who offer health insurance
and on those who choose not to, effective in the first year of full implementation. Some
businesses would be exempt from the requirements, based on payroll or number of employees.
Some Differences
As detailed in Table 5, the House bill would mandate employers to provide health insurance, with
penalties for non-compliance. Employers with aggregate wages under $500,000 that chose not to
offer coverage would not be subject to penalties. The penalty would be phased in so that a firm
with aggregate wages above $750,000 would pay 8% of its average wages. While the Senate bill
would not specifically impose a mandate, it would create an employer responsibility that could
also result in penalties for non-compliance. Only firms with more than 50 full-time employees
could be subject to a penalty—but only if at least one of its full-time employees enrolled in an
exchange plan and received a premium subsidy. A special rule would apply to those employers
whose substantial annual gross receipts were attributable to the construction industry. For these
employers, instead of using the 50 full-time employee count for the employer requirement,
employers who employed an average of at least 5 full-time employees on business days during
the preceding calendar year and whose annual payroll expenses exceeded $250,000 for such
preceding calendar year would be subject to the employer requirements. The penalty imposed on
an employer that did not offer coverage would be $750 per employee for all the full-time
employees in 2014.
Figure 1 provides simplified examples for the first year of full implementation of how the bills’
penalties could differ for an employer that did not offer health insurance. (This figure does not
include the special rule for construction workers.) The top portion assumes that all the employer’s
workers are full time with annual wages of $50,000. The bottom portion is the same, but assumes
annual wages of $14,872, which is the annual wage of an individual working 40 hours per week
at $7.15 an hour, the current federal minimum wage. Given those wage levels, the figure
illustrates how the penalty for not offering coverage would differ, depending on firm size. (Not
illustrated in the figure is that under the Senate bill, an employer that did not offer coverage
would not be subject to a penalty if none of its employees obtained federally subsidized exchange
coverage. Thus, the figure assumes at least one employee obtains exchange subsidies.) While the
example assumes a 40-hour workweek for employees in each bill, under the Senate bill, “full
time” is defined as working on average at least 30 hours per week, and under the House bill “full
time” would be determined by the Commissioner.
Even employers offering health insurance could be subject to penalties or fees under each bill. In
the Senate bill, a firm offering health insurance with more than 50 full-time employees could pay
a penalty if any of its full-time employees received a premium credit in the exchange (which
could only occur in limited circumstances, described below in the section on premium and costsharing subsidies). In 2014, the annual penalty assessed to the employer for each such employee
would be $3,000 ($250 per month). However, the total annual penalty for an employer would be
limited to the total number of the firm’s full-time employees times $750 ($62.50 per month). In
the House bill, beginning in second full year of implementation, those employers with aggregate
wages above $750,000 would be assessed 8% of average wages for the number of employees who
decline the employer’s health insurance and obtain exchange coverage, regardless of whether or
not they receive a premium credit, with adjustments for small employers.
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Small Business Tax Credit
Small businesses that choose to provide health insurance could be eligible for a credit toward
their cost of health insurance. Depending on the bill, these businesses may be exempt from any
employer responsibility to provide health insurance or any penalties for non-compliance. The
bills would offer an incentive to small businesses by helping pay for their employees’ coverage,
by offering a credit toward the purchase of health insurance.
Some Common Features Between the Bills
As detailed in Table 6, in the first year of full implementation, both bills would offer their full
credit to small businesses with 10 or fewer full-time employees and with average taxable wages
of $20,000 or less. Both bills would phase out the tax credit for average employee compensation
over $40,000 and as number of employees increased from 10 to 25.
Some Differences
As detailed in Table 6, the amount and duration of the credits are different in the two bills. The
House bill would begin to phase out the credit as average employee compensation exceeded
$20,000, while the Senate bill would begin to phase out the credit at $25,000. Additionally, only
the Senate bill would also provide credits to non-profit organizations. Only the House bill would
allow self-employed individuals to receive a credit.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Figure 1.Two Examples of Employer Penalties for Not Offering Coverage
Annualized tax penalty per employee
$5,000
$4,000
$3,000
H.R. 3962: Passed by
House
$2,000
H.R. 3590: Passed by
Senate
$1,000
$0
0
10
20
30
40
50
60
70
80
90
100
Number of employees,
assuming all are full time with $50,000 annual wages
Anuualized tax penalty per employee
$5,000
$4,000
$3,000
H.R. 3962: Passed by
House
H.R. 3590: Passed by
Senate
$2,000
$1,000
$0
0
10
20
30
40
50
60
70
80
90
100
Number of employees,
assuming all are full time with $14,872 annual wages
Source: CRS analysis.
Notes: Potential penalties shown are for 2013 under H.R. 3962 and for 2014 under H.R. 3590. Additionally,
analysis of Senate bill does not include the provisions relating to construction workers.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Health Insurance Exchanges
In addition to federalizing private health insurance standards, both bills would create health
insurance exchanges, similar in many respects to existing entities like the Massachusetts
Connector and eHealthInsurance, to facilitate the purchase of health insurance by certain
individuals and small businesses.
Some Common Features Between the Bills
An exchange would not be an insurer; it would provide eligible individuals and small businesses
with access to insurers’ plans in a comparable way (in the same way, for example, that
Travelocity or Expedia are not airlines but provide access to available flights and fares in a
comparable way). As detailed in Table 7, exchanges would have additional responsibilities as
well, such as negotiating with plans and determining eligibility for and administering premium
and cost-sharing subsidies.
Available exchange plans would be required to cover essential benefits and to limit costsharing/benefit-package options to a few standardized benefit tiers, designed for easier
comparison (though the bills differ in the specific levels). States could establish their own
exchanges or the federal government could establish exchanges in the states. In both bills,
multiple states could form a single exchange. Exchanges could work with other entities,
including state Medicaid agencies, to handle certain tasks, such as outreach, enrollment, and
eligibility determinations.
Similar criteria between the bills for individuals’ eligibility to enroll in an exchange plan are that
individuals would have to reside in the state and not be eligible for Medicaid. Certain small
employers could make coverage available to their workers through an exchange. Individuals
eligible for coverage offered directly by an employer (that is, not through an exchange plan)
could not apply their employer’s contribution toward coverage in an exchange plan, which would
deter people from dropping employer-sponsored insurance for exchange coverage.
Premium and cost-sharing credits for low- and moderate-income individuals (described in Table
8) would only be available through an exchange.
Some Differences
As detailed in Table 7, under the Senate bill, grants toward state exchanges would be awarded
within one year of enactment (even though federal premium subsidies, fully implemented market
reforms, and mandatory Medicaid expansions would not be in place until 2014); under H.R. 3962,
exchanges with fully implemented market reforms and premium subsidies would be functioning
in 2013. Under the Senate bill, after some start-up funding, exchanges would ultimately have to
be self-sustaining through assessments on participating plans or premiums; under H.R. 3962, the
exchanges would have permanent federal funding. After the exchange is fully operational, H.R.
3962 would require that new nongroup insurance be offered only through an exchange; the Senate
bill permits nongroup plans to be offered outside an exchange.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Unlike the House bill, the Senate bill would require individuals seeking to obtain exchange
coverage to prove they were lawful residents, even for individuals paying the entirety of their
insurance premiums.
The Senate bill would initially permit states the option to either define “small employers” eligible
to obtain exchange coverage as those with 100 or fewer employees or as those with 50 or fewer
employees; H.R. 3962 would initially permit employers with up to 25 employees to be exchangeeligible. When eligible small employers opt for exchange coverage, employers could not limit
workers’ choice of plans under the House bill, but could limit plan selection to a particular benefit
tier (e.g., silver) under the Senate bill.
Premium and Cost-Sharing Subsidies
Under current law, direct federal subsidies toward the purchase of private health insurance are
often narrow in scope—for a limited group of individuals (usually based on some hardship, such
as unemployment, or financial need) and/or for a particular amount of time. For example, the
Health Coverage Tax Credit (HCTC) is for certain workers displaced by international trade and
for retirees whose private pension plans were taken over by the Pension Benefit Guaranty
Corporation. 10 The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 as
amended by the Department of Defense Appropriations Act, 2010, P.L. 111-118) included
provisions to provide premium subsidies of 65% for health insurance coverage through COBRA
for the unemployed; the subsidy is available for up to 15 months to certain unemployed
individuals involuntarily terminated between September 1, 2008, and February 28, 2010. Both the
HCTC and the COBRA subsidies are paid to individuals as tax credits.
Particularly under health insurance reform proposals where individuals may be required to obtain
coverage, some individuals may need premium subsidies to help pay for coverage. However,
even when individuals have health insurance, they may be unable to afford the cost-sharing
(deductible and copayments) required to obtain health care. Thus subsidies may also be necessary
to lower the cost-sharing.
Some Common Features Between the Bills
As detailed in Table 8, both H.R. 3962 and the Senate bill would make certain individuals
eligible for premium and cost-sharing subsidies. Common eligibility criteria between the bills are
that individuals must have income below 400% of the federal poverty level (FPL),11 be enrolled
in an exchange plan (not through a qualifying employer), and be citizens or lawful residents12
who are not eligible for Medicaid.13 Under both bills, when the premium and cost-sharing credits
are first made available, they would only be available to individuals enrolled in the benefit tier
10
CRS Report RL32620, Health Coverage Tax Credit.
11
For a family of three in the 48 contiguous states in 2009, 400% FPL is $73,240. CRS computation based on “Annual
Update of the HHS Poverty Guidelines,” 74 Federal Register 4200, January 23, 2009, http://aspe.hhs.gov/poverty/
09fedreg.pdf.
12
See Table 13 for more information about the citizenship, lawful residence, and verification requirements.
13
Under H.R. 3962, citizens and qualifying aliens would be eligible for Medicaid up to 133% FPL in 2013, when the
premium credits would be available. Under the Senate bill, citizens and qualifying aliens would be eligible for
Medicaid up to 150% FPL by 2014, when the bill’s premium credits would be available.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
with an actuarial value of approximately 70% (a “basic” plan in the House bill and a “silver” plan
in the Senate).
Premium credits would be calculated to ensure that qualifying individuals pay no more than a
certain percentage of their income toward one of the less expensive basic or silver exchange
plans. If individuals choose a plan with a more expensive premium, they would be responsible
for paying the difference.
Individuals eligible for premium subsidies would also be eligible for cost-sharing subsidies.
Some Differences
As detailed in Table 8, like the required exchange, market reform and exchange provisions, the
premium and cost-sharing subsidies would be made available in 2013 under H.R. 3962 and in
2014 under the Senate bill. Under H.R. 3962, premium subsidies would be made directly from
the federal government to insurers, while the Senate bill provides the premium subsidies in the
form of advanceable, refundable tax credits to individuals.
Under H.R. 3962, individuals are not eligible for subsidies if they are eligible for employersponsored coverage as a full-time employee, or if they are enrolled in Medicare, Medicaid,
coverage related to military service, an employer-sponsored plan, a grandfathered plan, or other
coverage recognized by the Commissioner. Under the Senate bill, individuals are not eligible for
subsidies if they are eligible for that coverage—Medicare, Medicaid, CHIP, coverage related to
military service, an employer-sponsored plan, a grandfathered plan, or other coverage recognized
by the Secretary. An exception to the exclusion for those eligible for employer-sponsored
coverage in 2014 and after exists in H.R. 3962, if the employee’s contribution would exceed 12%
of income in 2014, and in the Senate bill, if the employee’s contribution would exceed 9.8% of
income or if the plan pays for less than 60% of covered expenses.
The percentage of income that credit-eligible individuals would have to pay toward premiums
differs between the bills. Below about 250% FPL, H.R. 3962 requires a smaller contribution (and
thus larger credits) than under the Senate bill; however, between roughly 250% and 400% FPL,
the Senate bill requires a smaller contribution by qualifying individuals toward premiums, as
illustrated in Figure 2.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Figure 2. Maximum Out-of-Pocket Premiums for Eligible Individuals,
by Federal Poverty Level
For first year credits are in effect—2013 for H.R. 3962, 2014 for H.R. 3590
12%
11%
Maximum % of income
paid out of pocket for premiums
10%
9%
8%
7%
6%
5%
4%
H.R. 3962: Passed by
House
3%
H.R. 3590: Passed by
Senate
2%
1%
0%
100%
150%
200%
250%
300%
350%
400%
Federal Poverty Level
Source: CRS analysis.
Notes: Under the Senate bill, citizens and qualifying legal residents at or below 133% FPL would be eligible for
Medicaid rather than premium credits. H.R. 3962 would extend Medicaid coverage to 150% FPL.
Compared to the Senate bill, H.R. 3962 would generally provide greater cost-sharing subsidies, as
illustrated in Figure 3, which shows the percentage of covered expenses to be paid by the plan
(i.e., actuarial value) after the cost-sharing subsidies are taken into account.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Figure 3. Actuarial Values Reflective of Cost-Sharing Subsidies,
by Federal Poverty Level
For first year credits are in effect—2013 for H.R. 3962, 2014 for H.R. 3590
100%
H.R. 3962: Passed by House
H.R. 3590: Passed by Senate
90%
80%
Actuarial value
70%
60%
50%
40%
30%
20%
10%
0%
Up to 150%
151% 200%
201% 250%
251% 300%
301% 350%
351% 400%
Federal Poverty Level
Source: CRS analysis.
Public Health Insurance Option/Multi-State
Qualified Health Plans
One issue that has received congressional attention is whether or not to include either a publicly
sponsored health insurance plan or plans similar to those offered to Members of Congress and
federal employees through the Federal Employees Health Benefits Program (FEHBP), and if so,
to what extent should such offerings be required to follow the same rules as private insurers.
Currently, Medicare is an example of a federal public health insurance program for the aged and
disabled. Under Medicare, Congress and the Department of Health and Human Services (HHS)
Centers for Medicare and Medicaid Services (CMS) determine many parameters of the program.
These include eligibility rules, financing (including determination of payroll taxes and
premiums), required benefits, payments to health care providers, and cost-sharing amounts.
However, even within this public plan, CMS subcontracts with private companies to carry out
much of the administration of the program.
Under FEHPB, the Office of Personnel Management (OPM) is authorized to contract with
insurance carriers; approve qualified health benefits plans for participation in the program;
negotiate with plans about benefit and premium levels; determine the times and conditions for
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
open seasons during which eligible individuals may elect coverage or change plans; make
information available to employees concerning plan options; apply administrative sanctions to
health care providers who have committed certain violations; and administer the financing of the
program. OPM is responsible for maintaining the funds that hold contingency reserves for the
plans and the fund that receives premium payments from enrollees and employing agencies, from
which premiums are disbursed to participating plans.
Some Common Features Between the Bills
The public option in the House bill and the multi-state health qualified health plans in the Senate
bill could only be offered through the exchange.
Some Differences
As detailed in Table 9, the House bill would require the Secretary to establish a public health
insurance option available only to individuals eligible to purchase insurance through an exchange.
The Secretary would be given start-up funding and the authority to enter into contracts for the
establishment and administration of the public option. Premiums for the public option would be
set according to new market reform rules at a level sufficient to cover the cost of medical claims,
administration, a contingency margin, and repayment of the start-up funding. Payment rates for
providers would be established through negotiations with the Secretary. The House bill would
not allow states to opt out of the public option. Under H.R. 3962, the provider network for the
public option would be established by deeming Medicare-participating providers to also be
providers under the public option, unless the providers opted out in a process established by the
Secretary. The House bill would allow providers to participate in the public option either as
preferred or non-preferred providers, which would allow non-preferred providers to bill for
amounts above the established payment rates in a manner similar to physician participation rules
under Medicare.
The Senate bill does not include a public option. The Director of OPM would enter into contracts
with health insurance issuers to offer at least two multi-state qualified health plans (MSQHPs)
through each exchange in each state. Such plans would provide individual, or in the case of small
employers, group coverage. A health insurance issuer would be required to agree to offer a
MSQHP that met the requirements in each exchange in each state. States could require additional
benefits, but there would be no additional premium tax credit provided for the state-only
mandated benefits. Enrollees in a MSQHP would be treated as a separate risk pool from FEHBP.
Consumer Operated and Oriented Plan (CO-OP)
Program
Non-profit health insurance cooperatives have been promoted as entities that could help address
concerns around health care cost, quality, and consumer focus.14 The incentives of a cooperative
14
Health insurance cooperatives can either be collectively owned or governed. The former is a mutual insurance
company, and the latter is a non-profit health insurance company with a member controlled board of directors that
cooperatively governs the organization, but is neither compensated nor holds an equity stake in the firm.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
are assumed to align with members’ interests around lower cost and higher quality. However,
according to the National Cooperative Business Alliance (NCBA), there are very few health
insurance cooperatives currently operating.15 There are no current law incentives or funds for the
creation of new health insurance cooperatives.
Advocates of the CO-OP program argue that cooperatives would address the three categories of
concern by returning retained earnings16 directly to its members, or by investing in plan members
via lower premiums, lower cost-sharing, expanded benefits, and innovations such as wellness
programs, chronic disease management, and integrated care.17 This model of health insurance has
shown some promise with respect to quality in case studies of Group Health Cooperative of
Seattle and HealthPartners of Minnesota.18
Opponents assert that cooperatives have not been successful in most of the country and that
evidence is lacking that cooperatives would make health insurance more affordable. 19 Citing the
recent management issues at Blue Cross Blue Shield of North Dakota (BCBS-ND), which is a
cooperative (in particular, a mutual insurer), some consumer advocates have noted that
cooperatives do not always work in the interests of consumers.20 North Dakota Insurance
Commissioner Adam Hamm, after a recent investigation of BCBS-ND, stated that “[t]he bottom
line is that health care premiums are for health care, they are not for expensive retirement parties,
corporate jets, risky hotel investments or a compensation structure that rewards senior
management regardless of BCBS's financial performance.”21
Some Common Features Between the Bills
Both the Senate bill and H.R. 3962 propose establishing the CO-OP program to encourage the
creation of new health insurance cooperatives. As detailed in Table 10, both the Senate bill and
H.R. 3962 would appropriate funding, $6 billion and $5 billion respectively, to assist with
cooperatives’ start-up costs and to meet solvency requirements. Ultimately, the goal of the
program would be to foster the creation of new non-profit, health insurance cooperatives in one or
more states. Both bills propose that:
•
Grants would only be made to qualified plans.
15
August 5, 2009, NCBA letter to Senator Rockefeller
http://commerce.senate.gov/public/_files/NCBACoopResponseLetter080509.pdf.
16
Retained earnings are the net earnings not paid out as dividends, but retained by the company to be reinvested in its
core business or to pay debt.
17
Senator Kent Conrad, “FAQ about the Consumer-Owned and -Oriented Plan (CO-OP),” available online at
http://conrad.senate.gov/issues/statements/healthcare/090813_coop_QA.cfm.
18
D. McCarthy, K. Mueller, and I. Tillmann, “Group Health Cooperative: Reinventing Primary Care by Connecting
Patients with a Medical Home,” The Commonwealth Fund, July 2009, and D. McCarthy, K. Mueller, and I. Tillmann,
“HealthPartners: Consumer-Focused Mission and Collaborative Approach Support Ambitious Performance
Improvement Agenda,” The Commonwealth Fund, June 2009.
19
CNN, “Negotiations over health insurance co-ops at impasse,” June 23, 2009, available online at
http://www.cnn.com/2009/POLITICS/06/23/health.care/index.html.
20
“North Dakota Scandal Raises Concerns About Health Co-op Route,” Karl Vick, Washington Post, October 10,
2009, available online at http://www.washingtonpost.com/wp-dyn/content/article/2009/10/09/AR2009100904085.html.
21
“Hamm releases Blue Cross Blue Shield target exam report,” available online at
http://www.nd.gov/ndins/communications/pressreleases/detail.asp?newsID=204.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
•
Grants would only be made to cooperatives operating as a not-for-profit,
member-run insurance company.
•
Cooperatives that offered insurance on or before July 16, 2009, would be
prohibited from receiving funds.
•
Cooperatives would be required to incorporate ethical and conflict of interest
standards designed to protect against insurance industry involvement and
interference.
•
State governments would be prohibited from sponsoring a cooperative that could
receive grants under the proposed program.
•
Cooperatives receiving grants from the CO-OP program would be required to be
governed by the majority vote of their membership.
•
Cooperatives receiving grants from the program would be required to operate
with a strong consumer focus, including timeliness, responsiveness, and
accountability to their members.
Some Differences
As detailed in Table 10, the two bills differ primarily around the administrative structure and
oversight of the grant program. Under the Senate bill, the HHS Secretary would be charged with
administration and oversight of the program, whereas H.R. 3962 would establish the
Commissioner in that role. The Senate bill would also establish an Advisory Board to assist the
Secretary in making grant decisions. This provision does not exist in the House bill. The Senate
bill alone would also permit CO-OP grantees to establish a private collective purchasing council
to increase cost efficiencies.
There are also important differences with respect to appropriations, the tax code, and the
relationship of CO-OP plans to the exchange and the reformed market. Under the Senate bill, $6
billion, $1 billion more than the House bill, would be appropriated to fund the program. In both
bills, CO-OP grantees would be required to be not-for-profit plans, but under the Senate bill, the
IRC would be amended so that a CO-OP grantee’s tax-exempt status would be contingent upon
compliance with the regulations of the CO-OP program. Under the Senate bill, insurers’ plans
offered inside an exchange could also be offered outside the exchange; thus, CO-OP plans could
potentially be offered outside of an exchange. In the House bill, however, CO-OP program grants
would be specifically limited to health insurance cooperatives that provide insurance through an
exchange.
Selected Revenue Provisions
The House and Senate bills include a number of provisions to raise revenues in order to pay for
expanded health insurance coverage. Some of these provisions are directly related to current
health insurance coverage, and some are indirectly related. The bills’ revenue provisions are
similar in that they include a combination of excise taxes, high-income surcharges, and
limitations on tax-advantaged health accounts. They differ largely in how these taxes are levied
and the magnitude of tax.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Some Common Features Between the Bills
Both the House and Senate proposals modify current tax advantaged accounts used for health care
spending. As detailed in Table 11, they both limit flexible spending account (FSA) contributions
to $2,500 per account, increase penalties for non-qualified health savings account (HSA)
distributions from 10% to 20% for those under age 65, and change the definition of medical
expenses for FSAs, HSAs and health reimbursement accounts (HRAs) to exclude over-thecounter prescriptions not prescribed by a physician.
Some Differences
While both bills impose excise taxes, they vary based on whom the tax is levied on and the extent
of the tax. As detailed in Table 11, the Senate bill imposes a 40% excise tax on insurers of highcost health plans (defined as those with premiums exceeding $8,500 for single coverage and
$23,000 for family coverage in 2014) as well as an additional tax on health insurers based on their
market share. The Senate bill also imposes an excise tax on pharmaceutical manufacturers, while
the House bill does not. While both proposals levy an excise tax on medical device
manufacturers, the House bill imposes a sales tax of 2.5% on each non-retail sale of devices; the
Senate version levies an excise tax of $2 billion in the first few years of implementation, and each
device manufacturer pays a share based on the size of their sales. The House does not have this
provision. Finally, the Senate bill imposes a 10% excise tax on indoor tanning services; this
provision is not in the House bill.
