Senator Baucus finally released his long awaited health care reform bill with zero bipartisan support. I've been looking through the bill and discovered something very interesting. Baucus has purposely written his bill to make sure adding a robust public option would not dramatically reduce the CBO score of his legislation (it would still save average Americans hundreds of billions). It would also make it harder to add a robust public option later in the process or eventually add a robust public option in the distant future using reconciliation.
In the Baucus bill, “The amount of the tax credits for exchange plans in each area of the country would be tied to the premium of the second-lowest-cost plan in the “silver” tier (the “reference plan”), which would have an actuarial value of 70 percent." That is very strange. The second-lowest-cost plan? Isn't the lowest-cost something usually the benchmark?
In all the House committee bills and the Senate HELP committee bill, the tax credits are calculated using the “reference premium”. The “reference premium” is the average of the three cheapest plans in each area for each plan tier.
Why does this matter? A robust public option would almost always be the lowest-cost plan offered. It would reduce the average for the “reference premium” and therefore reduce the government's cost of providing tax credits. A robust public option would dramatically reduce the government's cost of those bills. But the Baucus bill uses the “reference plan,” which is the second-lowest-cost plan. This means offering a dramatically cheaper robust public option would not substantially change the size of “reference plan” or the amount of tax credits the government would need to provide. Adding a robust public option to the Baucus' bill would not reduce the cost to the government by very much.
Very clever, Senator Baucus, not only do you not have a public option in your bill but you are making sure to salt the field to stop one from ever coming into being.
Conversely, if an amendment removed that one word "second" and added a robust public option like Senator Rockefeller's, it should reduce the cost of Baucus bill by over a hundred billion.
Showing posts with label reference premium. Show all posts
Showing posts with label reference premium. Show all posts
The 6 Word Change That Could Save Health Care Reform And The Public Plan
Providing subsidies to help Americans afford health insurance is the single biggest cost driver in health care reform. The CBO calculates that the subsides in the House bill would cost $773 billion, and in the Senate HELP Committee bill they would cost $723 billion.
There are several ways to reduce the cost of those subsidies. You can further restrict who would qualify for subsidies, reduce the size of the subsidies, reduce what is considered minimum health insurance benefits, reduce the minimum actuary cost sharing, or change how you calculate the size of the subsidies.
Changing how you calculate the size of the subsidies seems to me the single best minor change to reducing the cost of health care reform. It would also dramatically strengthen the case for, and the cost savings from, a robust Medicare-like public option.
Currently both the House bill and the Senate HELP Committee bill calculate the size of the subsidies based on the “reference premium,” which is equal to “the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels.” Lowering the price of the “reference premium” would dramatically reduce the cost of reform.
By simply redefining the “reference premium” to be equal to the premium of the lowest cost basic plan offered, it would substantially reduce the overall cost of health care reform. It would also dramatically increase the savings that result from the public plan proposed by the House Democrats.
The CBO concluded that the House's public plan would on average be “about 10 percent cheaper than a typical private plan offered in the exchanges.” It has also been reported that the public plan in its current form reduced the cost of the House's bill by $150 billion.
I'm assuming that since the public plan would be 10% cheaper it would reduce the size of the reference premium by 3.3%. I'm also assuming that the 3.3% reduction in the reference premium is responsible for the public plan reducing the cost of health care reform by roughly $150 billion.
If that is the case, redefining the “reference premium” to mean the premium of the lowest cost basic plan (which would be the public option) would farther reduce the cost of health care reform by roughly another $250 billion. Progressives should push for redefining the term “reference premium” as their solution for reducing the cost of the bill. It would not only produce dramatic savings but it would also make it harder to remove or change the public option in the House bill.
There is an expected change to the accounting rule dealing with Medicare payment rates, which would reduce the price tag of the House bill by $245 billion. Combined with the change I outlined above the cost of the House bill could be cut almost in half.
There are several ways to reduce the cost of those subsidies. You can further restrict who would qualify for subsidies, reduce the size of the subsidies, reduce what is considered minimum health insurance benefits, reduce the minimum actuary cost sharing, or change how you calculate the size of the subsidies.
Changing how you calculate the size of the subsidies seems to me the single best minor change to reducing the cost of health care reform. It would also dramatically strengthen the case for, and the cost savings from, a robust Medicare-like public option.
