Kennedy Plan Calls for Government Health Program, Employer Fees

By Brian Faler and Catherine Dodge
Bloomberg News
July 3, 2009

July 3 (Bloomberg) -- Senator Edward Kennedy's health committee released a new health-care overhaul plan that lawmakers said would lead to coverage for most Americans, in part by assessing fees on companies that don't offer insurance.

The plan includes a government-run insurance program as an alternative to private coverage, and would cost about $400 billion less than an earlier proposal.

Kennedy, a Massachusetts Democrat, and Senator Chris Dodd, a Connecticut Democrat, said in a letter to members of the Senate Health, Education, Labor and Pensions Committee that the plan would cost $611.4 billion over 10 years, citing an analysis by the non-partisan Congressional Budget Office.

The CBO later released a preliminary analysis of the legislation pegging its net cost at about $600 billion. That's down from an estimate of $1 trillion for a previous draft of the legislation.

The new plan, when combined with another proposal in the Senate Finance Committee, would help lead to health-insurance coverage of 97 percent of Americans, Dodd said. The CBO said Kennedy's portion of the plan would extend coverage to about 20 million Americans, a little less than half of the estimated 44 million uninsured Americans.

President Barack Obama praised the plan. And Dodd, on a conference call with reporters yesterday, said it meets Obama's goal of affordable and accessible health care.

"We are on the cusp, on the brink, of doing something here that is absolutely critical," said Dodd, who is leading the committee's work while Kennedy receives treatment for brain cancer.

Added Penalties

Lawmakers cut the plan's cost by $400 billion in part by adding the penalties for employers who don't offer insurance coverage, CBO said. The agency said lawmakers also trimmed costs by eliminating insurance subsidies for those with incomes above 400 percent of the federal poverty level, while reducing the subsidies for those earning less than that.

The revised plan also decreased subsidies for those with access to health-care coverage through their employer, even if employees consider that insurance to be unaffordable.

The plan would require all legal U.S. residents to have health insurance, CBO said. The Internal Revenue Service would impose penalties on those who don't have health insurance, though individuals with incomes below 150 percent of the federal poverty level would be exempt, the analysis said.

Insurers would be required to cover all applicants, and couldn't limit coverage for those with pre-existing conditions.

New Policies

The proposal would prevent insurers from varying premiums for a given plan according to an individual's health and would only allow them to peg premiums to age "to a limited degree," CBO said. The restrictions would only apply to new insurance policies, the agency said, allowing already existing ones to be exempt from the rules.

Obama said in a statement the overhaul reflects his principles of lowering costs and covering more Americans.

The government-run option "would make health care affordable by increasing competition, providing more choices and keeping the insurance companies honest," Obama said.

Health insurers have opposed a government-run plan, saying it would have the purchasing power and regulatory authority to run private competitors out of business.

Industry Reaction

Insurers say changes they've promised, such as covering people with preexisting conditions and not basing premiums on a person's health, will achieve Democrats' goals, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the insurers' Washington, D.C. trade group.

"If we do the types of reform that everybody's talking about, then a government-run plan in any form is not necessary," he said in a telephone interview yesterday.

CBO said Kennedy's public plan would pay health-care providers at "comparable" rates and "thus was not projected to have premiums lower than those charged by private insurance plans." The number of people getting coverage through their employer "would change very little" under the Kennedy plan, CBO said.

The annual fee on companies would be $750 for each full- time worker and $375 for part-time workers to help pay for employee health coverage, with those charges indexed for medical price inflation after 2013. Employers with fewer than 25 workers would be exempt.

Subsidies Offered

The Kennedy plan would offer subsidies to small companies that provide health insurance to low-wage workers, CBO said. It said the subsidies would vary according to the size of the company, though they would be limited to those with no more than 50 employees.

Obama is pressing Congress to send him legislation by October. Republican leaders have attacked Obama's health-care proposal and oppose a new government insurance plan.

Senator Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee, has proposed nonprofit cooperatives as a potential compromise for Republicans who oppose Obama's call for a government-run health plan.

The Kennedy committee's proposal could complicate efforts to combine the measure with work being done in the Finance Committee. Earlier, Dodd said he would leave open the public option as Finance Committee Chairman Max Baucus, a Montana Democrat, presses for a bipartisan compromise on the issue.

Last week, Health and Human Services Secretary Kathleen Sebelius signaled the administration would consider the cooperative approach, even as Obama continues to state his preference for a government-run insurance program.

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