Further, while both impose tax surcharges on high-income taxpayers, they vary in whether tax is
through the federal income tax or through payroll taxes. As detailed in Table 11, the House bill
imposes a 5.4% surcharge on individuals with modified gross income over $500,000 for singles
and $1 million for families. The Senate bill increases the Hospital Insurance portion of the
payroll tax by 0.9 percentage points on wages in excess of $200,000 for singles and $250,000 for
joint filers.
Abortion
H.R. 3962 and H.R. 3590 include provisions that address the coverage of abortion by health
benefits plans that would be available through an exchange. H.R. 3962 also discusses coverage by
a government-run health insurance option. Both measures distinguish between two types of
abortions: abortions for which federal funds appropriated for HHS may be used, based on the law
in effect six months prior to a plan year; and abortions for which such funds may not be used,
based on the law in effect six months prior to a plan year. The distinction between the two types
of abortions is premised on an existing funding restriction commonly referred to as the “Hyde
Amendment.” In 1976, Representative Henry J. Hyde offered an amendment to the Departments
of Labor and Health, Education, and Welfare Appropriation Act, 1977, that restricted the use of
appropriated funds to pay for abortions provided through the Medicaid program. 22 Since 1976,
similarly restrictive provisions have been included annually in the appropriations measures for the
Departments of Labor, HHS, and Education.
22
P.L. 94-439, § 209, 90 Stat. 1418, 1434 (1976) (“None of the funds contained in this Act shall be used to perform
abortions except where the life of the mother would be endangered if the fetus were carried to term.”).
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Section 507 of the Consolidated Appropriations Act, 2010, restricts the use of FY2010 funds
appropriated for HHS. Section 507(a) states: “None of the funds appropriated in this Act, and
none of the funds in any trust fund to which funds are appropriated in this Act, shall be expended
for any abortion.”23 An exception to the general prohibition on using appropriated funds for
abortions is included in section 508(a) of the measure:
The limitations established in the preceding section shall not apply to an abortion –
(1) if the pregnancy is the result of an act of rape or incest; or
(2) in the case where a woman suffers from a physical disorder, physical injury, or physical
illness, including a life-endangering physical condition caused by or arising from the
pregnancy itself, that would, as certified by a physician, place the woman in danger of death
unless an abortion is performed.24
In other words, FY2010 funds appropriated for HHS could be used to pay for an abortion if a
pregnancy is the result of an act of rape or incest, or if a woman’s life would be endangered if an
abortion were not performed. Such funds are unavailable, however, for elective abortions.
Some Common Features Between the Bills
As detailed in Table 12, H.R. 3962 and H.R. 3590 would restrict the use of federal funds to pay
for elective abortion services. Federal funds could be used, however, for abortions for which the
expenditure of federal funds appropriated for HHS is permitted. Both measures include
provisions to prohibit discrimination against health care providers and health care entities that
refuse to provide, pay for, provide coverage of, or refer for abortions. In addition, both measures
would preserve state laws regarding the prohibition or requirement of coverage or funding for
abortions, and state laws involving abortion-related procedural requirements. Federal conscience
protection and abortion-related antidiscrimination laws, including Title VII of the Civil Rights
Act of 1964, would not be affected by either measure.
Some Differences
As detailed in Table 12, H.R. 3962 would restrict coverage for elective abortions by a qualified
health benefits plan. If a plan includes such coverage, the entity that offers the plan would be
required to offer another plan that is identical in every respect, except that it does not cover
elective abortions. Under H.R. 3962, individuals would be permitted to purchase separate
supplemental coverage for elective abortions, but such coverage would have to be paid for
entirely with funds not authorized or appropriated by the measure. Because H.R. 3962 does not
permit any federal funds, including exchange premium subsidies, to be used to purchase either a
plan that includes coverage for elective abortions or supplemental coverage for elective abortions,
the measure does not include fund segregation requirements. In contrast, H.R. 3590 would allow
coverage of elective abortions by exchange plans, but would require enrollees in plans that
include such coverage to make two separate premium payments: one payment that reflects an
amount equal to the portion of the premium for coverage of services other than elective abortions;
23
H.R. 3288, 111th Cong. § 507(a) (2009).
24
H.R. 3288, 111th Cong. § 508(a) (2009).
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
and another payment that reflects an amount equal to the actuarial value of the coverage of
elective abortions.
Verification of Immigration Status and Treatment of
Noncitizens for Exchange Coverage and Subsidies
Among the many difficult issues in health reform are those surrounding noncitizen eligibility and
verification provisions.25 A noncitizen is anyone who is not a citizen or national of the United
States and is synonymous with the terms alien and foreign national. Noncitizens include those in
the United States permanently (e.g., legal permanent residents, refugees), those in the country
temporarily (e.g., students, temporary workers), and those who are in the country without
authorization.26 The Immigration and Nationality Act (INA) defines which noncitizens are legally
present in the United States.27
Some Common Features Between the Bills
As detailed in Table 13, legal permanent residents (LPRs) are treated similarly to U.S. citizens
under both bills. LPRs are mandated to obtain health insurance, are eligible to purchase insurance
through the exchange, and are eligible for the premium and cost-sharing subsidies if they meet the
other eligibility requirements. This consistency of treatment holds regardless of when they
entered the United States or whether they came initially as refugees or asylees.
Unauthorized aliens would not be eligible for the federal premium and cost-sharing subsidies in
either of the bills.
Both bills would use the individual’s name, social security number, and date of birth and would
rely on the Social Security Administration and the Department of Homeland Security to verify
citizenship and immigration status. The actual mechanics of the verification would differ as
discussed below.
Some Differences
As detailed in Table 13, H.R. 3962 would expressly require the Commissioner to verify
citizenship and immigration status of individuals seeking premium and cost-sharing subsidies.
(Under the House bill, such verification would not be required of exchange-participating
individuals who are not seeking federal subsidies.) The House bill would extend, with
modifications, the citizenship verification procedures as well as the noncitizen verification
procedures that currently apply to Medicaid and other federal means-tested programs to the
citizenship and immigration determination for the proposed premium and cost-sharing
25
CRS Report R40889, Noncitizen Eligibility and Verification Issues in the Health Care Reform Legislation, by Ruth
Ellen Wasem.
26
The three main components of the unauthorized resident alien population are (1) aliens who overstay their
nonimmigrant visas, (2) aliens who enter the country surreptitiously without inspection, and (3) aliens who are admitted
on the basis of fraudulent documents.
27
8 U.S.C. §1101 et seq.
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22
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
subsidies. 28 Among the modifications would be to enable the Commissioner to make the
eligibility determination. The Senate bill would rely on procedures currently used by Medicaid
(§1902(e) of the SSA) for individuals whose claims of citizenship or immigration status are not
verified with federal data.29 (The Senate bill would require such verification of all individuals
seeking exchange coverage, regardless of whether they would be federally subsidized or would
pay premiums entirely on their own.)
H.R. 3962 would exempt nonresident aliens from the individual mandate to obtain health
insurance; however, H.R. 3962 would require all noncitizens who meet the IRC definition of
resident alien (i.e., nonimmigrants, and unauthorized aliens who meet the substantial presence
test) to obtain health insurance. The House bill contains no express restrictions on noncitzens—
whether legally or illegally present, or in the United States temporarily or permanently—
accessing and paying for coverage available through an exchange. The Senate bill expressly
exempts unauthorized aliens from the mandate to have health coverage and bars them from the
health insurance exchange.
The proposed policies toward nonimmigrants (those admitted temporarily for a limited purpose,
such as students, visitors, or temporary workers) are more nuanced, in large part because some
classes of nonimmigrants reside legally in the United States for extended periods of time, some
are employed and taxed as a result of those earnings, and some are on a track to become LPRs.
28
§1137(d) of the SSA. For further discussion of current law on Medicaid citizenship verification, see CRS Report
RS22629, Medicaid Citizenship Documentation, by Ruth Ellen Wasem.
29
Section 1411 of H.R. 3590.
Congressional Research Service
23
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 1. Reforms Prior to Full Implementation
Topics for Table 1
Current Law
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 101-115
Sections 1001-1105
Laws amended
ERISA, IRC, PHSA, SSA
PHSA
Effective date, unless
otherwise specified
For plan years beginning on or after January
1, 2010
For plan years beginning on or after the
date that is 6 months after enactment.
The bill would require that group or
individual coverage would not have an
aggregate dollar lifetime limit with respect
to essential benefits payable under the plan
or coverage.
Group health plans and health insurance
issuers offering group or individual plans
would be prohibited from establishing
lifetime or annual limits on the dollar value
of benefits for any participant or
beneficiary.
No lifetime or annual limits
States have the primary responsibility of
regulating the business of insurance and
may define state benefit mandates.
However, federal law requires that private
health insurance include certain benefits
and protections, for services covered by a
plan. HIPAA requires, for example, that
group health plans and insurers provide
parity in annual and lifetime limits for any
offered mental health benefits. However,
there are no specific prohibitions on
unreasonable lifetime or annual limits.
Aggregate dollar lifetime limits would be
defined as a dollar limitation on the total
amount that may be paid with respect to
benefits under the plan or health insurance
coverage for an individual or other
coverage unit on a lifetime basis.
§109: ERISA §716, IRC §9815, and PHSA
§§2709 and 2756
With respect to plan years beginning prior
to January 1, 2014, group health plans and
health insurance issuers may only establish
a restricted annual limit with respect to the
scope of benefits that are essential health
benefits as determined by the Secretary. In
defining the restricted annual limit, the
Secretary would ensure that there is access
to needed services available with minimal
impact on premiums.
Nothing in this section would prohibit a
group health plan or health insurance
coverage from placing annual or lifetime
limits on specific covered benefits that are
not essential health benefits to the extent
that such limits are otherwise permitted by
federal and state law. §1001as amended by
§10101 : PHSA § 2711
CRS-24
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Prohibition on rescissions
Coverage of preventive
health services
CRS-25
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
HIPAA permits nonrenewal or
discontinuation of coverage due to, among
other things, fraud or intentional
misrepresentation. Health insurers have
been found to use this provision to rescind
coverage based on answers given in the
application that are deemed to be
inaccurate. Some states regulate the
application process.
No later than 90 days after enactment, the
Secretary would issue guidance
implementing the prohibition on rescission
in the group and individual markets. This
guidance would limit the situations in which
an insurer may rescind, or cancel, a
person’s health insurance policy.
Rescissions would still be permitted in
cases where the covered individual
committed fraud.
The bill would generally prohibit rescissions
for a group health plan and a health
insurance issuer offering group or individual
health insurance coverage. Rescissions
would still be permitted in cases where the
covered individual committed fraud or
made an intentional misrepresentation of
material fact as prohibited by the terms of
the plan or coverage.
If a health insurance issuer determines to
rescind coverage they would be required
to provide the individual with notice prior
to the effective date of the rescission, and
would be required to provide the
opportunity for a review by an
independent, external third party under
procedures specified by the Secretary. If
individuals request a review, their coverage
would remain in effect until the
independent reviewer determines that the
coverage may be rescinded. §103: PHSA
§§2703, 2712, 2742, and 2746
A cancellation of coverage in this case
would require prior notice to the enrollee.
§1001: PHS §2712
The House bill contains a preventive health
services provision conceptually similar to
the Senate bill in terms of utilizing the
evidence based recommendations of the
United States Preventive Services Task
Force and the recommendations of the
Centers for Disease Control and
Prevention. However, the House bill would
not be part of the immediate reforms,
would not include the Health Resources
and Services Administration (HRSA), would
not include the breast cancer provisions,
and would not provide specific authority to
the Secretary to promulgate guidelines
allowing a group health plan and a health
insurance issuer to utilize value-based
insurance designs. The House provision
would take effect beginning in plan year
Under the bill, group health plans and
health insurance issuers in the group and
individual markets would be required to
provide coverage for preventive health
services and would not impose any cost
sharing requirements for them. These
preventive services would include:
● evidence-based items or services that
have in effect a rating of ‘A’ or ‘B’ in the
current recommendations of the United
States Preventive Services Task Force
(USPSTF);
● immunizations that have in effect a
recommendation from the Advisory
Committee on Immunization Practices of
the Centers for Disease Control and
Prevention (CDC);
● for infants, children, and adolescents,
Mandated benefits regulation of the private
health insurance market is primarily done
at the state level. State regulatory authority
is broad in scope and can include
requirements involving preventive health
services. Such rules vary from state to
state.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
2013. See §222 Table 3- Categories of
essential benefits.
H.R. 3590 (Senate-passed)
evidence-informed preventive care and
screenings provided for in the
comprehensive guidelines supported by the
Health Resources and Services
Administration (HRSA); and
● with respect to women, such additional
preventive care and screenings not
described by the USPSTF as provided in
comprehensive guidelines supported by
HRSA.
A plan or issuer would be permitted to
cover or deny additional services not
recommended by the USPSTF. For the
purposes of this section the current
recommendations of the USPSTF regarding
breast cancer screening, mammography,
and prevention would be considered the
most current other than those issued in or
around November 2009.
The Secretary would be permitted to
develop guidelines to allow a group health
plan and a health insurance issuer offering
group or individual health insurance
coverage to utilize value-based insurance
designs. §1001, as amended by S. Amdt.
2791 and 2808 : PHSA §2713
CRS-26
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Extension of dependent
coverage
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Federal law does not define who qualifies
for dependent coverage under employer
sponsored insurance or individual health
insurance policies. Under federal law, fully
insured and self-insured group plans can
define dependency in the group health plan.
However, some states have defined who is
eligible for dependent coverage under fully
insured group health plans, as well as
individual health insurance policies.
A group health plan and a health insurance
issuer offering coverage in the group or
individual markets that provided dependent
coverage would extend that coverage until
the individual is 27 years of age.
A group health plan and a health insurance
issuer offering coverage in the group or
individual markets that provided dependent
coverage would extend that coverage to
unmarried adult children until the individual
is 26 years of age.
A health plan or a health insurance issuer
would not be required to make coverage
available for a child of a child receiving
dependent coverage.
The group health plan or health insurance
issuer would be permitted for dependent
coverage to increase premiums consistent
with the standard established by the
Secretary for family coverage. §105: PHSA
§§2703 and 2746, ERISA §704, and IRC
§9804
The Secretary would be required to
promulgate regulations to define the
dependents to which coverage would be
made available.§1001: PHS §2714
Development of uniform
explanation of coverage
documents
States may regulate the summary of
benefits documents that plans send to their
members. Federal law regulates these
documents for federal programs such as
Medicare Advantage, but there are no
broad federal standards for private plans in
the group and individual markets.
No provision.
No later than 12 months after enactment,
the Secretary would develop standards for
plans in the group and individual markets
for providing their enrollees with a
summary of benefits and coverage. These
standards would preempt state law. Each
plan would provide the summary to an
applicant at the time of application, to an
enrollee prior to the time of enrollment or
re-enrollment, and to a policyholder or
certificate holder at the time of issuance of
the policy or delivery of the certificate.
§1001: PHS §2715
Prohibition of
discrimination based on
salary
Section 105 of the IRC permits certain
amounts received under accident and
health plans to be excluded from the
computation of taxable income. This
exemption is only permissible if, in general,
70% or more of all employees are eligible
to benefit under the plan, and all benefits
provided for participants who are highly
compensated individuals are also provided
No provision.
Under the bill, the sponsor of a group
health plan (other than a self-insured plan)
would be prohibited from establishing rules
relating to health insurance eligibility of any
full-time employee that are based on the
total hourly or annual salary of the
employee. In no way would eligibility rules
be permitted to discriminate in favor of
higher wage employees. The rules and
CRS-27
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
for all other participants.
H.R. 3590 (Senate-passed)
definitions of section 105(h) of the IRC
would similarly apply to this provision.
§1001as amended by §10101: PHSA §2716
Certain employees may be excluded
including: employees who have not
completed 3 years of service; employees
who have not attained age 25; part-time or
seasonal employees; employees not
included in the plan who are included in
unit of employees covered by an agreement
between employee representatives and one
or more employers which the Secretary
finds to be a collective bargaining
agreement, and employees who are
nonresident aliens and who receive no
earned income from the employer which
constitutes income from sources within the
United States.
Highly compensated individuals are defined
as one of the 5 highest paid officers, a
shareholder who owns more than 10% in
value of the stock of the employer, or
among the highest paid 25% of all
employees eligible to participate.
Ensuring the quality of care
CRS-28
Among other federal laws intended to
prevent discrimination, HIPAA established
certain requirements that are intended to
prevent group health plans and group
health insurance issuers from discriminating
against individual participants or
beneficiaries based on a health factor. In
particular, HIPAA prohibits a group health
plan or health insurance issuer from basing
coverage eligibility rules on health-related
factors including health status (physical or
mental), claims experience, receipt of
health care, medical history, genetic
information, evidence of insurability, or
disability. In addition, a group health plan or
health insurance issuer may not require
that an individual pay a higher premium or
contribution than another “similarly
No provision.
Under the bill, no later than two years after
enactment, the Secretary, in consultation
with certain experts, would be required to
develop and implement reporting
requirements for use by plans in the group
and individual markets with respect to
coverage benefits and health care provider
reimbursement structures that:
● improve health outcomes through use of
quality reporting, case management, care
coordination and chronic disease
management;
● implement activities to prevent
hospitalization readmissions;
● implement activities to improve patient
safety and reduce medical errors through
the use of best clinical practices, evidence
based medicine, and health information
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
situated” participant, based on these
health-related factors.
technology; and
● implement wellness and health
promotion activities.
HIPAA also clarifies that group health plans
and health insurance issuers offering group
health coverage may establish premium
discounts or rebates or modify otherwise
applicable copayments or deductibles (i.e.,
rewards) in return for adherence to
wellness programs. HIPAA regulations
provide a framework for structuring these
wellness programs and divide wellness
programs into two categories. First, if a
wellness program provides a reward based
solely on participation in a wellness
program, or if it does not provide a
reward, the program complies with HIPAA
without having to satisfy any additional
standards, as long as the program is made
available to all similarly situated individuals.
Second, if a reward is based on an
individual meeting a certain standard
relating to a health factor, then the
program must meet additional
requirements. Among these additional
requirements, a reward offered by this type
of wellness program must not exceed 20%
of the cost of employee coverage under
the plan (i.e., the amount paid by the
employer and the employee for that
employee for coverage).
Reducing health insurance
premiums and increasing
value
CRS-29
Many states require public reporting of
health insurance financial data such as
medical loss ratios (MLR), and require
approval of premium rate increases and
public release of the justification for the
requested increase. Medical loss ratios
generally refer to the percentage of
premium dollars that are spent on medical
care as opposed to administrative costs
H.R. 3590 (Senate-passed)
The Secretary would be required to
promulgate regulations that provide criteria
for determining whether a reimbursement
structure meets these elements.
This section also contains provisions
relating to gun rights. A wellness or
promotion activity could not require
disclosure or collection of any information
relating to lawfully possessed firearms or
ammunition. The authority provided to the
Secretary under the amendment (or an
amendment to the proposed legislation)
could not be construed to authorize and
could not be used for the collection of
information relating to the lawful
ownership, possession, use, or storage of a
firearm or ammunition, or to maintain
records of individual ownership or
possession of a firearm or ammunition. A
health plan would be prohibited from
increasing premium rates, denying health
insurance coverage, and reducing or
withholding a discount, rebate, or reward
offered for participation in a wellness
program on the basis of or on reliance on
the lawful ownership, possession, use or
storage of a firearm or ammunition.
§1001as amended by §10101: PHSA §2717
The bill would create a requirement that
each health insurance issuer that offers
coverage in the small or large group
markets would provide a rebate to its
enrollees if the coverage has a medical loss
ratio (MLR) below a level specified by the
Secretary (but not less than 85%).
The Secretary would establish a uniform
definition of the MLR including a
Issuers in the group and individual markets
(including a grandfathered health plan)
would be required to submit to the
Secretary a report concerning the ratio of
incurred loss (or incurred claims) plus the
loss adjustment expense (or change in
contract reserves) to earned premiums.
The report would also include the
percentage of total premium revenue, after
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
including profit. State regulations around
accounting procedures for calculating MLRs
vary.
methodology for calculating it. The
methodology would take into account the
special circumstances of smaller plans,
different types of plans, and newer plans.
The MLR would exclude state taxes and
licensing and regulatory fees. The method
for calculating a MLR would be established,
with exceptions if necessary, to ensure
adequate participation by issuers,
competition in the health insurance market,
and value for consumers.
accounting for risk adjustment, risk
corridors, and payments for reinsurance,
that the coverage expends on:
● reimbursement for clinical services;
● for activities that improve health care
quality; and
● on all other non-claims costs including an
explanation of the nature of such costs and
excluding federal and state taxes, licensing,
or regulatory fees.
The provisions of this section would also
apply to the individual market, except to
the extent that the Secretary determined
that the application of the MLR provision
would destabilize the existing individual
market. The provisions would sunset once
plans are offered via the exchange. §102:
PHSA §§2714 and 2754
Beginning on January 1, 2014 , this
calculation would be based on the averages
of the premiums expended on the costs for
each of the previous 3 years for the plan.
The Secretary would make these reports
available to the public.
Beginning not later than January 1, 2011, a
health insurance issuer offering group or
individual health insurance coverage
(including grandfathered health plans)
would provide an annual rebate to each
enrollee on a pro rata basis if the ratio of
the amount of premium revenue expended
by the issuer on clinical claims and health
quality costs, after accounting for taxes,
regulatory fees, risk adjustment, risk
corridors, and reinsurance, is less than 85%
in the large group market and 80% for the
small group and individual markets. States
would be permitted to increase the
percentages, but the Secretary may adjust
the state percentage for the individual
market if it is determined that the
application of 80% would destabilize the
market.
The Secretary would promulgate
regulations enforcing the provisions of this
section not later than January 1, 2011.
§1001 as amended by §10101: PHSA §2718
CRS-30
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Sunshine on health
insurance premium rates
Current Law
States have broad authority to regulate
health insurance premiums and many have
sunshine provisions with respect to rate
increases.
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
As an initial review process, beginning in
2010, health insurance issuers would be
required to submit a justification for any
premium increases prior to implementation
of the increase following a process
developed by the Secretary and the states.
The Secretary would ensure the public
disclosure of information on premium rate
increases and their justifications. For a
continuing premium review process, state
insurance commissioners would provide
data to the Commissioner of the Health
Choices Administration on premium
increases and trends. States would make
recommendations to the Commissioner
concerning the exclusion of certain health
insurance issuers from participation in the
exchange based on a pattern of excessive
or unjustified premium increases.
The Secretary would, in conjunction with
the states, establish a process for the
annual review of unreasonable increases in
premiums for health insurance coverage
beginning in the 2010 plan year. Health
insurance issuers would be required to
submit to the Secretary, and the relevant
state, a justification for an unreasonable
premium increase prior to implementation
of the premium.
Beginning in 2014, the Commissioner in
conjunction with the states would, in the
place of the initial review process
conducted by the Secretary, monitor
premium increases of health insurance
coverage inside and outside of the
additional larger employers eligible to
participate in the exchange.
Reducing other health costs
and increasing value
CRS-31
Beginning with plan year 2014, the
Secretary, in conjunction with the states,
would monitor premium increases of
health insurance coverage within and
outside of the exchange.