Currently both the House bill and the Senate HELP Committee bill calculate the size of the subsidies based on the “reference premium,” which is equal to “the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels.” Lowering the price of the “reference premium” would dramatically reduce the cost of reform.
By simply redefining the “reference premium” to be equal to the premium of the lowest cost basic plan offered, it would substantially reduce the overall cost of health care reform. It would also dramatically increase the savings that result from the public plan proposed by the House Democrats.
The CBO concluded that the House's public plan would on average be “about 10 percent cheaper than a typical private plan offered in the exchanges.” It has also been reported that the public plan in its current form reduced the cost of the House's bill by $150 billion.
I'm assuming that since the public plan would be 10% cheaper it would reduce the size of the reference premium by 3.3%. I'm also assuming that the 3.3% reduction in the reference premium is responsible for the public plan reducing the cost of health care reform by roughly $150 billion.
If that is the case, redefining the “reference premium” to mean the premium of the lowest cost basic plan (which would be the public option) would farther reduce the cost of health care reform by roughly another $250 billion. Progressives should push for redefining the term “reference premium” as their solution for reducing the cost of the bill. It would not only produce dramatic savings but it would also make it harder to remove or change the public option in the House bill.
There is an expected change to the accounting rule dealing with Medicare payment rates, which would reduce the price tag of the House bill by $245 billion. Combined with the change I outlined above the cost of the House bill could be cut almost in half.
Public Plan Reduces Costs For Small Businesses
The House's America's Affordable Health Choice Act includes an “employer responsibility” provision. It is also know as an employer mandate or pay-or-play provision. The bill is written so that including the pubic option will reduce the burden of the employer mandate and costs for small businesses. This is very complicate but please stay with me.
An employer must provide “qualified” health insurance coverage for its employees or pay a penalty. The minimum amount that an employer most contribute to an employee's health insurance is no “less than 72.5 percent of the applicable premium...of the lowest cost plan offered by the employer that is a qualified health benefits plan.”
An employer may directly purchase health insurance for its employees or provide funds to the Health Exchange to enable their employees to select their own plans. For employers that provide their employees coverage through the Health Exchange the “applicable premium of the lowest cost plan” is equal to the “reference premium amount” in the area.
The “reference premium amount” is defined as “the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels.”
Now, the CBO concluded that the public plan in the House bill would be on average “about 10 percent cheaper than a typical private plan offered in the exchanges.”
Since the public plan would be one of the three cheapest plans offered, it would reduce the size of the “reference premium amount” and also the size of the applicable premium.
Therefore including the strong public plan lowers the minimum amount an employer, who provide coverage through the Exchange, must pay to insure an employee.
At the start only small businesses will have the option of providing insurance through the exchange. Using some rough calculations the public plan should save small businesses, which have their employees selection a plan on the exchange, roughly $450 an employee a year. The public plan will potential save around $3 billion a year for the small businesses that are allowed to use the exchange. The amount of savings to business would dramatically scale upwards if more companies are permitted to using the exchange to provide coverage.
An employer must provide “qualified” health insurance coverage for its employees or pay a penalty. The minimum amount that an employer most contribute to an employee's health insurance is no “less than 72.5 percent of the applicable premium...of the lowest cost plan offered by the employer that is a qualified health benefits plan.”
An employer may directly purchase health insurance for its employees or provide funds to the Health Exchange to enable their employees to select their own plans. For employers that provide their employees coverage through the Health Exchange the “applicable premium of the lowest cost plan” is equal to the “reference premium amount” in the area.
The “reference premium amount” is defined as “the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels.”
Now, the CBO concluded that the public plan in the House bill would be on average “about 10 percent cheaper than a typical private plan offered in the exchanges.”
Since the public plan would be one of the three cheapest plans offered, it would reduce the size of the “reference premium amount” and also the size of the applicable premium.
Therefore including the strong public plan lowers the minimum amount an employer, who provide coverage through the Exchange, must pay to insure an employee.
At the start only small businesses will have the option of providing insurance through the exchange. Using some rough calculations the public plan should save small businesses, which have their employees selection a plan on the exchange, roughly $450 an employee a year. The public plan will potential save around $3 billion a year for the small businesses that are allowed to use the exchange. The amount of savings to business would dramatically scale upwards if more companies are permitted to using the exchange to provide coverage.
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