From 2010-2014 the Secretary would
provide grants to the states for premium
monitoring activities. There would be
appropriated to the Secretary $1 billion to
be available for expenditure for these
grants. §104
The Secretary would carry out a program
of grants to states during the 5-year period
beginning with FY 2010 for carrying out the
premium review. There would be
appropriated to the Secretary $250 million
available for these grants. §1003: PHSA
§2794
No provision.
Each hospital would for each year establish
and update a list of the hospital’s standard
charges for items and services provided in
accordance with guidelines developed by
the Secretary. The list of charges would be
made public. §1001: PHS §2718
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Appeals process
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Section 503 of ERISA (codified at 29 CFR §
2560.530-1) requires that employee benefit
plans provide adequate notice in writing to
any participant or beneficiary whose claim
for benefits under the plan has been
denied, setting forth the specific reasons
for such denial, written in a manner
calculated to be understood by the
participant, and to afford a reasonable
opportunity to any participant whose claim
for benefits has been denied for a full and
fair review by the appropriate named
fiduciary of the decision denying the claim.
The House bill has an appeal process
provision similar to the Senate bill, except
that it would not build upon the
procedures set forth 29 CFR § 2560.530-1
and it would not involve the states. The
House provision is not part of the
immediate reforms and would take effect
beginning in the plan year 2013. See §232
Table 2-Grievance and appeals.
The bill would require that a group health
plan and a health insurance issuer in the
group or individual markets would
implement an effective appeals process for
coverage determinations and claims. The
process would at a minimum:
● have in effect an internal claims appeals
process;
● provide notice to enrollees of available
internal and external appeals processes,
and the availability of any applicable
assistance; and
● allow an enrollee to review their file,
present evidence and testimony and to
receive continued coverage pending the
outcome.
To comply with the requirements, group
plans would be expected to initially
incorporate the claims and appeals
procedures set forth at 29 CFR § 2560.5301 and would update their processes in
accordance with any standards established
by the Secretary of Labor. To comply with
the requirements, issuers offering individual
health coverage would provide internal
claims and appeals procedures set forth
under applicable law and updated by the
Secretary of HHS. §1001as amended by
§10101: PHSA §2719
CRS-32
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
Health insurance consumer
information
High-risk pools for
individuals with a preexisting condition
CRS-33
Traditionally, the states have operated their
own high-risk pools. Federal funding, most
recently via the Omnibus Appropriations
Act of 2009 (P.L. 111-8), has been available,
but the operation of high-risk pools
remains with the states.
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
No provision.
Authority is granted upon enactment, and
applicable to FY2010, for the Secretary to
award grants to states to establish, expand,
or provide support to states that choose
either to implement an Office of Health
Insurance Consumer Assistance or Health
Insurance Ombudsman. There would be
$30 million appropriated for the first fiscal
year of the program and an authorization
for appropriations, in such sums as
necessary. The Secretary would establish
criteria for the grant, and the Office of
Health Insurance Consumer Assistance or
Health Insurance Ombudsman would:
● assist with the filing of complaints and
appeals;
● collect, track, and quantify problems and
inquires;
● assist consumers with enrollment in a
group health plan or health insurance
coverage; and
● resolve problems with obtaining premium
tax credits. §1002: PHSA §2793
The Secretary would establish a temporary
national high-risk pool program to provide
health benefits to eligible individuals during
the period beginning on January 1, 2010,
and ending January 1, 2013. Individuals
would be eligible if they reside in the State
and are not covered by creditable
coverage, and who, during the 6-month
period ending on the date the individual
applies for the high-risk pool coverage,
applied for individual health insurance
coverage and:
● was denied because of a pre-existing
condition or health status; or
● was offered terms that limit the coverage
for such a pre-existing condition; or
● was offered coverage at a premium rate
that is above the premium rate for the
Not later than 90 days after enactment, the
Secretary would establish a temporary
high-risk pool program to provide health
insurance coverage for eligible individuals
during the period beginning on the date the
program is established and ending on
January 1, 2014. Appropriations would be
made in the amount of $5 billion for the
period of the program implementation to
January 1, 2014 to pay claims and the
administrative costs of the high-risk pool.
Individuals would be eligible if they are a
citizen or national, or lawfully present in
the US, have not been covered under
creditable coverage during the six-month
period prior to application for coverage in
the high-risk pool, and have a pre-existing
condition as determined following guidance
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
high-risk pool.
Appropriations would be made in the
amount of $5 billion for fiscal years during
the period of January 1, 2010 until the date
on which the Exchange is established to pay
claims and the administrative costs of the
high-risk pool. The Secretary would
establish criteria for determining whether
health insurance issuers and employmentbased health plans discouraged an individual
from remaining enrolled in prior coverage
based on that individual’s health status.
§101
Limitations on pre-existing
conditions exclusions
Under HIPAA, a plan is allowed to “look
back” 6 months for a condition that was
present before the start of coverage in a
group health plan. Coverage may be
excluded for pre-existing conditions found
via this look-back process for a period.
HIPAA limits the preexisting condition
exclusion period for most people to 12
months (18 months for late enrollment).
The term ‘‘late enrollment’’ means, that a
participant or beneficiary enrolls under the
plan other than during the first period in
which the individual is eligible to enroll
under the plan, or during a special
enrollment period. Special enrollment
periods are generally afforded to an
individual that did not enroll in coverage
because he/she had other coverage at the
time, but has now lost that other coverage.
For group coverage, the bill would reduce
the look back period for preexisting
conditions from 6 months to a 30-day
period. The bill would also reduce the
preexisting exclusion period from 12 to 3
months for timely enrollments, and 18 to 9
months for late enrollments.
The immediate provisions would take effect
for plan years beginning on or after January
1, 2010, but in the case of a group health
plan maintained by 1 or more collective
bargaining agreements, ratified before the
date of enactment, this section would not
apply to plan years beginning before the
earlier of the date on which the last of the
collective bargaining agreements terminates
or 3 years after the date of enactment.
§106: ERISA §701(a), IRC §9801(a), and
PHSA §2701(a)
H.R. 3590 (Senate-passed)
issued by the Secretary. The Secretary
would establish criteria to prevent issuers
and plans from dumping members into the
high-risk pool. §1101
The bill has a prohibition on preexisting
conditions exclusions provision, but it
would not be part of the immediate
reforms. This provision would not involve
reductions in the look back and exclusion
periods like the House. The Senate
provision would be part of the general
reforms for plan years beginning on or after
January 1, 2014. See §1201 Table 2Coverage for pre-existing health
conditions.
The immediate provisions sunset at the full
implementation date. See Table 2Coverage for pre-existing health
conditions.
Prohibition against postretirement reductions in
coverage
CRS-34
ERISA does not restrict an employer’s right
to reduce, eliminate, or make changes to
health insurance coverage. The only
H.R. 3962 would require that every group
health plan contain a provision that
expressly bars the plan from reducing the
No provision.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
protections a retiree, or an employee,
might have are any contractual or union
agreements that specify any requirements
of health insurance.
Reinsurance for early
retirees
H.R. 3962 (House-passed)
benefits provided under the plan to a
retired participant, or beneficiary of such
participant, if such reduction affects the
benefits provided to the participant or
beneficiary as of the date the participant
retired, unless such reduction is also made
with respect to active participants. Nothing
in this section would prohibit a plan from
enforcing a total aggregate cap on amounts
paid for retiree health coverage that is part
of the plan at the time of retirement. §110:
ERISA §716
The Secretary would be required to create,
within 90 days after enactment, a
temporary reinsurance program to assist
participating employment-based plans with
the cost of providing health benefits to
eligible retirees who are 55 and older and
their dependents. A trust fund would be
created and funds appropriated in an
amount requested by the Secretary as
necessary, except that the total would not
exceed $10 billion. The Secretary would
reimburse the plan for 80% of the portion
of a claim above $15,000 and below
$90,000 (adjusted annually for inflation).
Amounts paid to the plan would be used to
lower costs directly to participants in the
form of premiums, co-payments, and other
out-of-pocket costs, but could be not used
to reduce the costs of an employer
maintaining the plan.
The Secretary would have the authority to
stop taking applications for participation in
the program or take such other steps in
reducing expenditures under the
reinsurance program in order to ensure
that expenditures under the reinsurance
program do not exceed the funds
available.§111
CRS-35
H.R. 3590 (Senate-passed)
Same as H.R. 3962 except that there
would be appropriated $5 billion to carry
out this program and the Secretary would
have the authority to stop taking
applications for participation in the
program based on the availability of
funding, but not the broader authority to
take other steps in reducing expenditures
in deficit situations. §1102 as amended by
§10102
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Immediate information to
identify affordable coverage
CRS-36
Current Law
H.R. 3962 (House-passed)
Under the House bill, consumer
information to make coverage choices
would be provided by the Commissioner
under the outreach and enrollment
provisions for the exchange. The House
provision would not be part of the
immediate reforms. See §305.
H.R. 3590 (Senate-passed)
The Secretary would be required, in
consultation with the states, to establish,
not later than July 1, 2010, an Internet
portal for beneficiaries to easily access
affordable and comprehensive coverage
options. This portal would implement a
standardized format for the presentation of
information including eligibility, availability,
premium rates, cost sharing, and the
percentage of total premium revenues
spent on health care compared to
administrative costs. The Internet website
would, to the extent practicable, provide
ways for residents of, and small business in,
any state to receive information on at least
the following coverage options:
● health insurance coverage offered other
than coverage that provides reimbursement
for the treatment of a single disease or
condition or an unreasonably limited set of
diseases as determined by the Secretary;
● Medicaid coverage and CHIP;
● a state high-risk pool (if applicable);
● the high-risk pool program under section
1101; and
● coverage within the small group market
for small businesses and their employees,
including reinsurance for early retirees
under section 1102, tax credits available
under section 45R of the IRC, and other
information specifically for small businesses
regarding affordable health care options.
§1103 as amended by §10101
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Domestic violence not
considered a pre-existing
condition
Under the PHSA, individuals cannot be
excluded from enrolling into coverage
because of evidence of insurability
(including conditions arising out of acts of
domestic violence). However, the PHSA
permits limitations or exclusions of benefits
relating to a preexisting condition. There is
no exception for acts of domestic violence
in the definition of a preexisting condition.
The bill would require that in the group
and individual markets, acts of domestic
violence would be prohibited from being
treated as a preexisting condition. §107:
ERISA §701(d)(3), PHSA §§2701(d)(3) and
2754, and IRC §9801(d)(3)
The Senate bill has a prohibition on
preexisting conditions exclusions, including
a specific prohibition against exclusions
based on domestic violence. The Senate
provision however, would not be part of
the immediate reforms. The Senate
provision would be part of the general
reforms for plan years beginning on or after
January 1, 2014. See §1201 Table 2.
Coverage for pre-existing health
conditions
Prohibiting denials and
delays of necessary
treatment for children with
deformities
States have broad authority to make
coverage mandates and requirements vary
between states. There are a limited number
of federal coverage mandates such as those
for mental health parity at section 2705 of
the PHSA.
The bill would require for both the group
and individual markets, coverage of any
outpatient and inpatient diagnosis and
treatment for a minor child’s congenital or
developmental deformity, disease, or injury.
A minor child would include any individual
who is 21 years of age or younger.
No provision.
Treatment would be defined to include
surgical procedures performed to improve
function or to approximate a normal
appearance. Such a term would not include
cosmetic surgery performed to improve
appearance or self-esteem. §108: ERISA
§715, IRC §9814, and PHSA §§2708 and
2755
CRS-37
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Wellness program grants
CRS-38
Current Law
H.R. 3962 (House-passed)
HIPAA clarifies that group health plans and
health insurance issuers offering group
health coverage may establish premium
discounts or rebates or modify otherwise
applicable copayments or deductibles (i.e.,
rewards) in return for adherence to
wellness programs. HIPAA regulations
provide a framework for structuring these
wellness programs and divide wellness
programs into two categories. First, if a
wellness program provides a reward based
solely on participation in a wellness
program, or if it does not provide a
reward, it complies with HIPAA without
having to satisfy any additional standards, as
long as the program is made available to all
similarly situated individuals. Second, if a
reward is based on an individual meeting a
certain standard relating to a health factor,
then the program must meet additional
requirements. Among these additional
requirements, a reward offered by this type
of wellness program must not exceed 20%
of the cost of employee coverage under
the plan (i.e., the amount paid by the
employer and the employee for that
employee for coverage).
By July 1, 2010, the Secretaries of HHS and
Labor would jointly award wellness
program grants to small employers in an
amount equal to 50% of the costs paid or
incurred in connection with a qualified
wellness program during the plan year.
Allowable costs would be those
attributable to the wellness program
(excluding the cost of food), and not to the
health plan or health insurance coverage
offered in connection with such a plan.
Grants for a given plan year would be
capped at $150 per employee, could be
provided for up to three years and would
be capped at $50,000, in total, for an
employer.
A qualified wellness program means a
program that is jointly certified by the
Secretaries of HHS and Labor meets at
least three out of four required
components. These components pertain to
health awareness, health education,
periodic screenings, employee engagement,
and listed behavioral change activities
(including smoking cessation and weight
reduction) and having supportive work
policies regarding tobacco use, food
choices, stress management, and physical
activity. §112
H.R. 3590 (Senate-passed)
Would largely codify an amended version
of the HIPAA wellness program
regulations.
Wellness programs that do not require an
individual to satisfy a standard related to a
health factor as a condition for obtaining a
reward (or do not offer a reward) would
not violate HIPAA, so long as participation
in the programs is made available to all
similarly situated individuals.
Wellness programs with conditions for
obtaining a reward that are based on an
individual meeting a certain standard
relating to a health factor, must meet
additional requirements. Among these
requirements, the reward must be capped
at 30% of the cost of the employee-only
coverage under the plan (instead of 20%
under the current regulations), but the
Secretaries of HHS, Labor, and the
Treasury would have the discretion to
increase the reward up to 50%.
The HHS Secretary, in consultation with
the Secretaries of the Treasury and Labor,
would establish a 10-state pilot program in
which participating states would be
required to apply the wellness program
provisions to health insurers in the
individual market. §1201: PHSA §2705
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Extension of COBRA
Current Law
COBRA provides certain former
employees, retirees, spouses, former
spouses, and dependent children the right
to temporary continuation of health
coverage at group rates. Group health
coverage for COBRA participants is usually
more expensive than health coverage for
active employees, because the employer
usually pays part of the premium and they
do not under COBRA continuation.
However, COBRA continuation is typically
less expensive compared to insurance in
the individual market.
COBRA establishes required periods of
coverage for continuation health benefits.
COBRA plans may provide longer periods
of coverage beyond those required.
COBRA beneficiaries generally are eligible
for group coverage during a maximum of
18 months for qualifying events due to
employment termination or reduction of
hours of work. Certain qualifying events, or
a second qualifying event during the initial
period of coverage, may permit a
beneficiary to receive a maximum of 36
months of coverage.
CRS-39
H.R. 3962 (House-passed)
The bill would allow individuals to keep
their COBRA coverage until exchange
plans are available, in 2013.
As soon as practicable after the date of
enactment, the Secretary of Labor in
consultation with the Secretaries of HHS
and Treasury, and with plan administers
that provide or administer COBRA
continuation coverage, would establish
rules for continued availability of COBRA
continuation coverage.
This provision would supersede any state
(or political subdivision) law that would
have the effect of limiting or precluding
access to a state health benefits risk pool
solely by reason of the extension of the
COBRA coverage. §113
H.R. 3590 (Senate-passed)
No provision.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
State Health Access
Program Grants
Current Law
H.R. 3962 (House-passed)
The State Health Access Program is a grant
program created and funded under the
Omnibus Appropriations Act of 2009 (P. L.
111-8). The program, operated by HHS,
awards grants to states to help them
expand access to affordable healthcare
coverage for people who are uninsured.
States may take a number of approaches,
including:
The Secretary would provide grant
program incentives for states to move
forward with a variety of health reform
initiatives prior to 2013. Grants could be
used for state insurance exchanges,
community coverage programs, reinsurance
plan programs, transparent marketplace
programs, automated enrollment programs,
innovative strategies, and purchasing
collaborative programs. §114
● shared community coverage;
● reinsurance plans that subsidize a certain
share of insurance carrier losses within a
certain risk corridor;
● subsidized high-risk insurance pools;
● health insurance premium assistance;
● insurance connector authority that
develops new, less expensive, portable
benefit packages for small employers, parttime, and seasonal workers;
● automated enrollment systems for public
assistance programs; and
● innovative strategies to insure lowincome childless adults.
Grants are made for 1 year and may be
extended to 4 additional years, based on
the availability of funds. Each state submits
an annual report to the Secretary, assessing
the state's use of funds and describing
progress in meeting project goals.
CRS-40
H.R. 3590 (Senate-passed)
No provision.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 1
Patient protections
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Many states have laws defining network
adequacy or the number and distribution of
health care providers required to operate a
health plan. States may also have “any
willing provider” laws that require a health
plan to contract for the delivery of health
care services with any provider in the area
who would like to provide such services to
the plan's enrollees.
The House bill would require that QHBPs
that use a provider network would meet
the network adequacy standards
established by the Commissioner to ensure
enrollee access to services. The House bill
has no specific provisions with respect to
designation of a primary care provider,
emergency services, or obstetrical and
gynecological care as the Senate bill has.
The House network adequacy provision
would not be part of the immediate
reforms, but would take effect for plan
years beginning in 2013. See § 215
Under the bill, if a group health plan or
health insurance issuer in the group or
individual markets requires or provides for
designation by a participant, beneficiary or
enrollee of a participating primary care
provider, then the plan or issuer would be
required to permit the designation of any
participating primary care provider who is
available to accept the individual. This same
provision would apply for pediatric care.
Mandated benefits regulation of the private
health insurance market is primarily done
at the state level. State regulatory authority
is broad in scope and can include
requirements involving preventive health
services. Such rules vary from state to
state.
Traditionally, health insurance plans pay
out-of-network providers based on their
usual and customary rate (UCR). The UCR
is defined generally as the usual fee for a
procedure charged by the majority of
physicians with similar training and
experience within the same geographical
area. Private companies, such as Ingenix,
generally collected and reported UCRs.
However, on October 27, 2009, New York
Attorney General Cuomo announced a
settlement agreement with Ingenix that
created a new not-for-profit company,
FAIR Health, Inc., and a research network
headquartered at Syracuse University to
develop a new independent database for
consumer reimbursement. There is no
federal law regulating these activities.
CRS-41
If a group health plan or health insurance
issuer in the group or individual markets
covers emergency services they would be
required to cover those services without
the need for any prior authorization and
without the imposition of coverage
limitations irrespective of the provider’s
contractual status with the plan.
Patients would also have protected access
to obstetrical and gynecological care. A
group health plan or health insurance issuer
in the group or individual markets would be
prohibited from requiring authorization or
referral by the plan, issuer, or any person in
the case of a female participant, beneficiary,
or enrollee who seeks coverage for
obstetrical and gynecological care.
The House bill has no provision with
respect to academic or other non-profit
institutions collecting medical
reimbursement data.
Centers established at academic or other
non-profit institutions to collect medical
reimbursement data would be required to
develop fee schedules and other database
tools that fairly and accurately reflect
market rates for medical services and the
geographic differences in those rates. They
would also be required to make these data
and any statistical methodologies used
publicly available. §10101: PHSA §§2719A
and 2794
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 2. Private Health Insurance Market Reforms at Full Implementation Date
Topics for Table 2
Location in bill
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 201, 202, 211-217, 231-237, 239,
251, 309
Sections 1201, 1251, 1253, 1301, 1311,
1321, 1324,1333, 1341-1343
Law amended
Effective date of market
reforms (“full
implementation”), unless
specified otherwise)
CRS-42
Public Health Service Act (amends Title
XXVII)
Beginning January 1, 2013. §201(b)
Plan years beginning on or after January 1,
2014. §1255, as amended (and redesignated
from §1253) by §10103(f)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Qualified plans
CRS-43
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Current law: Existing federal and state law
and regulations concerning the private
market generally distinguish between
coverage obtained from the group market
and coverage obtained from the individual
market. In turn, some laws and regulations
distinguish between small groups and large
groups. For example, the federal Health
Insurance Portability and Accountability Act
(HIPAA) defines small groups as those with
2-50 employees; however, some states
include self-employed “groups of one” in
their small group definition.
Beginning 2013, a qualified health benefits
plan (QHBP) would be a health plan that
meets the new federal requirements
regarding private health insurance
standards, essential benefits (including costsharing), as detailed in Table 3. Essential
Benefits, and consumer protections. Only
QHBPs may be offered in an exchange, but
may be offered outside of an exchange.
Existing employment-based plans must
meet the QHBP standards by 2018, except
for limited benefit plans. QHBPs include
qualified health benefits plans offered
through the CO-OP program or the Public
Health Insurance Option. The
Commissioner would allow a QHBP to
provide coverage through a qualified direct
primary care medical home plan, as long as
the QHBP meets all applicable
requirements and the medical home
coordinates with the issuer offering the
QHBP. §§201(b), 202(b), 303, 310, 321
A qualified health plan (QHP) would be a
health plan that has been certified by each
exchange through which such plan is
offered as meeting a specified list of
requirements related to marketing, choice
of providers, plan networks, and other
features, and provides the essential health
benefits package (detailed in Table 3.
Essential Benefits). A QHP issuer would
be licensed and in good standing with each
state in which it would offer coverage;
would offer at least one QHP each
providing silver and gold levels of coverage;
would charge the same premium for a plan
regardless if it was offered in or out of the
exchange (including through an insurance
agent); and would comply with regulations
applicable to exchanges. QHPs include
qualified health plans offered through the
CO-OP program or the Community Health
Insurance Option. §1301
An individual would not be compelled to
enroll, or not enroll, in a QHP or
participate in the exchange. A qualified
individual could enroll in any QHP, except
in the case of a catastrophic plan (described
below). A QHP, or exchange, would be
prohibited from imposing a penalty on an
individual who cancels enrollment in such a
plan because the individual becomes eligible
for minimum essential coverage (previously
defined) or minimum essential coverage
becomes affordable to that person.
§1312(d)(3)-(4)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
Consumer choice and
employer offer of qualified
plans
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Individuals would be allowed to enroll in
any QHP available to them.
Grandfathered plans
Employers who are qualified to offer
coverage through the exchange may
comply with the employer mandate by
offering any QHBP offered through the
exchange. Employees of such employers
would be able to choose any QHBP
available to them. §302(e)
Employers who are qualified to offer
coverage through an exchange would be
allowed to offer any level of coverage
(bronze, silver, gold, or platinum).
Employees of such employers would be
able to choose any QHP that offers the
level of coverage elected by such
employers. §1312(a)
Existing individual health insurance plans
would be grandfathered indefinitely, as long
as there are no changes to the terms or
conditions of the coverage, except as
required by law. Grandfathered individual
health insurance plans would be prohibited
from enrolling new individuals after the full
implementation date, unless such
individuals are dependents of an enrollee
who had such coverage prior to that date.
Existing group health insurance plans would
be grandfathered until 2018 at which time
they would be required to comply with the
QHBP standards, except for limited benefit
plans. §202(a)-(b)
On date of enactment, existing individual
and group plans would be grandfathered.
Enrollees could continue and renew
enrollment in a grandfathered plan
indefinitely. Enrollment would be limited
to those who were currently enrolled,
their families, or for grandfathered
employer-sponsored insurance to new
employees and their families.
Grandfathered plans would still be subject
to a couple of market reforms: uniform
explanation of coverage documents and
reporting of medical loss ratio and other
information. See Table I,
“Development of uniform
explanation of coverage documents”
and “Reducing health insurance
premiums and increasing value.”
§1001: PHSA §§2716, 2718
Existing group plans subject to one or
more collective bargaining agreements
would be grandfathered until the date on
which the agreement terminates, at which
time the immediate reforms and private
market reforms would apply.
§1251, as amended by §10103(d)-(e)
Coverage for pre-existing
CRS-44
The federal Health Insurance Portability
and Accountability Act (HIPAA) limits the
A QHBP would be prohibited from
excluding coverage for pre-existing health
Group health plans and issuers in the
individual and group markets would be
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
health conditions
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
period of time when coverage for preexisting health conditions may be excluded
under group coverage for individuals who
meet HIPAA eligibility criteria. HIPAA
prohibits such coverage exclusions for
HIPAA-eligible individuals with coverage in
the individual market. Some states have
imposed requirements regarding coverage
for pre-existing health conditions for
covered persons who are not eligible for
HIPAA protections.
conditions, or placing limits on coverage
based on health status, medical condition,
claims experience, receipt of health care,
medical history, genetic information,
evidence of insurability, disability, or source
of injury (including conditions arising out of
acts of domestic violence) or similar
factors. §211
prohibited from excluding coverage for
pre-existing health conditions. For
enrollees under age 19, this provision
would become effective beginning 6 months
after date of enactment. §1201: PHSA
§2704, as amended by §10103(e)
A relevant provision, which would modify
current HIPAA standards applicable to preexisting coverage exclusions, would be
implemented before the full
implementation date, and sunset at the
implementation of Sec. 211. See Table 1,
“Limitations on pre-existing
conditions exclusions.” §106
Another relevant provision, which would
prohibit an act of domestic violence from
being regarded as a pre-existing condition,
would be implemented before the full
implementation date, and would not sunset.
See Table 1, “Domestic violence not
considered a pre-existing condition.”
§107
CRS-45
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Guaranteed issue,
guaranteed renewability,
and health insurance
rescissions
CRS-46
Current Law
H.R. 3962 (House-passed)
HIPAA requires that coverage sold to all
small groups (2-50 employees) must be
sold on a guaranteed issue basis—that is,
the issuer must accept every small
employer that applies for coverage. Also,
HIPAA guarantees the availability of a plan
to HIPAA-eligible individuals seeking
coverage in the individual market. HIPAA
guarantees the renewability of coverage in
the individual and group markets for all
enrollees. “Guaranteed renewal” in health
insurance is the requirement on an issuer
to renew group coverage at the option of
the plan sponsor (e.g., employer) or
individual coverage at the option of the
enrollee. Guaranteed issue and renewal
alone would not guarantee that the
insurance offered was affordable.
Individual and group health coverage would
be offered on both a guaranteed issue and
guaranteed renewal basis. Health insurance
rescissions would be prohibited, except in
cases of fraud. §212
H.R. 3590 (Senate-passed)
Individual and group health insurance
issuers would be required to offer
coverage on a guaranteed issue and
guaranteed renewal basis. §1201: PHSA
§§2702, 2703
A relevant provision, which would prohibit
rescissions except in instances of fraud,
would be implemented before the full
implementation date, and would not sunset.
See Table I, “Prohibition on
rescissions.” §1001: PHSA §2712
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Rating rules
CRS-47
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
There are no federal rating rules for the
private health insurance market. Most
states currently impose premium rating
rules on insurance carriers in the small
group market, and some states have such
rules in the individual market. The
spectrum of existing state rating rules
ranges from pure community rating to
adjusted (or modified) community rating, to
rate bands, to no restrictions. Under pure
community rating, all enrollees in a plan pay
the same premium, regardless of their
health, age or any other factor related to
insurance risk. As of December 2008, only
two states (New Jersey and New York) use
pure community rating in their nongroup
markets, and only New York imposes pure
community rating rules in the small group
market. Adjusted community rating
prohibits issuers from pricing health
insurance policies based on health factors,
but allows it for other key factors such as
age or gender. Rate bands allow premium
variation based on health, but such
variation is limited according to a range
specified by the state. Rate bands are
typically expressed as a percentage above
and below the index rate (i.e., the rate that
would be charged to a standard population
if the plan is prohibited from rating based
on health factors). Some states have
enacted rating rules in the individual and
small group markets that include geography
as a characteristic on which premiums may
vary. In these cases, the state has
established rating areas. Typically, states
use counties or zip codes to define those
areas.
A QHBP would be required to determine
premiums using adjusted community rating
rules. Premiums would be allowed to vary
based only on age (by no more than a 2:1
ratio based on age categories specified by
the Commissioner), premium rating area
(as permitted by states or the
Commissioner), and family enrollment (so
long as the ratio of family premium to
individual premium is uniform, as specified
under state law and consistent with
Commissioner rules). §213
The Senate Amendment would impose
adjusted community rating rules, but only
on issuers in the individual and small group
markets, with some exceptions. Premiums
for those markets would vary based only
on the following risk factors: self-only or
family enrollment; rating area, as specified
by the state; age (by no more than a 3:1
ratio across age rating bands established by
the Secretary, in consultation with the
National Association of Insurance
Commissioners (NAIC)), and tobacco use
(by no more than 1.5:1 ratio). If a state
allows large group issuers to offer coverage
through that state’s exchange, these rating
rules apply to all coverage in that market,
except for self-insured plans. §1201: PHSA
§2701, as amended by §10103(a)
Any issuer in the individual or small group
market would be required to consider all
enrollees in all plans offered by the issuer in
the applicable market as members of a
single risk pool, including enrollees not
enrolled in such plans offered through the
exchange. §1312(c)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Non-discrimination in
health insurance coverage
based on health factors
Provider network adequacy
CRS-48
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
HIPAA established federal rules regarding
non-discrimination based on health statusrelated factors. It prohibits group issuers
from establishing rules for eligibility and
premium contributions based on health
status-related factors. Those factors
include health status, medical condition
(including both physical and mental
illnesses), claims experience, receipt of
health care, medical history, genetic
information, evidence of insurability
(including conditions arising out of acts of
domestic violence) and disability. In
addition, the Genetic Information
Nondiscrimination Act of 2008 prohibits
issuers in the individual health insurance
market from establishing eligibility rules
(including continued eligibility) based on an
individual’s genetic information. The Paul
Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of
2008, as amended, requires parity in
coverage for large groups (more than 50
employees) by prohibiting disparities in the
coverage of physical illnesses and mental
health and substance abuse problems in
terms of annual or lifetime dollar limits on
mental health benefits, treatment
limitations and out-of-network coverage.
A QHBP would be required to comply with
standards established by the Commissioner
prohibiting discrimination in health benefits
and benefit structures that build on existing
HIPAA nondiscrimination rules. Existing
rules concerning (1) no requirement on
group plans to provide mental health
benefits, and (2) no impact of limited
mental health parity on terms and
conditions relating to the amount, duration,
or scope of mental health benefits, would
apply to QHBPs, regardless of whether
coverage is offered in the individual or
group market. §214
Group health plans and issuers in the
individual and group markets would be
prohibited from basing eligibility (including
continued eligibility) for coverage on health
status-related factors. Such factors include
health status, medical condition (including
both physical and mental illness), claims
experience, receipt of health care, medical
history, genetic information, evidence of
insurability (including conditions arising out
of acts of domestic violence), disability, and
any other health status-related factor
determined appropriate by the Secretary.
However, the offering of premium
discounts or rewards based on enrollee
participation in wellness programs would
be permitted, so long as the conditions for
obtaining such reward meets standards
specified in the section. §1201: PHSA
§2705
HIPAA established special rules for plans
that establish networks of health care
providers. HIPAA allows small group
issuers to (1) limit the employers that apply
for coverage to those firms with eligible
individuals who live or work in the network
service area, and (2) deny coverage to small
employers if the issuer demonstrates (if
required) to the state that it has limited
provider capacity due to obligations to
existing enrollees and is applying this
decision uniformly without regard to claims
A QHBP that uses a provider network
would be required to comply with network
adequacy standards that may be established
by the Commissioner. Such a QHBP would
provide a current listing of all providers in
its network on the plan’s website and the
exchange’s website. §215
A related provision, which would prohibit
insurance eligibility rules based on salary,
would be implemented before the full
implementation date, and would not sunset.
See Table 1, “Prohibition of
discrimination based on salary.”
§1001: PHSA §2716, as amended by §10101
The Secretary would, by regulation,
establish criteria for the certification of
qualified health plans. A QHP would be
certified if it ensured a sufficient choice of
health care providers, and provided
enrollees with information on the
availability of in-network and out-ofnetwork providers, among other
requirements. §1311(c)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
experience or health status-related factors.
HIPAA also prohibits a small group issuer
that has denied coverage in any service
area to offer small group coverage in that
area for 180 days after the denial.
Fair marketing
requirements
States have established fair marketing
standards to prohibit insurers from
marketing their insurance products only to
healthy individuals and groups.
The Commissioner would establish uniform
marketing standards for QHBPs. Such
standards would apply to QHBPs outside of
the exchange only to the extent specified
by the Commissioner. §§231, 234
A QHP offered through the exchange
would meet marketing requirements and
not employ practices that would discourage
enrollment by individuals with significant
health needs. §1311(c)
Grievance and appeals
ERISA does not require an employer to
offer health benefits, but does mandate
compliance to certain standards if an
employer chooses to offer health benefits,
such as procedures for appealing denied
benefit claims to the plan (“internal
appeals”). In addition, as of February 2008,
44 States and the District of Columbia
mandate the independent review of benefit
denials by an entity outside of the health
plan (“external review”).
A QHBP would be required to provide
timely grievance and appeals mechanisms in
compliance with standards that would be
established by the Commissioner. Internal
claims and appeals processes would
incorporate the existing ERISA
requirements. The Commissioner would
establish an external review process to
provide an independent, de novo review of
denied claims. Nothing in this section
would be construed as affecting the
availability of judicial review under state law
for adverse decisions. §232
A relevant provision, concerning internal
and external appeals processes, would be
implemented before the full
implementation date, and would not sunset.
See Table 1, “Appeals process.” §1001:
PHSA §2719
Grievance and appeals standards would
apply to QHBPs outside of the exchange
only to the extent specified by the
Commissioner. §234
Information transparency
and plan disclosure
CRS-49
ERISA requires applicable health plans (as
well as other “welfare benefit” plans) to
The Commissioner would appoint a
Qualified Health Benefits Plan Ombudsman
to receive and provide assistance with
grievances. among other responsibilities.
§,244
Another relevant provision, regarding
grants to states for the
establishment/expansion of a health
insurance ombudsman, would be
implemented before the full
implementation date; authority would be
applicable to FY 2010 only. See Table 1,
“Health insurance consumer
information.” §1002: PHSA §2793
A QHBP would be required to notify plan
enrollees of any decrease in coverage or
A relevant provision, concerning the
development of standards applicable to the
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
CRS-50
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
disclose and report certain plan
information to enrollees and regulators.
For example, plan administrators must
provide to enrollees a written summary
plan description (SPD) which contains the
terms of the plan and the benefits offered,
including any material modifications, and
the SPD must be written in a manner that
can be understood by the average enrollee.
Certain plans must file an annual report
with the Department of Labor, containing
information about the operation, funding,
assets, and investments of those plans.
increase in cost-sharing at least 90 days
prior to the effective date of such changes.
§217
disclosure of benefit and coverage
information, would be implemented before
the full implementation date, and would not
sunset. See Table I, “Development of
uniform explanation of coverage
documents.” §1001: PHSA §2715
QHBPs in the exchange would be required
to comply with disclosure standards
established by the Commissioner
concerning plan terms and conditions,
claims payment policies, plan finances,
claims denials, and other information as
determined appropriate by the
Commissioner. The Labor Secretary
would harmonize such disclosure standards
for application to group plans. The
Commissioner would require such
disclosures to be provided in plain language.
QHBPs would be required to disclose costsharing requirements to enrollees and
comply with standards established by the
Commissioner to ensure transparency
regarding reimbursements between the
plan and health care providers. A
pharmacy benefit manager (PBM), under
contract with a QHBP, would be required
to provide information to the
Commissioner and QHBP: volume of
prescriptions filled, aggregate average
payments per prescription for mail order
and retail sales, and other information.
Information disclosed by a PBM would be
considered confidential, and disclosure of
such information would be prohibited
except for specified purposes. On an
annual basis, the Commissioner would
develop a public report assessing the
overall impact of PBMs on prescription
drug prices and spending. Disclosure of a
specific PBM, retailer, manufacturer or
wholesaler, or other confidential or
proprietary information would be
prohibited. A PBM that fails to provide
information required under this section or
PBMs that manage prescription drug
coverage under a contract with a Medicare
Part D drug plan or a qualified health plan
offered through an exchange would be
required to share certain financial
information with the Secretary, the plans
the PBMs contract with through Medicare
Part D, or the exchanges in a manner,
form, and timeframe specified by the
Secretary. Specifically, PBMs would be
required to disclose information on: (1) the
percent of all prescriptions that are
provided through retail pharmacies
compared to mail order pharmacies, and
the generic dispensing rates for each type
of pharmacy that is paid by the PBM under
contract; (2) the aggregate amount and
types of rebates, discounts or price
concessions that the PBM negotiates on
behalf of the plan and the aggregate amount
of these that are passed through to the
plan sponsor, and the total number of
prescriptions dispensed; and (3) the
aggregate amount of the difference
between the amount the plan pays the PBM
and the amount that the PBM pays the
retail and mail order pharmacy, and the
total number of prescriptions dispensed.
This information would be considered
confidential and would be protected by the
Secretary. §6005
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
knowingly provides false information would
be subject to penalties specified in Sec.
1927(b)(3)(C) of the Social Security Act.
§233
The disclosure and transparency
requirements would apply to QHBPs
outside of the exchange only to the extent
specified by the Commissioner. §234
Timely payment of claims
Under Medicare Advantage (MA), private
health plans are paid a per-person amount
to provide all Medicare-covered benefits
(except hospice) to beneficiaries who
enroll in their plan. MA plans include
health maintenance organizations (HMOs)
and private fee-for-service (PFFS) plans.
MA PFFS plans are required to pay 95% of
"clean claims" (defined as a claim that has
no defect or impropriety, and is submitted
with all the required documentation) within
30 days of receipt. The 30-day rule also
applies to claims submitted to any MA
organization by a provider who does not
have a written contract with the plan. All
other claims from non-contracted
providers must be paid within 60 days. MA
organizations that contract with providers
(i.e., HMOs and PPOs) must include a
prompt payment provision in their
contracts.
QHBPs would be required to comply with
the prompt pay requirements used under
Medicare Advantage. §235
No provision.
Coordination and
subrogation of benefits
While there are no federal statutes
specifying primary and secondary payment
rules when individuals are covered by
multiple insurers in the private market, the
Medicare program may provide an
example. The Medicare Secondary Payer
(MSP) program identifies specific conditions
under which another party pays first and
Medicare is only responsible for qualified
secondary payments. It authorizes several
methods to identify cases when an insurer
The Commissioner would establish
standards for the coordination of benefits
and reimbursement of payments in cases
involving individual and multiple plan
coverage. §236
No provision.
CRS-51
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
other than Medicare is the primary payer
and to facilitate recoveries when incorrect
Medicare payments have been made. Under
certain conditions, the law makes Medicare
the secondary payer to insurance plans and
programs for beneficiaries covered through
(1) a group health plan based on either
their own or a spouse's current
employment; (2) auto and other liability
insurance; (3) no-fault liability insurance;
and (4) workers' compensation situations,
including the Black Lung program.
Dependent coverage
Michelle’s Law (P.L. 110-381) ensures that
dependent students enrolled in postsecondary education who take a medically
necessary leave of absence do not lose
health insurance coverage. The federal law
provides that a group health plan may not
terminate a college student's health
coverage because the student takes a leave
of absence from school or changes to parttime status due to health conditions. The
leave of absence must be medically
necessary, begin while the student is
suffering from a serious illness or injury,
and would otherwise result in a loss of
coverage. Many states currently require
carriers to extend dependent coverage
under a family policy to young adults until
those individuals reach a certain age or no
longer satisfy other eligibility criteria, e.g.,
full-time college enrollment. As of January
2009, 30 states had coverage rules for
dependent adults in either the group
market or individual market or both.
A QHBP would be required to provide to
the policyholder the option of keeping
qualified dependent children on the family’s
health insurance policy, as long as the child
is under 27 years of age and is not enrolled
in any other health plan. The QHBP would
be allowed to increase premiums to
provide coverage to such dependents, as
long as the premiums are consistent with
the rating rules specified in Sec. 213. §216
A relevant provision affecting health
insurance coverage of dependent children
would be implemented before the full
implementation date, and would not sunset.
See Table I, “Extension of dependent
coverage.” §1001: PHSA §2714
Interstate compacts
The federal McCarran-Ferguson Act affirms
that states are the primary regulators of
insurance, including health insurance. Laws
regulating health insurance vary by state
and cover a wide spectrum of issues,
including licensure, solvency, benefit
Beginning on January 1, 2015, states would
be allowed to form health care choice
compacts for the purpose of facilitating the
sale and purchase of individual health
insurance plans across state lines. The
Secretary would request the NAIC to
No later than July 1, 2013, the Secretary, in
consultation with NAIC, would promulgate
regulations for interstate health care choice
compacts, which could be entered into
beginning January 1, 2016. Under such
compacts, QHPs would be offered in all
CRS-52
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
mandates, rating rules, and consumer
protections.
CRS-53
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
develop model guidelines by January 1,
2014 for the creation of such compacts,
which would subject coverage sold in
multiple states participating in the compact
to the laws and regulations of one primary
state, but preserve the authority of each
secondary state to enforce specific rules
(e.g., consumer protection standards). By
January 1, 2015, the Secretary would make
grants available to states for activities
related to regulating health insurance
coverage sold in secondary states. H.R.
3962 would authorize for appropriations
such sums as necessary to implement the
compact provisions from FY2015 through
FY2020. §309
participating states, but insurers would still
be subject to the consumer protection laws
of the purchaser’s state. Insurers would be
required to be licensed in all participating
states and to clearly notify consumers that
a policy may not be subject to all the laws
and regulations of the purchaser’s state.
The bill would also require that states
enact a law to enter into compacts and to
obtain approval of the Secretary, but only if
the Secretary determines that the compact
will provide coverage that is at least as
comprehensive and affordable, to at least a
comparable number of residents, as would
otherwise be provided. Moreover, the bill
would require that the compact would not
increase the federal deficit or weaken
enforcement of state consumer protection
laws. §1333
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
State flexibility to establish a
Basic Health Program
There is no existing federal law providing
direct ongoing program financing to the
states for health insurance coverage of lowincome individuals not eligible for Medicaid
either under standard criteria or via
waivers. The Washington State Basic
Health (BH) Plan program administered and
financed by the Washington State Health
Care Authority (HCA) started as a pilot
program established by the Washington
State Health Care Access Act of 1987.
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
Would require the Secretary to create a
state option for individuals who are not
eligible for Medicaid, have not reached the
age of 65, and whose household income
exceeds 133%, but does not exceed 200%
of the poverty line for the size of the family
involved; or in the case of an alien lawfully
present in the United States, whose income
is not greater than 133 percent of the
poverty line for the size of the family
involved but who is not eligible for the
Medicaid. A standard heath plan would be
defined as a health benefits plan that the
state contracts with that:
● would not be open for enrollment to
those outside of the program;
● provides at least the essential health
benefits; and
● has a medical loss ratio of at least 85%.
The Secretary would transfer to the state
an amount equal to 95% of the premium
tax credits under section 36B of the IRC of
1986, and the cost-sharing reductions
under section 1402, that would have been
provided for the fiscal year to eligible
individuals as if they were in the exchange.
§1331 as amended by §10104
CRS-54
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
H.R. 3962 (House-passed)
Waiver for state innovation
Reinsurance
CRS-55
H.R. 3590 (Senate-passed)
Beginning in 2017, the bill permits states to
apply for a waiver for up to five years of
requirements relating to QHPs, exchanges,
cost-sharing reductions, tax credits, the
individual responsibility requirement, and
shared responsibility for employers. The
state applying for the waiver would be
required to enact a law, provide a 10-year
budget plan ensuring budget neutrality for
the federal government, and to comply
with regulations that ensure transparency.
The Secretary would be required to
provide to a state the aggregate amount of
tax credits and cost sharing reductions that
would have been paid to residents of the
state in the absence of a waiver. §1332
Some states have established reinsurance
policies to encourage the offer of private
health insurance to individuals and groups
of higher risk. Reinsurance typically is
thought of as insurance for insurers. When
issuing policies, an insurer faces the risk
that the premiums it collects will not be
sufficient to cover its expenses and
generate profit. For a health insurer,
unusually high health care claims could lead
to significant financial loss. Reinsurance
shifts the risk of covering such high
expenses from the primary insurer to a
reinsurer.
No later than January 1, 2014, each state
would be required to establish a
reinsurance program for the individual
health insurance market. §1341, as
amended by §10104(r)
A relevant provision, regarding
establishment of a temporary reinsurance
program, would be implemented before the
full implementation date, and would sunset
when appropriations are expended. See
Table 1, “Reinsurance for early
retirees.” §111
A relevant provision, regarding
establishment of a temporary reinsurance
program, would be implemented before the
full implementation date, and would sunset
on January 1, 2014. See Table I,
“Reinsurance for early retirees.”
§1102, as amended by §10102
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Risk corridors
Risk corridor rules are used in a program
for regional participating provider
organizations under Part D of the Medicare
program. Risk corridors refer to a
mechanism which adjusts payments to plans
according to a formula based on each plan’s
actual, allowed expenses in relation to a
target amount. If a plan’s expenses exceed
a certain percentage above the target, the
plan’s payment is increased. Likewise, if a
plan’s expenses exceed a certain
percentage below the target, the plan’s
payment is decreased.
No provision.
The Secretary would be required to
establish and administer temporary risk
corridors, under which payments to QHPs
in the individual and small group markets
would be made according to applicable risk
corridor rules, based on the Medicare Part
D program for regional participating
provider organizations. §1342
Risk adjustment
In general, plan payments under Medicare
Advantage are risk-adjusted to account for
the variation in the cost of providing care.
Risk adjustment is designed to compensate
plans for the increased cost of treating
older and sicker beneficiaries, and thus
discourage plans from preferential
enrollment of healthier individuals. The
Medicare risk adjustment models take into
account the variation in expected medical
expenditures of the Medicare population
associated with demographic characteristics
(age, sex, current Medicaid eligibility,
original Medicare eligibility due to a
disability), as well as medical diagnoses.
No provision.
Each state would be required to adopt a
risk-adjustment model, established by the
Secretary, to apply risk adjustment to
health plans and issuers in the individual
and small group markets. Plans with
enrollment of less than average risk would
pay an assessment to the state. States
would provide payments to plans with
higher than average risk. §1343
CRS-56
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 2
Relation to other
requirements
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
For coverage not offered through the
exchange and employment-based plans, the
new requirements under Title II of this bill
(relating to QHBPs) would not supersede
specified federal and state laws, as long as
such laws do not prevent implementation
of provisions related to the private health
insurance market, as determined by the
Commissioner. The application of Section
514 of ERISA, regarding the federal
preemption of state laws that relate to
employee benefit plans, would not be
affected.
The private health insurance provisions
would not preempt state law, as long as
such laws do not prevent the application of
such provisions. §1321(d)
For coverage offered through the
exchange, the new requirements under
Title II of this bill (relating to QHBPs)
would not supersede any requirements
under HIPAA (including requirements
relating to genetic information nondiscrimination and mental health parity) or
state law, as long as such requirements do
not prevent implementation of provisions
related to the private health insurance
market, as determined by the
Commissioner. Individual rights and
remedies under State laws would apply.
§251
A state may require a QHP to offer
benefits in addition to “essential health
benefits.” In such instances, the state
would be required to make payments, to
the enrollee or on behalf of the enrollee, to
defray the cost of the additional benefits.
§1311(d), as amended by 10104(e) (There is
a similar provision in the House bill that
only affects state mandated benefits for
exchange plans. See Table 7, “Health
Insurance Exchanges,” Standardized
benefit tiers for exchange plans.)
QHPs in the CO-OP program, under the
Community Health Insurance Option, or as
a nationwide plan, would be subject to
certain federal and state laws applicable to
private health insurers. Such laws would
include: guaranteed renewal, rating, preexisting conditions, nondiscrimination,
quality improvement and reporting, fraud
and abuse, solvency and financial
requirements, market conduct, prompt
payment, appeals and grievances, privacy
and confidentiality, licensure, and benefit
plan material or information. §1324
State benefit mandates would continue to
apply to coverage outside of an exchange.
§1312(d)(2)
CRS-57
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 3.Essential Benefits
Topics for Table 3
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 221-224
Sections 1201,1302
Law amended
PHSA (amends title XXVII)
Effective date
Beginning January 1, 2013 for all new private health plans. By
2018 for existing group health plans. §§201(b), 202(b)
Plan years beginning on or after January 1, 2014. §1255, as amended
(and redesignated from §1253) by §10103(f)
Benefits package
QHBPs would be required to provide the essential benefits
package. Exchange plans would be required to offer coverage
that complies with the essential benefits package standards (Sec.
222), and provides specified levels of coverage (Sec. 303). QHBPs
not offered through the exchange could offer benefits in addition
to the essential benefits package. The essential benefits package
would cover specified items and services, prohibit cost-sharing on
preventive services, limit annual out-of-pocket spending, prohibit
annual and lifetime benefit limits on covered health care items and
services, comply with network adequacy standards, and be
equivalent in its scope of benefits to the average employer health
plan in 2013 (as certified by CMS’s Office of the Actuary). §§221,
222(a)
QHPs and plans offered in the individual and small group markets
would be required to provide the essential health benefits package.
The essential health benefits package would refer to a health plan that
would provide coverage for “essential health benefits,” would not
exceed out-of-pocket and deductible limits specified in the bill, and
would not impose a deductible on preventive services. The Secretary
would ensure that the scope of essential health benefits is equal to
the scope of benefit provided under a typical employer plan, as
determined by the Secretary(as certified by CMS’s Office of the
Actuary). §§1201: PHSA § 2707(a),1302(a),1302(b)(2)
A relevant provision, that would prohibit lifetime limits with
respect to essential benefits, would be implemented before the
full implementation date, and would not sunset. See Table I,
“No lifetime or annual limits.” §109
A relevant provision, affecting lifetime and annual benefit limits, would
be implemented before the full implementation date, and would not
sunset. See Table I, “No lifetime or annual limits.” §1001:
PHSA §2711, as amended by §10101
CRS-58
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 3
Categories of essential benefits
H.R. 3962 (House-passed)
The essential benefits package would provide coverage, at a
minimum, for the following categories of benefits:
The essential health benefits package would provide coverage, at a
minimum, for the following categories of benefits:
● hospitalization;
● outpatient hospital and clinic services, including emergency
department services;
● services of physicians and other health professionals;
● services, equipment, and supplies incident to the services of a
physician or health professional in clinically appropriate settings;
● prescription drugs;
● rehabilitative and habilitative services;
● mental health and substance use disorder services;
● hospitalization;
● ambulatory patient services;
● emergency services;
● certain preventive services (no cost-sharing permitted) and
vaccines;
● maternity care;
● well baby and well child care and oral health, vision, and hearing
services, equipment, and supplies for those under age 21; and
● durable medical equipment, prosthetics, orthotics, and related
supplies. §222(b)
Cost-sharing for essential health
benefits
CRS-59
H.R. 3590 (Senate-passed)
● prescription drugs;
● rehabilitative and habilitative services and devices;
● mental health and substance use disorder services, including
behavioral health treatment;
● preventive and wellness and chronic disease management;
● maternity and newborn care;
● pediatric services, including oral and vision care; and
● laboratory services. §1302(b)
A relevant provision, concerning coverage for treatment for
children with deformities, would be implemented before the full
implementation date, and would not sunset. See Table 1,
“Prohibiting denials and delays of necessary treatment
for children with deformities.” §108
A relevant provision, concerning coverage for preventive health
services, would be implemented before the full implementation date,
and would not sunset. See Table 1, “Coverage of preventive
health services.” §1001 : PHSA §2713
The essential benefits package would not include cost-sharing for
preventive items and services recommended (with a grade A or
B) by the Task Force on Clinical Preventive Services, and vaccines
recommended by the Centers for Disease Control and
Prevention. To the extent possible, the Secretary would establish
cost-sharing levels using copayments (a flat dollar fee) and not
coinsurance (a percentage fee). §222(c)
Plans providing the essential health benefits package would be
prohibited from applying a deductible to preventive health services.
Small group health plans providing the essential health benefits package
would be prohibited from imposing a deductible greater than $2,000
for self-only coverage, or $4,000 for any other coverage in 2014;
deductible limits would be annually adjusted thereafter. §1302(c)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 3
H.R. 3962 (House-passed)
Out-of-pocket spending limit
The annual out-of-pocket limit in 2013 for the essential benefits
package would be no more than $5,000 for an individual and
$10,000 for a family, adjusted annually for inflation. §222(c)
Annual/lifetime benefit limits
The essential benefits package would be prohibited from including
any annual or lifetime limits on covered health care items and
services. §222(a)(3)
Authority for determining
essential benefits
H.R. 3590 (Senate-passed)
A health plan providing the essential health benefits package would be
prohibited from imposing an annual out-of-pocket limit that exceeds
the maximum thresholds permissible for high deductible health plans
(HDHPs) that qualify for Health Savings Accounts (HSAs). (For 2009,
the out-of-pocket maximum for health savings account-qualified
HDHPs is $5,800 for single coverage and $11,600 for family
coverage.) §1302(c)
A relevant provision, that would prohibit lifetime limits with
respect to essential benefits, would be implemented before the
full implementation date, and would not sunset. See Table I,
“No lifetime or annual limits.” §109
A relevant provision, affecting lifetime and annual benefit limits, would
be implemented before the full implementation date, and would not
sunset. See Table I, “No lifetime or annual limits.” §1001:
PHSA §2711, as amended by §10101
The Health Benefits Advisory Committee, a private-public panel
of medical and other experts, would be established to
recommend benefit standards and periodic updates to the HHS
Secretary. The Advisory Committee would recommend initial
benefit standards no later than one year after enactment. The
Secretary would adopt an initial set of benefit standards, through
the rulemaking process, no later than 18 months after
enactment.
The Secretary would define and periodically update coverage that
provides essential health benefits. The Secretary would ensure that
the scope of the essential health benefits is equal to the scope of
benefits under a typical employer-provided health plan, as certified by
the Chief Actuary of the Centers for Medicare and Medicaid Services.
§1302(b)
The Commissioner would specify the variation allowed for costsharing levels in basic, enhanced, and premium plus plans, based
on the essential benefits package. Cost-sharing may vary up to
10% for each benefit category specified. §§222(c)(3), 223, 224
Actuarial value based on essential
benefits
CRS-60
For provisions regarding benefits standardized according to
actuarial values based on essential benefits, see Table 7. Health
Insurance Exchanges, “Standardized benefit tiers for
exchange plans.” §303
For provisions regarding benefits standardized according to actuarial
values based on essential benefits, see Table 7. Health Insurance
Exchanges, “Standardized benefit tiers for exchange plans.”
§§1301(a)(1)(C)(ii),1311(b)(2)(B)(ii)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 4. Individual Mandate
Topics for Table 4
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Section 501
Section 1501
Law amended
Creates new Section 59B in IRC
Creates new Section 5000A in IRC
Effective date
1/1/13 §501
1/1/14 §1501
Is there an individual mandate to
have health insurance
Yes, most individuals would be required to maintain acceptable
coverage, defined as coverage under a qualified health benefits
plan (QHBP), an employment-based plan, a grandfathered
nongroup plan, part A of Medicare, Medicaid, military coverage
(including Tricare), veteran's health care program, services for
members of Indian tribes (through the Indian Health Service, a
tribal organization or an urban Indian organization), and coverage
as determined by the Secretary in coordination with the
Commissioner. §501: IRC §59B(d)
Yes, most individuals would be required to maintain minimum
essential coverage for themselves and their dependents, defined as
coverage under part A of Medicare, Medicaid, the Children's Health
Insurance Program (CHIP), the TRICARE for Life program, the
veteran's health care program, the Peace Corps program, an eligible
employer sponsored plan, plans in the individual market, a
grandfathered health plan, and any other health benefits coverage,
such as a state health benefits risk pool, as recognized by the
Secretary in coordination with the Secretary of Treasury. Eligible
employer sponsored plans would include local, state or federal
government plans, any other plan or coverage offered in the small or
large group market, and grandfathered plans. Minimum essential
coverage would not include coverage of excepted benefits as defined
in the Public Health Service Act (PHSA) such as coverage for only
accident or disability income, limited scope dental or vision benefits,
coverage for specific illnesses, or Medicare supplemental health
insurance. §1501: IRC Ch.48 §5000A(a) and (f)
CRS-61
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 4
Penalty for non-compliance
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Yes, individuals who did not meet mandate for themselves and
their children could be required to pay a tax, prorated for the
time the individual (or family) does not have coverage during the
year, equal to the lesser of (1) 2.5% of the taxpayer's modified
adjusted gross income (MAGI) over the amount of income
required to file a tax return, or (2) the national average premium
for applicable single or family coverage. §501: IRC §59B(a) and (b)
Individuals who did not meet mandate for one or more months
would be required to pay a penalty for themselves and their
dependents, for each month they were in non-compliance. The
penalty would be the lesser of (1) the sum of the monthly penalty
amount (calculated as the lesser of (a) the per person penalty amount,
but no more than 300% of the per person penalty in total for the
taxpayer and any dependents, or (b) 0.5% of household income for a
tax year beginning in 2014, 1.0% for a tax year beginning in 2015, and
2% thereafter);or (2) an amount equal to the national average
premium for qualified health plans which have a bronze level of
coverage, provide coverage for the applicable family size involved, and
are offered through an exchanges for plan years beginning in the
calendar year with or within which the taxable year ends. The perperson, annual dollar penalty would be phased in—$95 in 2014, $495
in 2015, reaching $750 in 2016 (adjusted for inflation thereafter). The
monthly penalty amount, for any dependents under the age of 18,
would be reduced by one-half.
Taxpayers who did not pay a required penalty would not be subject
to any criminal prosecution or penalty. The Secretary could not file
notice of lien or levy on any property,
§1501: IRC §5000A(b),(c) and (g), as amended by §10106(b)(1)
CRS-62
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 4
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Exemptions to individual mandate
Exempted individuals would include nonresident aliens, individuals
who live and work outside of the United States, individuals
residing in possessions of the United States, those with qualified
religious exemptions, those allowed to be a dependent for taxfiling purposes, and others granted an exemption by the
Secretary. §501: IRC §59B(c)
Exempted individuals would include individuals with qualifying
religious exemptions, those in a health care sharing ministry,
individuals not lawfully present in the United States, and incarcerated
individuals. No penalty would be imposed on those without coverage
for less than 90 days (with only one period of 90 days allowed in a
year), members of Indian tribes, individuals whose household income
did not exceed 100% of the federal poverty level (FPL), or any
individual who the Secretary of HHS determines to have suffered a
hardship with respect to the capability to obtain coverage under a
QHP.
Individuals whose required contribution for a calendar year exceeds
8% of household income would be exempt from the penalty. For tax
years after 2014, the 8% would be adjusted to reflect the excess rate
of premium growth and the rate of income growth for the period.
Certain individuals who would otherwise be subject to the mandate,
but are residing outside of the United States, as well as bona fide
residents of any possession of the United States, would be considered
to have minimum essential coverage and therefore not subject to the
penalty. §1501: IRC §5000A(d), (e) and (f) as amended by §10106(d)
Congressional Findings
CRS-63
No provision.
Includes Congressional findings that address the constitutionality of an
individual mandate to obtain health insurance. §1501 as amended by
§10106
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 5. Employer Mandate
Topics for Table 5
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 411, 412, 421, 423, 511 and 512
Sections 1502, 1511, 1512, and 1513
Laws amended
IRC, PHSA, ERISA
IRC, Fair Labor Standards Act
Effective date
January 1, 2013. §421, §423, §511, §512
January 1, 2014. §1502, §1513
Is there an employer mandate?
Yes, the bill would require certain employers either to offer
individual and family coverage under a QHBP (or continue
current employment-based plans) to their employees or to pay a
set amount into an exchange, with some exceptions. Employers
would include private-sector employers, churches, and federal,
state, local and tribal governments. §411, §412, §421, §423, §
511and §512
No, but the bill would impose certain requirements and potential
penalties on employers who do not offer coverage. All employers
with more than 50 full-time employees (defined as employees
working on average at least 30 hours per week and excluding
seasonal workers) who did not provide coverage could be required
to pay a penalty for certain employees, as well as employers who
provide access to coverage, but fail to meet certain requirements.
A special rule would apply to those employers whose substantial
annual gross receipts were attributable to the construction industry.
For these employers, instead of using the 50 full-time employee count
for the employer requirement, employers who employed an average
of at least 5 full-time employees on business days during the
preceding calendar year and whose annual payroll expenses exceeded
$250,000 for such preceding calendar year would be subject to the
employer requirements. The same exclusions would apply for the
seasonal workers of construction industry employers.
§1513 as amended by §10106(f)
General penalty for not offering
health insurance
Employers with aggregate wages over $750,000 that chose not to
offer coverage would be subject to an excise tax equal to 8% of
the average wages paid by the employer (exceptions discussed
below). §412 and §512
A firm with more than 50 employees (or an applicable construction
employer) that chose not to offer health insurance could be subject
to a penalty if any of its full-time employees were enrolled in an
exchange plan for which a premium credit is paid. In 2014, the penalty
assessed to the employer would be equal to the number of full-time
employees times 1/12 of $750, for any applicable month. After 2014,
the applicable payment amount would be indexed. No penalty would
be imposed for any month with respect to any employee who has a
free choice voucher. §1513 as amended by §10108
Potential penalty or other action
even if an employer offers some
health insurance
Beginning in 2014, for employees who decline the employer’s
qualifying coverage, those employers with aggregate wages above
$750,000 would be assessed 8% of average wages for the number
of employees who decline and obtain exchange coverage, with
adjustments for small employers as described below. The
employer's excise tax for these individuals would go into the
Exchange but would not apply toward their premiums.
An employer (either an applicable large or construction employer)
that offers its employees coverage could be subject to penalties, if
one or more of its full-time employees were enrolled in a QHP for
which a premium credit is paid, for that employee. In 2014, the annual
penalty assessed to the employer for each such employee would be
$3,000 ($250 per month). However, the total annual penalty for an
employer would be limited to the total number of the firm's full-time
CRS-64
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 5
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
The Secretary, in coordination with the Commissioner, could
terminate an employer's election to provide health insurance if
the employer was in substantial non-compliance with the health
coverage participation requirements. If an employer fails to
satisfy the health coverage participation requirements for any
employee, their would be a tax for each such failure of $100 per
day, other than failures corrected within 30 days and nonintentional failures. Total annual penalty could not exceed the
lesser of 10% of the amount the employer spent on health plans
or $500,000. §411, §421, §423, § 511and §512
employees times $750 ($62.50 per month). The penalties would be
calculated on a monthly basis, and the dollar amounts would be
indexed after 2014.
Exemptions or special rules for
small employers
The required level of excise tax for smaller employers that chose
not to offer coverage would depend on a firm’s aggregate wages
(AW) for the preceding calendar year:
● 0% if AW does not exceed $500,000
● 2%, if AW exceeds $500,000 but does not exceed $585,000
● 4% if AW exceeds $585,000 but does not exceed $670,000
● 6% if AW exceeds $670,000 but does not exceed $750,000
● 8%, if AW exceeds $750,000
§411, §413, §512
The requirements only apply to firms with more than 50 full-time
employees (defined as employees working on average at least 30
hours per week and excluding seasonal workers). An employer would
not be considered to employ more than 50 full-time employees if the
workforce exceeds 50 for 120 days or less during the calendars year
and the employees in excess of 50 during 120 day were seasonal.
§1513
Requirements for employers
offering health insurance
For employers offering health insurance, the following rules
would apply:
● Employers could offer employment-based coverage or, for
certain small businesses, they could offer coverage through an
exchange.
● Current employment-based health plans grandfathered for 5
years, after which time any plan offered by an employer would
have to meet (and could exceed) the requirements of the
essential benefits package.
● Employers would have to contribute at least 72.5% of the
lowest-cost QHBP or current employment-based plan they
offered (65% for those electing family coverage), prorated for
part-time employees.
● Salary reductions used to offset required employer
contributions would not count as amounts paid by the employer.
§411, §412
For employers offering health insurance, the following rules would
apply:
● Large employers could offer full-time employees the opportunity to
enroll in a group health plan. Small employers could offer full-time
employees and their dependents coverage in a group plan or in an
exchange plan.
● Current employment-based plans would be grandfathered.
● An employer would not be treated as meeting the employer
requirements, if at least one full-time employee is enrolled in an
exchange plan and is receiving a premium credit because the
employee's required contribution exceeds 9.8% of the employee's
household income. §1513
CRS-65
Thus, for example, an employer with 100 full-time employees of
whom 30 received credits for the year would be subject to a penalty.
For 2014, the penalty amount would be $3,000 for each of the 30
credit-receiving employees, or $90,000. However, because the
limitation on an employer penalty is equal to the total number of fulltime employees (100) multiplied by $750, which in this case is
$75,000, the employer would pay only $75,000 (the lesser of $75,000
and the $90,000 calculated penalty). §1513
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 5
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Auto-enrollment
Employers would automatically enroll their employees into the
plan for individual coverage with the lowest associated employee
premium, unless the employee selected a different plan or opted
out of employer coverage. Employers would be required to
provide written notice detailing the employee's rights and
obligations relating to auto enrollment. §412
Firms with more than 200 full-time employees that offer coverage
would automatically enroll new full-time employees in a plan (and
continue enrollment of current employees). Automatic enrollment
programs would be required to include adequate notice and the
opportunity for an employee to opt out. §1511
Information requirements
Employers would be required to provide certain information to
the IRS and to employees to show compliance with health
participation requirements. §412
Employers would be required to file certain information to the IRS
and to employees, regardless of whether or not they provided health
insurance. Employers would also be required to provide notice to
employees about the existence of the exchange, including a
description of the services provided by the exchange. §1502, §1512
Waiting periods
No provision.
A fee of $600 (indexed after 2014) per full-time employee would be
imposed on applicable large employers that required extended waiting
periods (over 60 days) before employees could enroll in a minimum
essential coverage under an employer-sponsored plan. §1513 as
replaced by §10106(e)
Affiliated groups and other special
employer groups
Under regulations prescribed by the Secretary (for certain
employers who are part of a group of employers treated as a
single employer under the IRC), separate elections to offer health
insurance could be made with respect to (1) separate lines of
business and (2) full-time employees and employees who are not
full-time. §421, §511
No provision.
Free choice vouchers
No provision.
An employer who offers minimum essential coverage and pays any
portion of the costs of such plan would provide free choice vouchers
to each qualified employee. A qualified employee would be one
whose required contribution to the employer plan is greater than 8%
and less than 9.8% off the employee’s household income for the
taxable year, whose household income is not greater than 400% of
the FPL for the relevant family size, and who does not participate in
the plan offered by the employer. Beginning after 2014, the 8% and
9.8% would be indexed by the rate of premium growth.
The amount of a voucher would be equal to the monthly portion of
the cost of the employer plan which would have been paid by the
employer if the employee were covered under the plan for which the
employer pays the largest portion of plan costs, for either self or , if
elected by the employee, family coverage.
The cost of any health plan would be determined under rules similar
to section 2204 of the PHSA (relating to premiums for continuation
CRS-66
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 5
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
coverage), except that the amount would be adjusted for age and
category of enrolment, as established through regulation by the
Secretary.
An exchange would credit the amount of a voucher to the monthly
premium of a qualified health plan in which the qualified employee is
enrolled, and the employer would pay the exchange the credited
amount. If the amount of the voucher exceeded the premium, the
excess would be paid to the employee.
For employees, the amount of the voucher that did not exceed the
premium would be excluded from gross income. For employers, the
amount of the voucher would be treated as compensation for
personal services actually rendered. The voucher would be taken
into account in determining the premium credit.
No penalty would be imposed on am employer with respect to any
employee who was provided a voucher. §10108(f): IRC §139D
CRS-67
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 6. Small Business Tax Credit
Topics for Table 6
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Section 521
Section 1421
Location in bill
Law amended
Creates new Section 45R in IRC
Creates new Section 45R in IRC
Effective Date
January 1, 2013. §521
January 1, 2010 (including carrybacks of credits). As amended by
§10105 and §1421(f)
Maximum amount and duration of
credit
50% credit toward the employer share of the cost of qualified
employee health coverage, for no more than two taxable years.
§521(a): IRC §45R(a)and(b)
35% credit (2010-2013) and 50% credit (beginning in 2014 for no
more than two consecutive taxable years) of the lesser of (1) the
employer premium contribution toward plans offered by the
employer through an exchange, or (2) the contribution the employer
would have made if each of those same employees had enrolled in a
QHP with a premium equal to the average (determined by the
Secretary) for the small group market in the rating area in which the
employee enrolls for coverage. (For 2010-2013, “average” would be
determined by the Secretary based on the average premium for the
small group market in the state, or area in the state, in which the
employer offers health insurance). §1421(a): IRC §45R(b) and (g) as
amended by §10105
Employer eligibility
Certain small businesses with a tax liability. Small businesses with
10 or fewer full-time employees and with average taxable wages
of $20,000 or less could claim the full credit amount. §521(a): IRC
§45R(a) and (b)
Certain small businesses, not restricted to those with a tax liability
would be eligible. Small employers would have to contribute at least
50% of the cost of premiums towards a qualified health plan. Small
businesses with 10 or fewer full-time employees and with average
taxable wages of $25,000 or less could claim the full credit amount.
§1421(a): IRC §45R(a) and (d) as amended by §10105
Phase-out of credit
Phased out as average employee compensation increases from
$20,000 to $40,000 and as number of employees increases from
10 to 25. Employees would be counted if they received at least
$5,000 in compensation, but the credit could not apply toward
insurance for employees whose compensation exceeds $80,000
(highly compensated employees). After 2013, adjustments for
inflation would be applied to the average employee compensation
and to the limit on highly compensated employees. §521(a): IRC
§45R(b),(c)and (e)
Phased out as average employee compensation increases from
$25,000 to $40,000 and as the number of full-time employees
increases from 10 to 25. Full-time employees would be calculated by
dividing the total hours worked by all employees during the tax year
by 2,080 (with a maximum of 2,080 hours for any one employee).
Seasonal workers would be exempt from this calculation. Average
annual wages would be determined by dividing the aggregate amount
of wages paid by the employer by the number of full-time-equivalent
employees, for the taxable year.§1421(a): IRC §45R(c) and (d) as
amended by §10105
CRS-68
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 6
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Special rules, if any, for nonprofits organizations
Non-profit organizations would be ineligible. §521(b)
Non-profit organizations would be eligible. Credit amount would be
the lesser of (1) a 25% credit (2010–2013) and a 35% credit
(beginning in 2014), or (2) the amount of employer-paid payroll taxes
(including the Medicare contribution) for the relevant calendar year.
§1421(a): IRC §45R(f)and (g) as amended by §10105
Special rules for self-employed
individuals
Could be eligible. §521(a): IRC §45R(f)
Not eligible. §1421(a): IRC §45R(e)
Table 7. Health Insurance Exchanges
Topics for Table 7
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 241-244, 301-308
Sections 1311-1321
Earliest possible date of exchange
establishment
January 1, 2013, when federal private health insurance market
reforms, premium subsidies, and Medicaid expansions must be in
effect. §302(c)
Within one year of enactment (or as soon as possible thereafter),
Secretary must provide grant awards to states for establishing their
exchange. Exchanges must be established in states by January 1, 2014,
when federal private health insurance market reforms, premium
subsidies, and Medicaid expansions must be in effect. §1311
Who has primary responsibility
(or opportunity) to establish and
operate exchanges
The Commissioner. §241
States, if they adopt the private market reforms. States already
operating an exchange prior to 1/1/10 that insures a percentage of the
population projected to be covered nationally by the bill would be
presumed to meet the standards, unless the Secretary determines
otherwise. §1311, §1321(e)
Who may also establish or
operate an exchange
States, with Commissioner’s approval. States already operating
an exchange prior to 1/1/10 would be presumed to meet the
standards, unless the Commissioner determines otherwise. §308
The Secretary, if state so chooses, or automatically by 1/1/2014 as a
federal fallback. §1321
Startup funding for exchanges
Federal funds (in the case of a state-based exchange, federal
funds via matching grants). §§307, 308
Federal funds, available until 1/1/2015. §1311(a)
Operating funding for exchanges
Federal funds (in the case of a state-based exchange, federal
funds via matching grants). §§307, 308
Assessments or user fees on participating plans. Exchanges to be selfsustaining by 1/1/2015. §1311(d)(5)
Exchange functions
The following tasks are generally for the Commissioner (or
usually states, when a state operates an exchange):
The exchange would be a government or nonprofit entity that would
make qualified health plans (and stand-alone dental plans) available to
qualified individuals and employers and that would do the following:
Primary location in bill
Law amended
CRS-69
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 7
H.R. 3962 (House-passed)
● Certify, recertify, decertify plans as offering qualifying
coverage.
● Accept bids and negotiate and enter into contracts with
insurers (including denying “excessive premiums and premium
increases”).
● Facilitate outreach to and enrollment of eligible individuals and
employers (including establishing open enrollment period
generally sometime during September to November).
● Provide information for comparing plan benefits and assist
consumer with their choices regarding premiums and out-ofpocket cost-sharing.
● Establish a toll-free hotline and a website.
● Establish a risk-pooling mechanism.
● In coordination with state insurance regulators, establish
oversight and enforcement of plans.
● Provide process to automatically enroll subsidy-eligible
applicants in a plan if none is chosen.
§301(b), §§303-6
H.R. 3590 (Senate-passed)
● Certify, recertify, decertify plans as offering qualifying coverage,
based on criteria set by the Secretary in regulation.
● Establish open enrollment periods based on criteria set by the
Secretary.
● Provide standardized information for comparing plan benefits and
plan ratings (based on criteria set by the Secretary).
● Establish and make available an online calculator for individuals to
estimate their premium and cost-sharing subsidies, if any.
● Establish a toll-free hotline and a website.
● Certify exemptions from the individual mandate and transfer the list
of such individuals to the Treasury Secretary (see also §1401: IRC
§36B(c)(2)(C)).
● Publish average costs of licensing, regulatory fees, and any other
payments required by the exchange (as well as administrative costs
and monies lost to waste, fraud and abuse) on a website.
● Keep an accurate accounting of all activities, receipts and
expenditures and annually submit a report to the Secretary.
● Establish and fund Navigators (i.e., entities that can conduct public
education on qualified health plans, distribute information about
enrollment and subsidies, facilitate enrollment in plans, provide
referrals for certain enrollees—all in a culturally and linguistically
appropriate manner to the needs of those served by exchanges),
based on standards set by the Secretary.
§1311(c)(4), (c)(5), (d), (i), §1313(a)(1)
Medicaid “screen and enroll” (i.e.,
individuals determined to be
eligible for Medicaid must be
enrolled in Medicaid)
The Commissioner “shall provide for the enrollment of the
individual under the State Medicaid” program if the individual
applies for a subsidy in the exchange but is determined to be
eligible for Medicaid. §305(e)
Exchanges would inform individuals of eligibility requirements for
Medicaid, the Children’s Health Insurance Program (CHIP), or any
other state or local health insurance program and “enroll such
individuals in such program.” §1311(d)(4)(F)
Authority to contract with other
entities to perform exchange
functions
In consultation with the Secretary, the Commissioner would
enter into a memorandum of understanding with every state
coordinating enrollment of individuals in exchange plans or
Medicaid. §305(e)(2)
States could permit exchange to contract with an “eligible entity” to
carry out exchange functions. An “eligible entity” would be a state
Medicaid agency or an entity incorporated or subject to the laws of a
state(s) with demonstrated experience in individual and small group
CRS-70
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 7
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
health insurance markets and benefits, but not a health insurer or a
member of the same controlled group of corporations as a health
insurer. §1311(f)(3)
Additional or specific
requirements of qualifying plans
seeking to offer coverage through
an exchange (beyond applicable
requirements in Table 1 and
Table 2)
● Be licensed in the state.
● Provide for affordable premiums.
● Implement and coordinate with plans on premium and costsharing credits.
● Generally accept all enrollment.
● Participate in risk-pooling arrangement.
● Include essential community providers and culturally and
linguistically appropriate services and communications.
● Implement special rules for Indian enrollees and health care
providers.
● Implement program integrity standards established by the
Commissioner.
● Offer adequate provider network.
§304(b)
Exchange-eligible individuals
State residents not offered coverage directly by an employer as a
full-time employee, and not eligible for Medicare, Medicaid or, in
2013, CHIP.
Once individuals qualify for and enroll in an exchange plan, they
could continue enrollment in that plan—unless they became
eligible for Medicare or Medicaid (in which case the
CRS-71
● Be licensed and in good standing to offer health insurance in the
state.
● Justify any premium increase prior to its implementation, which the
exchange could consider to determine whether it would be offered
through the exchange.
● Generally accept all enrollment and not market or design benefits to
discourage enrollment by those with significant health needs.
● Include essential community providers that served predominantly
low-income medically underserved individuals.
● Offer adequate provider network.
● Report on, be accredited by, and participate in various quality
initiatives.
● Beginning 1/1/2015, when contracting with a hospital with more
than 50 beds, contract with only those using a patient safety evaluation
system and a mechanism to ensure discharged patients receive
patient-centered education and counseling, comprehensive discharge
planning, and post-discharge reinforcement by an appropriate health
care professional. When contracting with other providers, contract
only with those implementing health care quality improvements
required by the Secretary through regulation. The Secretary may
adjust the number of hospital beds or establish other “reasonable
exceptions” to these requirements.
§1301(a)(1), §1311(c)(1), §1311(e),(g),(h)
Lawfully residing state residents not eligible for Medicaid or CHIP, and
who are not incarcerated (except individuals pending disposition of
charges). §1312(f)(1), §1311(d)(4)(F)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 7
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Commissioner would have some transition flexibility), or other
circumstances as the Commissioner may provide. §302
The only plans the federal government would make available to
Members of Congress (i.e., any member of the House or Senate) or
congressional staff (i.e., all full-time and part-time employees employed
by the official office of a Member of Congress, whether in or outside
of Washington, DC) would be health plans created by this legislation
or offered through an exchange. §1312(d)(3)(D)
Exchange-eligible employers, for
enrollment of employees in
exchange plans
In 2013, up to 25 employees.
In 2014, up to 50 employees.
In 2015, up to 100 employees, though the Commissioner could
permit even larger employers.
Before 2016, state choose: up to 50 or up to 100 employees.
In 2016, up to 100 employees.
In 2017, states could allow large employers to obtain coverage
through an exchange (but could not be required to do so).
Once employers qualify for and enroll employees in an exchange
plans, the employer would continue to be considered exchange
eligible—unless the employer offered direct coverage not
through an exchange.
Exchange-participating employers would have to make all
employees eligible for exchange coverage. §302
Exchange-participating employers would have to make all full-time
employees eligible for exchange coverage.
§1312(f)(2), §1304
Choice of plans for individuals in
exchange through an employer
Employees could choose any plan in any benefit tier, though
individual could be responsible for any additional premiums.
§302(e)(6)(B)
Employees could choose any plan in the benefit tier (e.g., silver)
specified by the employer. §1312(a)(2)
Required employer contribution
for employers offering coverage
through exchange
For full-time employees (prorated for part-time employees),
72½% for single coverage (65% for family coverage) of the
“reference premium” (generally the three basic plans with the
lowest premiums in the area). §302(e)(6)(A)
No provision.
Standardized benefit tiers for
exchange plans
In an area, insurers must offer only one basic plan, which must
meet essential benefits package (e.g., actuarial value of
approximately 70%).
In an area, insurers must offer at least one silver plan (actuarial value
of approximately 70%) and at least one gold plan (actuarial value of
approximately 80%).
Insurers then may offer one enhanced plan (i.e., actuarial value of
approximately 85%), then may offer one premium plan (i.e.,
actuarial value of approximately 95%), then may offer one or
more premium-plus plans, which also provide additional benefits,
such as adult oral health and vision care.
Insurers then may offer bronze plans (actuarial value of approximately
60%) and platinum plans (actuarial value of approximately 90%).
Cost-sharing levels would be specified by the Secretary for each
benefit category, although plans would be permitted to vary the
cost-sharing from the specified levels by up to 10%.
Plans would determine their specific cost-sharing levels, subject to the
requirements regarding actuarial value, essential benefits, etc.
CRS-72
Dental-only would also be permitted, if the plan provides required
pediatric dental benefits.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 7
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
§1301(a)(1)(C)(ii), §1311(b)(2)(B)(ii)
Benefits beyond the essential benefits package that states require
insurers to include would continue to apply to exchange plans, if
the state has entered into an arrangement satisfactory to the
Commissioner to reimburse the Commissioner for the amount
of any net increase in premium credits attributable to the benefit
mandate.§303
Payment of premiums
Individuals would submit premium payments directly to their
insurer, not to the Commissioner or the exchange. §305(b)(4)
Individuals could submit premium payments directly to their insurer or
to the exchange. §1312(b)
Other varying treatment of
individuals vs. small businesses
No provision.
States could establish a separate exchange for qualifying small
employers (a “SHOP” exchange), to which the Secretary would
provide technical assistance to states to encourage small business
participation. A state could create a single exchange if resources were
adequate for both groups. §1311(a)(5), (b)
Permissible exchange geography
besides state level
The Commissioner could permit multi-state exchanges.
No more than one exchange could operate in any state. §308
The Secretary could permit multi-state exchanges.
Multiple exchanges could operate in a state (“subsidiary exchanges”) if
each exchange served a distinct geographic area that was adequately
large. §1311(f)(1), (2)
Treatment of plans in the
nongroup and small-group
markets outside the exchange
Except for grandfathered plans, beginning in 2013, new nongroup
plans must be offered only through an exchange. §202(c)(1)
Plans offered in the exchange could also be offered outside the
exchange if the exact same premium was charged. §1301(a)(1),
§1312(d)
Treatment of health insurance
agents and brokers
Exchange plans would be available for purchase from agents and
brokers. §100(c)(9), §305(g)
A state could allow agents and brokers to enroll individuals in
exchange plans and to assist individuals apply for premium and costsharing subsidies. §1312(e)
Oversight of exchanges
Inspector General for the Health Choices Administration. §1647
The Secretary. §1313
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 8. Premium and Cost-Sharing Subsidies
Topics for Table 8
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 341-347
Sections 1401-1415
Law amended
IRC, for providing premium subsidies as tax credits.
First year premium and costsharing credits are available
2013
2014
Individuals’ eligibility for premium
and cost-sharing subsidies
To qualify for premium and cost-sharing subsidies, individuals must:
● Be citizens or certain other lawfully present individuals,
● Be enrolled in an exchange basic plan (actuarial value of 70%) not
through an employer, and
● Have income below 400% FPL.
To qualify for premium and cost-sharing subsidies, individuals must:
● Be citizens or certain other lawfully present individuals who file tax
returns,
● Be enrolled in an exchange silver plan (actuarial value of 70%) not
through an employer, and
● Have income below 400% FPL.
To qualify, individuals must not be enrolled in any of the following:
● Medicare,
● Medicaid,
● Coverage related to military service,
● An employer-sponsored plan,
● A grandfathered plan, or
● Other coverage recognized by the Commissioner.
To qualify, individuals must not be eligible for any of the following:
● Medicare,
● Medicaid (or CHIP),
● Coverage related to military or Peace Corps service,
● An employer-sponsored plan,
● A grandfathered plan, or
● Other coverage recognized by the Secretary.
(For more detail on requirements
and verification of citizenship or
legal presence, see Table 13)
To qualify, individuals must not be eligible for the following:
● Employer-sponsored coverage for which the full-time employee
would receive an adequate employer contribution, or
● Medicaid.
Beginning in the second year of premium credits (2014), an
exception for those full-time employees eligible for employersponsored coverage would exist if individuals’ payment toward
premiums would exceed 12% of their income.
Beginning in 2015, individuals could receive premium subsidies for
plans in tiers besides basic, but they would then have to pay any
additional premiums and would also be ineligible for cost-sharing
subsidies.
§342, §341(c)
CRS-74
Beginning in the first year of premium credits (2014), an exception for
those employees eligible for employer-sponsored coverage would
exist if individuals’ payment toward premiums would exceed 9.8% of
their income or if the plan pays for less than 60% of covered
expenses.
§1401: IRC§36B
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 8
Calculation of premium credit
amount
Payment of premium subsidies
CRS-75
H.R. 3962 (House-passed)
Premium credits would be calculated to ensure that qualifying
individuals pay no more than a certain percentage of their income
toward the “reference premium” (average premium of the three
lowest-cost basic exchange plans available in the area, potentially
excluding plans with extremely limited enrollment). Individuals
choosing a plan with a more expensive premium would be
responsible for the difference.
H.R. 3590 (Senate-passed)
Premium credits would be calculated to ensure that qualifying
individuals pay no more than a certain percentage of their income
toward the second lowest cost silver exchange plans available in the
area. Individuals choosing a plan with a more expensive premium
would be responsible for the difference.
The bill specifies the maximum out-of-pocket premium as a percent
of income as follows:
● Up to 133% FPL—1.5% of income,
● 150% FPL—3% of income,
● 200% FPL—5.5% of income,
● 250% FPL—8% of income,
● 300% FPL—10% of income,
● 350% FPL—11% of income,
● 400% FPL—12% of income.
The Commissioner would establish the percentages on a linear
scale between the points specified above.
The bill specifies the maximum out-of-pocket premium as a percent
of income in a formula for those between 133%-300% FPL so that
following amounts would result:
● Up to 133% FPL—2% of income,
● 133.01% FPL—4% of income,
● 150% FPL—4.6% of income,
● 200% FPL—6.3% of income,
● 250% FPL—8.1% of income,
● 300% FPL—9.8% of income,
● 350% FPL—9.8% of income,
● 400% FPL—9.8% of income.
The exact percentage would be calculated as part of individuals’ tax
returns.
After 2013, the maximum-income percentages would be indexed to
ensure the government’s share of premiums paid does not increase.
§343.
After 2014, the maximum-income percentages would be indexed by
how much premiums grew faster than incomes.
§1401: IRC§36B
By the exchange Commissioner directly to insurers on behalf of
qualified individuals. §341(a)(1)(2)
Directly to individuals through advanceable, refundable tax credits.
§1401: IRC§36B
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 8
Calculation of cost-sharing
subsidies
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Cost-sharing subsidies would be based on basic plans (actuarial
value of 70%) reducing out-of-pocket maximums for cost-sharing
(e.g., deductibles and copays) and increasing their actuarial values to
specified levels for qualified individuals.
Cost-sharing subsidies would be based on silver plans (actuarial value
of 70%) reducing out-of-pocket maximums for cost-sharing (e.g.,
deductibles and copays) and potentially increasing their actuarial
values to specified levels for qualified individuals.
The bill specifies out-of-pocket maximums for cost-sharing in 2013
for single coverage as follows:
● Up to 150% FPL—$500,
● 151% - 200% FPL—$1,000,
● 201% - 250% FPL—$2,000,
● 251% - 300% FPL—$4,000,
● 301% - 350% FPL—$4,500,
● 351% - 400% FPL—$5,000.
The bill specifies out-of-pocket maximums for cost-sharing in 2014
based on the highest out-of-pocket maximum permitted for highdeductible health plans that qualify for Health Savings Accounts
(HSAs). (For 2009, the out-of-pocket maximum for HSA-qualified
HDHPs is $5,800 for single coverage and $11,600 for family
coverage.) The cost-sharing subsidies would reduce those amounts
for 2014 as follows:
● Up to 200% FPL—reduction of two-thirds,
● 201% - 300% FPL—reduction of one-half,
● 301% - 400% FPL—reduction of one-third.
Family coverage out-of-pocket maximums would be double these
amounts.
The bill specifies the actuarial values as follows:
● Up to 150% FPL—actuarial value of 97%,
● 151% - 200% FPL—actuarial value of 93%,
● 201% - 250% FPL—actuarial value of 85%,
● 251% - 300% FPL—actuarial value of 78%,
● 301% - 350% FPL—actuarial value of 72%,
● 351% - 400% FPL—actuarial value of 70%.
The Commissioner would specify the cost-sharing for each income
range that plans would have to implement to meet the criteria
above. §§343-344
Payment of cost-sharing subsidies
CRS-76
By exchange Commissioner directly to insurers on behalf of
qualified individuals. §341(a)(1)(2), §344(d)
Additional cost-sharing subsidies, if necessary, would be provided to
ensure the plan cost-sharing was as follows:
● Up to 150% FPL—actuarial value of 90%, and
● 151% - 200% FPL—actuarial value of 80%.
If the HSA-related reductions caused the actuarial values to exceed
the levels above, or for those between 201%-400% FPL to exceed
70%, then the out-of-pocket maximums would be raised accordingly.
§1402
By the Secretary directly to insurers on behalf of qualified individuals.
§1402(c)(3)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 9. Public Health Insurance Option/Multi-State Qualified Health Plan
Topics for Table 9
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 321-331
Section §10104: §1334(a)
Primary location in bill
Law amended
Who establishes the public
option/ multi-state qualified health
plan
The Secretary. §321(a)
The Director of the Office of Personnel Management (OPM). As
amended by §10104: §1334(a)
Availability
The public option would only be available through an exchange.
§321(b)
The Director would enter into contracts with health insurance
issuers (which could include a group of issuers affiliated either by
common ownership and control or by common use of a nationally
licensed service mark) to offer at least 2 multi-state qualified health
plans (MSQHPs) through each exchange in each state (without regard
to statutes requiring competitive bidding). Such plans would provide
individual, or in the case of small employers, group coverage. As
amended by §10104: §1334(a)
Individual eligibility
Any individual eligible to purchase insurance through the
exchange may enroll in the public option. Enrollment would be
voluntary. In general, any employee, including a Member of
Congress, could forgo employment-based health insurance and
choose instead to enroll in health insurance through any
Exchange plan, including both public and private plans. §329, §330
Any individual eligible to purchase insurance through the exchange
could enroll in a MSQHP. Enrollment would be voluntary and
individuals could be eligible for premium credits and cost-sharing
assistance. As amended by §10104: §1334(c)(2)
Application of exchange rules
The public option would be required to meet the requirements
that apply to all exchange plans, including those related to
benefits, provider networks, consumer protection and costsharing. With respect to the offer of the public option through
the exchange, the Secretary would be treated as the entity
offering exchange-participating plans (QHBPs). §321
A health insurance issuer would be required to agree to offer a
MSQHP that met the requirements in each exchange in each state; be
licensed in each state and subject to all requirements of state law not
inconsistent with this section (including the standards and
requirements that a state imposes that do not prevent the application
of a requirement of relating to health insurance coverage in the Public
Health Service Act or a requirement of this title); comply with the
minimum standards prescribed for carriers offering health benefits
plans under FEHBP (if not in conflict with a provision of this title); and
met other requirements as determined appropriate by the Director,
in consultation with the Secretary. As amended by §10104: §1334(b)
Benefit levels
The public option would offer basic, enhanced, and premium
plans, and may offer premium-plus plans. §321(b)
A MSQHP would meet the requirements of this subsection if, the
Director determined that the plan offered a uniform benefits package
in each state consisting of the essential benefits; the plan met all
requirements of this title with respect to a qualified health plan,
including requirements relating to the offering of the bronze, silver,
and gold levels of coverage and catastrophic coverage in each state
exchange; the plan met the rating requirements of this Act (except
CRS-77
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 9
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
for certain state rating requirements); and the issuer offered the plan
in all geographic regions, and in all states that adopted adjusted
community rating before the date of enactment of this Act. As
amended by §10104: §1334(c)
Establishment of Treasury
Account
An account for receipts and disbursements for operation of the
public option would be established in the U.S. Treasury. §322(b)
No provision.
Establishment of premiums
The Secretary would establish geographically adjusted premiums
that comply with premium rules established by the Commissioner
at levels sufficient to cover medical claims, administration, a
contingency margin (see below), and repayment of start-up funds.
§322
No provision.
The Secretary would collect data necessary to establish
premiums, and other purposes. §321(e)
Contingency margin
Premiums established before 2015 would be required to take into
account a contingency margin of not less than 90 days of
estimated claims. For premiums starting in 2015, the Secretary
would solicit recommendations from the American Academy of
Actuaries on the amount of a contingency fund. §322(a)
No provision.
Start-up funds
$2 billion would be appropriated to the Secretary for the
establishment of the public option. An additional appropriation
would be transferred to the fund to cover 90 days worth of
claims based on estimated enrollment. The amounts would be
repaid within 10 years. §322(b)
No provision.
Solvency provisions
The public option would be prohibited from receiving federal
funds if it became insolvent. §322(b)
No provision.
Establishment of payment rates
The Secretary would be required to negotiate payments for
providers, items, and services, including prescription drugs.
Payment rates in aggregate would not be allowed to be lower
than rates under Medicare, and not higher than average rates paid
by other qualified health benefit offering entities. The Secretary
would be required to implement payment and delivery system
reforms under the public option that had been determined
successful under other parts of this Act. §323 and §324
No provision.
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 9
Provider networks
H.R. 3962 (House-passed)
Medicare-participating providers would be providers for the
public option, unless they chose to opt out in a process
established by the Secretary through a rule-making process that
included a public notice and comment period. §323(b)
H.R. 3590 (Senate-passed)
No provision.
Physicians who are licensed, certified, or otherwise permitted to
practice under state law would be able to participate in the public
option as preferred or non-preferred providers; preferred
physicians would be prohibited from balance-billing (that is, billing
for amounts above the established rates), while non-preferred
physicians could balance-bill up to 115% of a reduced payment
rate. Non-physician providers would be prohibited from balancebilling. §325
Authority to contract
The Secretary would be allowed to enter no-risk contracts for
the administration of the public option, in the same way the
Secretary enters into contracts for the administration of
Medicare. Functions would include, subject to restrictions:
● Determination of payment amounts.
● Making payments.
● Beneficiary education and assistance.
● Provider consultative services.
● Communication with providers.
● Provider education and technical assistance. §321(c)
Each contract for an MSQHP would be for at least 1 year, and could
be automatically renewed if neither party provided notice to
terminate. The Director would ensure that the benefits coverage
was in accordance with the types of coverage provided under PHSA
2701(a)(1)(A)(i) – relating to fair health insurance premiums. At least
one contract would be with a non-profit entity.
The Director would implement this subsection similar to the way the
Director implements the contracting provisions with respect to
carriers under the Federal employees health benefit program (FEHBP)
- through negotiating with each MSQHP on (1) medical loss ratio; (2)
profit margin; (3) premiums to be charged; and (4) such other terms
and conditions of coverage as are in the interests of enrollees in such
plans. The Director could prohibit the offering of any MSQHP that
did not meet these terms and conditions.
In entering into contracts under this subsection, the Director would
ensure that there is at least one MSQHP that does not provide
coverage of abortion services described in §1303(b)(1)(B)(i) of this
Act.
Approval of a contract could be withdrawn only after notice and an
opportunity for a hearing to the issuer. As amended by §10104:
§1334(a)
Ombudsman
CRS-79
The Secretary would create an office of the ombudsman, which
would have duties similar to those of the Medicare Beneficiary
Ombudsman. §321(d)
No provision.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 9
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Consumer protections
Enrollees would have access to federal courts for the
enforcement of rights in the same manner that Medicare
beneficiaries have with respect to the Medicare program. §321(g)
No provision.
Fraud and abuse
Provisions of civil law identified by the Secretary (in consultation
with the Inspector General) that impose sanctions with respect
to fraud, waste and abuse under Medicare would apply to the
public option. §326
No provision.
HIPAA requirements and health
information privacy and security
HIPAA’s administrative simplification standards for electronic
transactions, and health information privacy and security would
apply to the public option. §327, §328
No provision.
Veterans Affairs
The Secretary would be required to enter into a memorandum of
understanding with the Secretary of Veterans Affairs for the
collection of costs associated with nonservice-connected care
provided in VA facilities to public health insurance enrollees. §331
No provision.
Additional state required benefits
No provision.
States could require additional benefits, but there would be no
additional premium tax credit provided for the state-only mandated
benefits. The states would make payments to an individual enrolled in
a multi-state plan or on behalf of such an individual to defray the cost
of additional benefits.
For states with age rating requirements that are lower than 3:1, the
state could require the exchange to only permit MSQHPs that comply
the state’s more protective age rating requirements. As amended by
§10104: §1334(f)
Certification
No provision.
A MSQHP offered under a contract would be deemed to be certified
by an exchange. As amended by §10104: §1334(d)
Phase-In
No provision.
The Director would enter into a contract with a health insurance
issuer if the issuer offered the plan in at least 60% of states in the first
year, at least 70% in the second year, at least 85% in the third year,
and in all states thereafter. As amended by §10104: §1334(e)
Other duties of the Director
No provision.
The requirements of the FEHBP program would only apply to
MSQHPs to the extent that they were not in conflict with the
requirements of this Act. As amended by §10104: §1334(f)
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Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 9
Applicability
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
The Director could not reduce financial or personnel resources to
the functions of OPM related to the administration of FEHBP.
Enrollees in a MSQHP would be treated as a separate risk pool from
FEHBP.
The Director could establish separate units or offices within OPM, to
ensure that the administration of MSQHPs did not interfere with the
administration of FEHBP. The Director could appoint additional
personal to carry out activities under this section. The Director
would ensure that the program under this section is separate from
FEHBP. FEHBP plans would not be required to offer a MSQHP. As
amended by §10104: §1334(g)
Advisory committee
No provision.
The Director would establish an advisory board to provide
recommendations. A significant percentage of the members of the
board would be comprised of enrollees in a MSQHP or their
representatives. As amended by §10104: §1334(h)
Authorization of Appropriations
No provision.
Such sums as necessary would be authorized to be appropriated to
carry out this section. As amended by §10104: §1334(i)
CRS-81
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 10.Consumer Operated and Oriented Plan (CO-OP) Program
Topics for Table 10
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Section 310
Section 1322
Primary location in bill
Law amended
None for the program administration. The tax provision amends
section 501(c) of the IRC. §1322(h)
Effective date
Not later than 6 months after enactment. §310(a)
An Advisory Board formed not later than three months after
enactment. §1322(b)(3)
Date when grant awards are made
Not later than 36 months after enactment. §310(b)
The Secretary would award not later than July 1, 2013. §1322(b)(2)(D)
Who has primary responsibility to
establish and operate the CO-OPs
The Commissioner. §310(a)
The Secretary. §1322(a)
Specific limits on responsible
authority
No provision.
The Secretary would not be permitted to:
● participate in any negotiations between qualified health insurance
issuers and any health care providers or drug manufacturers;
● establish or maintain a price structure for any benefits; and
● interfere with the competitive nature of providing health benefits.
§1322(f)
Advisors to program
Secretary of the Treasury. §310(a)
A 15-member Advisory Board appointed by the Comptroller
General. §1322(b)(3)(A)
Appropriations
$5 billion. §310(b)(7)
$6 billion. §1322(g)
Use of loans and grants
Would provide loans for assistance in meeting start-up costs and
grants to provide assistance in meeting solvency requirements of
the States. §310(b)(1)
Would provide loans for assistance in meeting start-up costs and
grants to provide assistance in meeting solvency requirements of the
states. §1322(b)
Conditions for participation
A grant or loan would not be awarded unless the following
conditions are met:
A grant or loan would not be awarded unless the following conditions
are met to be a qualified health insurance issuer:
● The cooperative would be a not-for-profit, member
organization with the membership being made up entirely of
beneficiaries of the insurance coverage offered by the
cooperative.
● The organization or a related entity could not have been
operating on or before July 16, 2009.
● The cooperative’s governing documents would incorporate
ethics and conflict of interest standard protecting against
insurance industry involvement and interference.
● The cooperative would be a nonprofit, member organization under
state law.
CRS-82
● The organization or a related entity could not have been operating
on or before July 16, 2009.
● The cooperative’s governing documents would incorporate ethics
and conflict of interest standard protecting against insurance industry
involvement and interference.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 10
H.R. 3962 (House-passed)
● The cooperative would not be sponsored by a State
government.
● Substantially all the activities of the cooperative would consist
of the issuance of qualified health plans through an exchange.
● The cooperative would be licensed to offer insurance in each
state it is offering a plan.
● A majority vote of its members would govern the cooperative.
● The cooperative would operate with a strong consumer focus,
including timeliness, responsiveness, and accountability to its
members.
● Any profits made would be used to lower premiums, improve
benefits, or to otherwise improve the quality of health care
delivered to its members. §310(b)(2)(A)-(I)
Priorities in making grants and
loans
The Commissioner would give priority to cooperatives that:
● operate on a statewide basis;
● use an integrated delivery system; and
● have a significant level of financial support from
nongovernmental sources. §310(b)(3)
H.R. 3590 (Senate-passed)
● The organization would not be sponsored by a state or local
government or any political subdivision of either.
● The substantially all of the activities of the organization would
consist of the issuance of qualified health plans in the individual and
small group markets.
● The cooperative would meet all of the requirements that other
issuers of qualified health plans are required to meet in any state,
including solvency and licensure requirements, rules on payments to
providers, network adequacy rules, rate and form filing rules, and any
applicable state premium assessments.
● A majority vote of its members would govern the cooperative.
● The cooperative would operate with a strong consumer focus,
including timeliness, responsiveness, and accountability to its
members.
● Any profits made would be used to lower premiums, improve
benefits, or to otherwise improve the quality of health care delivered
to its members.
● The cooperative would coordinate with the implementation of
state insurance reforms required by this bill. §1322(c)(1)-(6)
In the context of ensuring there would be sufficient funding to
establish at least one CO-OP insurance issuer in each State, and
taking into account the recommendations of the Advisory Board, the
Secretary would give priority to cooperatives that:
● operate on a statewide basis;
● use an integrated delivery system; and
● have a significant level of financial support from nongovernmental
sources. §1322(b)(2)(a)
Interaction with exchanges
CO-OP grants would specifically be for qualified cooperatives
provided through an exchange. §310(a), (b)(2)(E)
CO-OP grantees would be required to be qualified health plans,
which are required to be part of an exchange, but may also be offered
outside of the exchange. §1322(b), (c)
Tax exemptions
Would require a CO-OP grantees to be not-for-profit, but does
not create a new tax exemption or amend tax code. §310(a),
(b)(2)
Would amend the Internal Revenue Code on 1986 to establish a new
category in the list of exemptions under Section 501(c). Would
require compliance with program requirements as a condition of the
tax exemption. §1322(h): IRC § 501(c)(29)
Restrictions on use of funds
No provision.
CO-OP grantees would be restricted from using grant and loans for
attempting to influence legislation or for marketing. §1322(b)(2)(c)
Collaboration with other
cooperatives
Nothing in this section would be construed to prevent a
cooperative in one state from integrating with a cooperative
established in another state(s) for the administration, issuance of
CO-OP participants would be permitted to establish a private
purchasing council for collective purchasing arrangements for items
and services that increase administrative and other cost efficiencies
CRS-83
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 10
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
coverage or other activities related to acting as a QHBP. Nothing
in this section would be construed as preventing a state from
taking actions to permit such integration. §310(b)(4)
including claims administration, health information technology, and
actuarial services. This council could not set payment rates to
providers and would not preempt applicable antitrust law. §1322(d)
Amortization of grants and loans
The Secretary would provide for the repayment of grants or
loans to the Treasury in an amortized manner over a 10-year
period. §310(b)(5)
Not later than July 1, 2013, and prior to awarding loans and grants
under the CO-OP program, the Secretary would promulgate
regulations with respect to the repayment of loans and grants in a
manner that is consistent with state solvency regulations and other
similar state laws that may apply. In promulgating such regulations, the
Secretary would provide that such loans would be repaid within 5
years and such grants would be repaid within 15 years, taking into
consideration any appropriate state reserve requirements, solvency
regulations, and requisite surplus note arrangements that must be
constructed in a state to provide for such repayment prior to
awarding such loans and grants. §1322(b) as amended by §10104
Repayment for violations of terms
of the program
If a cooperative violated the terms of the CO-OP program and
fails to correct the violation within a reasonable period of time, as
determined by the Commissioner, the cooperative would be
required to replay the total amount of any loan or grant received
plus interest at a rate that would be determined by the Secretary.
§310(b)(6)
If the Secretary determines that a cooperative has failed to meet any
of the requirements and has failed to correct such failure within a
reasonable period of time then the cooperative would be required to
repay to the Secretary an amount equal to the sum of 110% of the
aggregate amount of loans and grants received plus interest on the
aggregate amount of loans and grants received.
The Secretary would also notify the Secretary of the Treasury of any
determination of a failure that results in the termination of an issuer’s
tax-exempt status. §1322(c)(iii)
CRS-84
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 11. Selected Revenue Provisions
Topics for Table 11
Current Law
Primary location in the bill
Law amended
Surcharge on high income
individuals
Current federal tax rates increase with
income. The marginal tax rates vary from
10% of taxable income for very low income
taxpayers to 35% for high-income
taxpayers.
Among higher income taxpayers in 2009:
Married filers with adjusted gross income
over $372,950 pay $100,894.50 plus 35% of
the excess over $372,950 in federal taxes.
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 531-534, 551-555
Sections 9001-9017 and Sec. 10901-10906
IRC
IRC
The bill would impose a tax equal to 5.4%
on modified adjusted gross income (AGI)
that exceeds $500,000 for single filers and
$1 million for joint filers.
The Senate bill would impose an additional
payroll tax of 0.9 percentage points on
high-income workers with wages over
$200,000 for single filers and $250,000 for
joint filers Since employers will not know
the wages of a spouse, they are directed to
collect these revenues from all workers
with wages exceeding $200,000. Excess
withholding among joint filers would be
reconciled on tax returns.
Effective date: Date of enactment of this
Act. §551
Raises $460.5 billion over 10 years.
The 0.9 percentage point tax would also be
levied on payroll for self-employed if their
incomes exceed the specified thresholds.
The self-employed would not be allowed to
deduct this additional tax as a business
expense.
Single filers with adjusted gross income
over $372,950 pay $108,216 plus 35% of
the excess over $372,950
In addition to federal tax rates, both
employees and employers each pay a
payroll tax of 7.65%. Of which 6.2% is for
Old Age Survivors and Disability Insurance
and 1.45% to for Hospital Insurance to
finance Medicare Part A.
Effective for taxable years after December
31, 2012. §9015 as amended by §10906
Raises $86.8 billion in revenues over 10
years.
Excise Taxes
Excise tax on high-cost
plans
No provision.
The bill would impose an excise tax of 40%
on health insurers and health plan
administrators for coverage that exceeds
certain thresholds ($8,500 single coverage
and $23,000 for family coverage in 2013).
Effective January 1, 2013.
Thresholds indexed by growth in the
Consumer Price Index (CPI) plus 1% in
subsequent years.
Health insurance coverage subject to the
excise tax is broadly defined to include not
only the employer and employee premium
CRS-85
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 11
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
payments for health insurance (including
self-insured plans), but also premiums paid
by the employee and the employer for
dental and vision. In addition, taxadvantaged accounts such as flexible
spending accounts (FSAs), health savings
accounts (HSAs) and health reimbursement
accounts (HRAs) are also specified as
health insurance coverage and subject to
the excise tax.
Alternative Thresholds:
Retired taxpayers (ages 55 to 64) and those
working in high-risk professions (including
longshore workers) are subject to higher
thresholds ($9,850 for single coverage and
$26,000 for family coverage).
For individuals residing in high-cost states
the thresholds would be phased in between
2013 and 2016 starting from 20% higher
initially and 5% higher by 2015. §9001
Raises $148.9 billion over 10 years.
CRS-86
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 11
Annual fee on health
insurers
Current Law
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
An annual fee would be imposed on all
health insurers based on their market
share. The fee would be applied to net
premiums written. The annual fee allocated
across health insurers would be $2 billion
in 2011, $4 billion in 2012, $7 billion in
2013, $9 billion in 2014-1016 and $10
billion thereafter.
The fee would not apply to self-insured
plans, federal, state or government entities
or non-profit insurers. It does apply to
companies or organizations that underwrite
government-funded insurance (i.e.,
Medicaid managed care plans, Federal
Employees Health Benefits Program
[FEHBP]).
The effective date is January 1, 2011. §9010
as amended by §10905
Raises $59.6 billion over 10 years.
Limit on executive pay of
health insurance providers
No provision.
Covered health insurance providers would
not be able to deduct compensation above
$500,000 per year. This income threshold
would include deferred compensation.
This provision would be effective for
compensation paid in taxable years
beginning after 2012 with respect to
services performed after 2009. §9014
Raises $0.6 billion in revenues over 10
years.
CRS-87
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 11
Annual fee on branded
prescription pharmaceutical
manufacturers and
importers
Current Law
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
An annual fee would be imposed on certain
manufacturers and importers of branded
prescription drugs (including biological
products and excluding orphan drugs). The
total fee would be $2.3 billion a year and
imposed on each entity based on their
annual sales. §9008
Raises $22.2 billion in revenues over 10
years.
Annual fee on medical
device manufacturers
A tax of 2.5% of a price determined as
specified would be imposed on the first
taxable sale (including certain leases and
uses) of a medical device. The tax would
not apply to devices sold to (or of the type
and quantity typically sold to) consumers by
retail establishments. §552
Raises $20.0 billion over 10 years.
An annual fee would be imposed on certain
manufacturers and importers of medical
devices (that generally cost more than
$100 and are subject to more stringent
safety and effectiveness controls by the
Food and Drug Administration). The total
fee would be $2 billion from 2011 to 2017
and $3 billion thereafter. The fee would be
levied on device manufacturers based on
their annual sales. For sales of not more
than $5 million, no tax would be levied. For
sales of more than $5 million and less than
$25 million, 50% of sales would be subject
to the excise tax. For sales of more than
$25 billion, 100% would be subject to the
excise tax. §9009 as amended by §10904
Raises $19.3 billion over 10 years.
Excise tax on elective
cosmetic medical
procedures
No provision.
Imposes a 5% tax on cosmetic surgery to
be paid by the individual on whom
procedure is performed. Effective for
procedures performed on or after January
1, 2010. §9017
Raises $5.8 billion over 10 years.
Modifications to Tax-Advantaged Accounts and Itemized Deductions for Health Care
CRS-88
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 11
Current Law
H.R. 3962 (House-passed)
Limitation on health flexible
spending accounts (FSAs)
Health FSAs are employer-established
benefit plans that reimburse employees on
a pre-tax basis for specified health care
expenses (e.g. deductibles, co-payments,
and non-covered expenses). Under current
law, it is at the discretion of each employer
to set limits on FSA contributions.
H.R. 3962 would limit the amount of annual
FSA contributions to $2,500 per person
effective January 1, 2013. This threshold
would be indexed to inflation in subsequent
years. §532
Same as H.R. 3962, except for effective
date which would be January 1, 2011.
§9005 as amended by §10902
Raises $13.3 billion over 10 years.
Raises $13.3 billion over 10 years.
HSAs are also tax-advantaged accounts that
allow individuals to fund unreimbursed
medical expenses on a pre-tax basis. Eligible
individuals establish and fund accounts
when they have a qualifying high deductible
health plan and no other health plan (with
some exceptions). Unlike FSAs, HSAs may
be rolled over and the funds accumulated
over time. Distributions from an HSA that
are used for qualified medical expenses are
not included in taxable income. Those not
used for qualified medical expenses are
taxable as ordinary income and are subject
to an additional 10% penalty tax for
individuals under age 65.
H.R. 3962 would increase the penalty on
non-qualified distributions from 10% to
20% of the disbursed amount for individuals
under age 65.
Same provision. §9004
Under current law, qualified medical
expenses for FSAs, HSAs, and HRAs can
include over-the-counter medications.
H.R. 3962 would not allow over-the
counter prescriptions to be covered by
these tax-advantaged accounts unless they
are prescribed by a physician.
Raise penalty for nonqualified HSA distributions
Modify definition of medical
expenses for FSAs, HSAs,
and HRAs.
Effective date: January 1, 2011. §533
Raises $1.3 billion over 10 years
Effective date: January 1, 2011. §531
Raises $5.0 billion over 10 years.
CRS-89
H.R. 3590 (Senate-passed)
Same provision. §9003
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 11
Current Law
H.R. 3962 (House-passed)
Eliminate deductions for
retiree expenses allocable
to Medicare Part D subsidy
Under current law, employers providing
prescription drug coverage to retirees that
meet federal standards are eligible for
subsidy payments from the federal
government. These qualified retiree
prescription drug plan subsidies are
excludible from the employer’s gross
income for the purposes of regular income
tax and alternative minimum tax
calculations. The employer is also allowed
to claim a business deduction for retiree
prescription drug expenses even though
they also receive the federal subsidy to
cover a portion of those expenses.
Employers would be required to
coordinate the subsidy and the deduction
for retiree prescription drug coverage. In
this provision, the amount allowable as a
deduction for retiree prescription drug
coverage would be reduced by the amount
of the federal subsidy received.
Taxpayers who itemize their deductions
may deduct unreimbursed medical
expenses that exceed 7.5% of adjusted
gross income (AGI). Medical expenses
include health insurance premiums paid by
the taxpayer, but also can include certain
transportation and lodging expenses related
to medical care as well as qualified longterm care costs, as well as long-term care
premiums that do not exceed a certain
amount.
No provision.
Raise threshold for itemized
medical expenses
Same provision, except different effective
date: January 1, 2011. §9012
Raises $5.4 billion over 10 years.
Effective date: January 1, 2013. §534
Raises $2.2 billion over 10 years.
Note: Revenue estimates are from the Joint Committee on Taxation JCX-53-09 and JCX-61-09.
CRS-90
H.R. 3590 (Senate-passed)
Would increase the threshold from 7.5% to
10% of AGI for taxpayers who are under
age 65.
Effective date: January 1, 2013.
Taxpayers over age 65 would be
temporarily excluded from this provision
and still be subject to the 7.5% limit for the
time period 2013 and 2016. §9013
Raises $15.2 billion over 10 years.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 12. Abortion
Topics for Table 12
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 222(e), 258, 259, 265, 304(d)
Section 1303
Coverage of abortion services by
qualified health plans
The issuer of a qualified health benefits plan would determine
whether the plan provides coverage for either elective abortions
or abortions for which the expenditure of federal funds
appropriated for HHS is permitted. However, if a plan includes
coverage for elective abortions, the entity that offers the plan
must offer another plan that is identical in every respect, except
that it does not cover elective abortions. §222(e)(2), 265(c)(3)
A state could elect to prohibit abortion coverage in Exchange plans if
the state enacts a law that provides for such a prohibition. The issuer
of a qualified health plan would determine whether or not the plan
provides coverage for elective abortions, as well as abortions for
which the expenditure of federal funds appropriated for HHS is
permitted. §1303(a), (b)(1)
Coverage of abortion services by
the public option
The Secretary would determine whether the public option
provides coverage for either elective abortions or abortions for
which the expenditure of federal funds appropriated for HHS is
permitted. §222(e)(2)
No provision.
Use of federal funds for abortion
services
Would prohibit federal funds from paying for an abortion or
covering any part of the costs of any health plan that includes
coverage of abortion, except in cases where a pregnancy is the
result of an act of rape or incest, or where a woman’s life would
be endangered if an abortion were not performed. An
affordability credit could not be used to purchase coverage under
a health benefits plan or to purchase separate supplemental
coverage for elective abortions. §265(a), (b)
The issuer of a qualified health plan that provides coverage for
elective abortions could not use any amount attributable to a
premium assistance credit or cost-sharing reduction to pay for such
abortions. §1303(b)(2)(A)
Primary location in bill
Law amended
CRS-91
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 12
Segregation of funds
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
The issuer of a qualified health plan that provides coverage for
elective abortions would be required to collect two separate
payments from each enrollee in the plan: one payment that reflects an
amount equal to the portion of the premium for coverage of services
other than elective abortions; and another payment that reflects an
amount equal to the actuarial value of the coverage of elective
abortions. The plan issuer would be required to deposit the separate
payments into separate allocation accounts that consist solely of each
type of payment and that are used exclusively to pay for the specified
services. State health insurance commissioners would ensure
compliance with the segregation requirements in accordance with
applicable provisions of generally accepted accounting requirements,
OMB circulars on funds management, and GAO guidance on
accounting.
To determine the actuarial value of the coverage for elective
abortions, the plan issuer would estimate the basic per enrollee, per
month cost, determined on an average actuarial basis, for including
such coverage. The estimate may take into account the impact on
overall costs of including coverage for elective abortions, but may not
take into account any cost reduction estimated to result from such
services, including prenatal care, delivery, or postnatal care. The per
month cost must be estimated as if coverage were included for the
entire population covered and may not be less than $1 per enrollee,
per month. §1303(b)(2)
Notice to enrollees
No provision.
A qualified health plan that provides coverage for elective abortions
would be required to provide notice of such coverage to enrollees as
part of the summary of benefits and coverage explanation at the time
of enrollment. The notice, any plan advertising used by the issuer,
any information provided by the Exchange, and any other information
specified by the Secretary would provide information only with
respect to the total amount of the combined payments for elective
abortion services and other services covered by the plan. §1303(b)(3)
Provider conscience protections
Would prohibit a federal agency or program, and any state or
local government that receives federal financial assistance under
H.R. 3962 from:
● subjecting any individual or institutional health care entity to
discrimination on the basis that the health care entity does not
provide, pay for, provide coverage of, or refer for abortions; or
● requiring any health plan created or regulated under H.R. 3962
(or any amendment made by the bill) to subject any individual or
Would prohibit qualified health plans offered through an Exchange
from discriminating against any individual health care provider or
health care facility because of its unwillingness to provide, pay for,
provide coverage of, or refer for abortions. §1303(b)(4)
CRS-92
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 12
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
institutional health care entity to discrimination on the basis that
the health care entity does not provide, pay for, provide coverage
of, or refer for abortions. §259
Preemption of state and federal
laws regarding abortion
CRS-93
State laws regarding the prohibition or requirement of coverage
or funding for abortions, and state laws involving abortion-related
procedural requirements would not be preempted. Federal
conscience protection and abortion-related antidiscrimination
laws, as well as Title VII of the Civil Rights Act of 1964, would
also not be affected by H.R. 3962. §258
Same as H.R. 3962. §1303(c)
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 13.Verification of Immigration Status and Treatment of Noncitizens for Exchange Coverage and Subsidies
Topics for Table 13
Primary location in bill
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Sections 341, 347, 501
Sections 1312, 1401, 1411, 1412
Law amended
IRC, regarding the individual mandate
IRC, regarding the individual mandate
Individual mandate to obtain
health coverage
All citizens and noncitizens who meet the IRC definition of
resident alien would be subject to the individual mandate.
Nonresident aliens would be exempt. §501: IRC§59B(c)(2)
All citizens, nationals and individuals who are lawfully present would
be subject to the individual mandate. §1501(b): IRC§5000A(d)(3)
Access to health exchange
There is no express restrictions on noncitzens—whether legally
or illegally present, or in the United States temporarily or
permanently—accessing and paying for coverage available through
the health insurance exchange.
Exchange eligibility would be limited to individuals who are a citizen
or national of the United States or are lawfully present in the United
States. As a result, unauthorized aliens would be barred from the
health insurance exchange. §1312(f)(3)
Eligibility for premium and costsharing subsidies
Those eligible would be "an individual who is lawfully present in a
State in the United States (other than as a nonimmigrant
described in a subparagraph (excluding subparagraphs (K), (T),
(U), and (V)) of section 101(a)(15) of the Immigration and
Nationality Act)." The only nonimmigrants who would be eligible
to obtain subsidies would be those trafficking victims, crime
victims, fiancées of U.S. citizens, and certain V visaholders who
have had applications for LPR status pending for three years.
§341(b)(4)
Lawfully present aliens who meet the income requirements but are
barred from Medicaid because of alienage would be eligible for the
premium and cost-sharing subsidies. §1401(a)
Unauthorized aliens would not be eligible for the premium and costsharing subsidies. §1412(d)
Unauthorized aliens would not be eligible for the premium and
cost-sharing subsidies: “Nothing in this subtitle shall allow
Federal payments for affordability credits on behalf of individuals
who are not lawfully present in the United States.” §347
Verification of status
CRS-94
With modifications, the citizenship verification procedures as well
as the noncitizen verification procedures of §1137(d) of the SSA
that currently apply to Medicaid and other federal means-tested
programs would apply to the citizenship and immigration
determination for the proposed premium and cost-sharing
subsidies. §341
The Social Security Administration would verify the name, social
security number, and date of birth of the individual. For those
claiming to be U.S. citizens, the claim will be considered substantiated
if the claim of citizenship is consistent with SSA data. For individuals
who do not claim to be U.S. citizens but claim to be lawfully present
in the United States, the claim will be considered substantiated if the
claim of lawful presence is consistent with Department of Homeland
Security (DHS) data. It would rely on that procedures currently used
by Medicaid (i.e., §1902(e) of the SSA) for individuals whose claims of
citizenship or immigration status are not verified with federal data.
§1411
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Table 14. Other Provisions
Topics for Table 14
Reporting requirements/
promulgation of regulations
regarding coverage of
prevention and wellness
activities
Current Law
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
The Secretary would be required to
develop reporting requirements for group
health plans and health insurance issuers
with respect to plan or coverage benefits
and health care provider reimbursement
structures that, among other things,
implement “wellness and health promotion
activities.” Health plans and insurance
issuers would be required to annually
submit to the Secretary and enrollees a
report on whether the benefits under the
plan or coverage satisfy these and other
elements. This section also would require
the Secretary to promulgate regulations
providing criteria for determining whether
a reimbursement structure meets these
elements. Under this section, wellness and
health promotion activities could include
personalized wellness and prevention
services “that are coordinated, maintained
or delivered by a health care provider, a
wellness and prevention plan manager, or a
health, wellness or prevention services
organization that conducts health risk
assessments or offers ongoing face-to-face,
telephonic or web-based intervention
efforts for each of the program’s
participants....” These activities could
include wellness and prevention efforts
such as smoking cessation, weight
management, nutrition, and healthy lifestyle
support.
This section also contains provisions
relating to gun rights. Among these
provisions, a wellness or health promotion
activity (as referenced above) could not
require disclosure or collection of any
information relating to (A) the presence or
storage of a lawfully possessed firearm or
ammunition in the residence or on the
CRS-95
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
property of an individual; or (B) the lawful
use, possession, or storage of a firearm or
ammunition by an individual.
§1001 as amended by section 10101(e)
(creating Sec. 2717 of the PHSA)
Incentives in employerprovided wellness programs
Among the federal laws that apply to
wellness programs, HIPAA clarifies that
group health plans and health insurance
issuers offering group health coverage may
establish premium discounts or rebates or
modify otherwise applicable copayments or
deductibles (i.e., rewards) in return for
adherence to these programs. HIPAA
regulations provide a framework for
structuring these wellness programs and
divide wellness programs into two
categories. First, if a wellness program
provides a reward based solely on
participation in a wellness program, or if it
does not provide a reward, the program
complies with HIPAA without having to
satisfy any additional standards, as long as
the program is made available to all
similarly situated individuals. Second, if a
reward is based on an individual meeting a
certain standard relating to a health factor,
then the program must meet additional
requirements. Among these additional
requirements, a reward offered by this type
of wellness program must not exceed 20%
of the cost of employee coverage under
the plan (i.e., the amount paid by the
employer and the employee for that
employee for coverage).
No provision.
Section 1201 (creating sec. 2705 of the
PHSA) would amend section 2702 of the
PHSA to largely codify an amended version
of the HIPAA wellness program
regulations. Wellness programs that do not
require an individual to satisfy a standard
related to a health factor as a condition for
obtaining a reward (or do not offer a
reward) would not violate HIPAA, so long
as participation in the programs is made
available to all similarly situated individuals.
Wellness programs with conditions for
obtaining a reward that are based on an
individual meeting a certain standard
relating to a health factor, would have to
meet additional requirements. Among
these requirements, the reward must be
capped at 30% of the cost of the employeeonly coverage under the plan (instead of
20% under the current regulations), but the
Secretaries of HHS, Labor, and the
Treasury would have the discretion to
increase the reward up to 50%. The HHS
Secretary, in consultation with the
Secretaries of the Treasury and Labor,
would establish a 10-state pilot program in
which participating states would be
required to apply the wellness program
provisions to health insurers in the
individual market.
§1201, §1562 as amended by §10107
(applying the provisions of §1201 to group
health plans and health insurance issuers
under ERISA and the IRC)
Wellness program grants to
CRS-96
The Secretaries of HHS and Labor would
The Secretary of HHS would be required
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
employers
CRS-97
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
be required to establish a grant program to
help small employers (to be defined) cover
50% of the costs of providing employee
wellness programs. Allowable costs would
be those attributable to the wellness
program (excluding the cost of food), and
not to the health plan or health insurance
coverage offered in connection with such a
plan. Grants for a given plan year would be
capped at $150 per employee. Grants
could be provided for up to three years
and would be capped at $50,000, in total,
for an employer.
to award grants to eligible employers to
provide their employees with access to
comprehensive workplace wellness
programs. The grant program would be
conducted for a 5-year period. Eligible
employers would be defined as those that
employ fewer than 100 employees who
work 25 or more hours per week, and that
do not provide a workplace wellness
program as of the date of enactment. To
receive a grant, such employers would be
required to submit an appropriate
application to the Secretary.
A qualified wellness program would be
jointly certified by the Secretaries of HHS
and Labor as meeting several criteria,
including (1) being consistent with current
evidence-based research and best practices;
(2) being culturally appropriate, and
accessible for individuals with disabilities
and with limited English proficiency, among
others; (3) having a number of required
components, including health awareness,
health education, periodic screenings,
employee engagement, and listed behavioral
change activities (including smoking
cessation and weight reduction); and (4)
having supportive work policies regarding
tobacco use, food choices, stress
management, and physical activity. A
program could not be certified unless each
required program component were
available to all employees. Employee
participation could not be mandated.
Qualified programs could provide
incentives for participation provided such
incentives are not tied to the premium or
cost-sharing of the individual under the
health benefits plan. Any employee health
information collected through the wellness
program would be confidential and could
not be used for purposes other than
The Secretary would be required to
develop program criteria consistent with
evidence-based research and best practices,
considering the Guide to Community
Preventive Service and the National
Registry for Effective Programs.
Wellness programs would have to be made
available to all employees and include
several specified components, including
education, efforts to encourage
participation, initiatives to change unhealthy
behaviors, and supportive work
environments.
There would be authorized to be
appropriated $200 million in total, to be
available until expended, for FY2011
through FY2015.
§10408
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
administration of the program.
There would be authorized to be
appropriated SSAN to carry out this
section.
§112
Wellness program technical
assistance, surveys, and
evaluations
No provision.
Section 4303 would require the CDC
Director to provide employers with
technical assistance and other resources to
evaluate workplace wellness programs,
including measuring employee participation;
developing standardized measures of
factors that have a positive effect on health
behaviors, outcomes, and expenditures;
and evaluating the effect of programs on
health outcomes, absenteeism, productivity,
workplace injury rates, and medical costs.
The Director also would be required to
build evaluation capacity among workplace
staff and provide resources, technical
assistance, and consultation. The CDC
Director would be required to conduct a
national survey of employer-based health
policies and programs, and to report to
Congress on findings and recommendations
for the implementation of effective policies
and programs. In addition, the Secretary of
HHS would be required to evaluate all
programs funded through the CDC before
conducting such an evaluation of privately
funded programs, unless an entity with a
privately funded wellness program requests
such an evaluation. Finally,
recommendations, data, or assessments
carried out under this part could not be
used to mandate requirements for
workplace wellness programs.
§4303, as amended by §10404
CRS-98
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Multiple employer welfare
arrangements (MEWAs)
Medical malpractice
Current Law
ERISA defines a MEWA as an employee
welfare benefit plan or other arrangement
that is established and maintained to
provide specified benefits, including health
insurance coverage, to the employees of
two or more employers. According to the
Department of Labor, although MEWAs
can be provided through legitimate
organizations, they are sometimes
marketed using attractive but actuarially
unsound premium structures that generate
large administrative fees for the promoters.
In 1983, following discovery of certain
abuses and mismanagement of MEWA
funds, Congress passed a special exception
to ERISA preemption that allows states to
regulate MEWAs under state insurance
laws, subject to certain limitations.
However, the Department of Labor has
indicated that it continues to find instances
of fraud and abuse with regard to MEWAs.
No provision.
Medical malpractice liability reform has
often been considered by Congress;
however, it is the states that regulate or
have implemented tort reform for medical
malpractice lawsuits.
Would authorize the Secretary of Health
and Human Services to make incentive
payments to states that enact and
implement effective alternative medical
liability laws. The content of such a law
would be one that includes provisions for
either, or both, a certificate of merit or
early offer program, and that does not limit
attorneys’ fees or impose caps on damages.
Where states have enacted tort reform,
provisions vary regarding statutes of
limitation and caps on non-economic
damages or punitive damages. Typical tort
reform provisions also include modifying
common law tort doctrines such as joint
and several liability, contributory and
comparative negligence, periodic payments,
and the collateral source rule.
CRS-99
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Persons (in connection with MEWAs)
would be prohibited from knowingly
making false statements or representations
in connection with the marketing or sale of
the plan.
MEWAs would be required to register with
the Secretary of Labor before operating in
a state. The Secretary would have the
authority to adopt regulatory standards or
issue orders that a person engaged in the
business of providing insurance through a
MEWA is subject to the laws of the state in
which such person operates.
The Secretary would be authorized to
issue cease and desist orders against
certain MEWAs if it appears that the
alleged conduct of the MEWA is fraudulent,
creates an immediate danger to the public
safety or welfare, or is causing or can be
reasonably expected to cause significant,
imminent, and irreparable public injury.
§§6601-6607: ERISA
In determining the effectiveness of such a
law, the Secretary must consider whether
it (1) makes the medical liability system
more reliable through the prevention of, or
prompt resolution of, disputes; (2)
encourages the disclosure of health care
errors; and (3) maintains access to
affordable liability insurance.
Includes a “Sense of the Senate” with
respect to medical malpractice.
It expresses that the Senate believes:
•
health care reform presents an
opportunity to address issues related
to medical malpractice and medical
liability insurance;
•
states should be encouraged to
develop and test litigation alternatives
while preserving an individual's right to
seek redress in court; and
•
Congress should consider establishing
a State demonstration program to
evaluate alternatives to the existing
civil litigation system with respect to
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Current Law
H.R. 3962 (House-passed)
H.R. 3590 (Senate-passed)
Nothing in the section would preempt or
modify existing state laws that limit
attorneys’ fees or cap damage awards; nor
would the provision impair a state’s
authority to establish such laws, or restrict
the eligibility of a state for an incentive
payment on the basis of such laws provided
they are not established or implemented as
part of an alternative medical liability law
that meets the requirements described
above.
medical malpractice claims. §6801
The Secretary would be required to submit
to Congress an annual report on the
progress states are making in enacting and
implementing alternative medical liability
laws and the effectiveness of such laws. The
section would authorize to be appropriated
such sums as necessary for the incentive
payments, which would be used to improve
health care in the state. §2531
Would authorize the Secretary of Health
and Human Services to award
demonstration grants to states for the
development, implementation, and
evaluation of alternatives to current tort
litigation.
A state desiring a grant would be required
to develop an alternative that (A) allows for
the resolution of disputes caused by health
care providers or organizations, and (B)
promotes a reduction of health care errors
by encouraging the collection and analysis
of patient safety data.
The Secretary is to provide technical
assistance to the states including guidance
on common definitions, non-economic
damages, avoidable injuries, and disclosure
to patients of health care errors and
adverse events.
The Secretary is to consult with a review
panel composed of relevant experts
appointed by the Comptroller General
when reviewing applications.
Each state receiving a grant is to submit a
report to the Secretary covering the
impact of the activities funded on patient
safety and on the availability and price of
medical liability insurance. The Secretary is
similarly required to report to Congress.
The provision would not limit any prior,
current, or future efforts of any state to
establish any alternative to tort litigation.
It would appropriate $50,000,000 for 5
years beginning FY2011 to carry out this
section. § 10607.
CRS-100
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Medical Malpractice and
Free Clinics
Current Law
Under the Public Health Services Act,
health professionals, officers, governing
board members, or employees of a
federally qualified health center are deemed
employees of the Public Health Service.
Thus, such individuals or entities cannot be
sued for medical malpractice that was
committed within the scope of
employment. Any medical malpractice claim
that, in the absence of this provision, could
be brought against such an entity or
individual may instead be brought against
the United States.
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
Would extend federal employee status to
officers, governing board members,
employees, or contractors of free clinics.
§ 10608
For the same purposes, health professionals
who volunteer at free clinics and provide
qualifying health services are deemed to be
federal employees of the Public Health
Service. However, board members, officers
or other employees of free clinics are not
extended the same liability protection.
End-of-life planning
QHBPs would be required to provide for
the dissemination of information related to
end-of-life planning to individuals who seek
enrollment in Exchange-participating plans.
QHBPs would also be required to present
individuals with the option to establish
advance directives and physician’s orders
for life sustaining treatment, according to
state laws, as well as present information
related to other planning tools.
QHBPs would be prohibited from
promoting suicide, assisted suicide, or the
active hastening of death.
§240
CRS-101
No provision.
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Current Law
Assisted suicide
H.R. 3962 (House-passed)
No provision.
H.R. 3590 (Senate-passed)
The federal government, any state or local
government, or health care provider that
receives federal financial assistance under
this Act or any health plan created under
this Act would be prohibited from
subjecting an individual or institutional
health care entity to discrimination based
on not providing a health care item or
service for the purpose of causing, or
assisting in causing, the death of any
individual, such as by assisted suicide,
euthanasia, or mercy killing.
The HHS Office for Civil Rights would be
designated to receive complaints of
discrimination based on this section.
§1553
Standards for electronic
billing and other
administrative transactions
To promote the growth of electronic
record keeping and claims processing,
HIPAA’s Administrative Simplification
provisions (SSA Sections 1171-1179)
mandated the development of electronic
format and data standards for specified
administrative and financial transactions
between providers and health plans.
Updated standards to replace the versions
currently in use were recently published.
The compliance deadline for the updated
standards is January 1, 2012. While the
standards are intended to eliminate
variation in electronic billing and other
routine transactions, they include optional
data/content fields that can accommodate
plan-specific information. Providers often
are faced with a multiplicity of
implementation guides and plan-specific
requirements and must customize
transactions on a plan-by-plan basis.
HIPAA also mandated the development of
unique identifiers for providers, health
plans, employers, and individuals for use in
CRS-102
Section 115 would require the Secretary,
within two years of enactment, to adopt an
additional set of administrative and financial
transactions standards to help clarify,
complete, and expand the existing HIPAA
standards. The goal would be to create
uniformity in the use of those standards.
Within five years of enactment, the
Secretary would have to submit to
Congress a plan for implementing and
enforcing the new standards. Until such
time as the new standards are adopted, the
Secretary would be required to adopt an
interim companion guide (including
operating rules) for each HIPAA
transaction.
The Secretary would be required to
establish a unique health plan identifier and
adopt a transaction standard for health
claim attachments (one of the two HIPAAspecified transactions for which a standard
has yet to be adopted). The section would
amend the Medicare statute to require that
all Part A and Part B payments, with some
Similarly, HIPAA’s Administrative
Simplification provisions would be amended
with the intent of creating uniformity in the
use of HIPAA electronic transactions
standards. However, the Senate bill takes a
different approach. It would establish a
timeline, extending through mid-2014, for
the adoption of a single set of operating
rules for each HIPAA transaction for which
there is an existing standard. It also would
mandate the adoption of an electronic
funds transfer (EFT) standard for the
payment of health claims. By December 31,
2015, health plans would have to certify
that their health information technology
systems comply with the most current
standards and operating rules. Health plans
that failed to meet the certification
requirements would be fined.
The Secretary would be required to
establish a unique health plan identifier and
adopt a transaction standard and associated
operating rules for health claim
attachments (one of the two HIPAA-
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Topics for Table 14
Current Law
standardized transactions. Unique
identifiers have been adopted for providers
and employers, but not for health plans.
Congress has blocked the development of a
unique individual identifier.
H.R. 3962 (House-passed)
exceptions, be made electronically as of
January 1, 2015.
§115
H.R. 3590 (Senate-passed)
specified transactions for which a standard
has yet to be adopted). The section would
amend the Medicare statute to require that
all Part A and Part B payments, with some
exceptions, be made electronically as of
January 1, 2014. §1104
HIPAA’s Administrative Simplification
provisions would be further amended
requiring the Secretary, by January 1, 2012,
and every 3 years thereafter with input
from specified groups, to consider adopting
additional standards for financial and
administrative transactions not already
named under HIPAA (including certain
specified activities) to improve the
operation and efficiency of the health care
system. In addition, the Secretary would be
required to consider, and post online,
revisions to the crosswalk between the 9th
and 10th versions of the International
Classification of Disease (ICD), and to post
crosswalks of future ICD versions. §10109
CRS-103
Private Health Insurance Provisions of H.R. 3962 and H.R. 3590
Author Contact Information
Chris L. Peterson, Coordinator
Specialist in Health Care Financing
cpeterson@crs.loc.gov, 7-4681
Janemarie Mulvey
Specialist in Aging Policy
jmulvey@crs.loc.gov, 7-6928
Hinda Chaikind
Specialist in Health Care Financing
hchaikind@crs.loc.gov, 7-7569
Mark Newsom
Analyst in Health Care Financing
mnewsom@crs.loc.gov, 7-1686
Bernadette Fernandez
Analyst in Health Care Financing
bfernandez@crs.loc.gov, 7-0322
Jon O. Shimabukuro
Legislative Attorney
jshimabukuro@crs.loc.gov, 7-7990
Paulette C. Morgan
Specialist in Health Care Financing
pcmorgan@crs.loc.gov, 7-7317
Acknowledgments
Ruth Ellen Wasem (77342) contributed to the sections relating to immigration status and treatment of
noncitizens. Jennifer Staman (7-2610) contributed the sections on MEWAs and wellness programs, and to
the definitions in the report’s introduction. Sarah Lister (7-7320) also contributed to the section on wellness
programs. Vivian Chu (7-4576) contributed the section on medical malpractice. Kirsten Colello (7-7839)
contributed the sections on end-of-life planning and assisted suicide. Steve Redhead (7-2261) contributed
the section on standards for electronic billing and other administrative transactions.
Congressional Research Service
104