KeithHennessey.com » Understanding the Kennedy health care bill
Here are 15 things to know about the draft Kennedy-Dodd health bill.
- The Kennedy-Dodd bill would create an individual mandate requiringyou to buy a “qualified” health insurance plan, as defined by thegovernment. If you don’t have “qualified” health insurance for a givenmonth, you will pay a new Federal tax. Incredibly, the amount andstructure of this new tax is left to the discretion of the Secretariesof Treasury and Health and Human Services (HHS), whose only guidance is“to establish the minimum practicable amount that can accomplish thegoal of enhancing participation in qualifying coverage (as so
defined).” The new Medical Advisory Council (see #3D) could
exempt classes of people from this new tax. To avoid this tax, you
would have to report your health insurance information for each month
of the prior year to the Secretary of HHS, along with “any such other
information as the Secretary may prescribe.”
- The bill would also create an employer mandate. Employers would
have to offer insurance to their employees. Employers would have to
pay at least a certain percentage (TBD) of the premium, and at least a
certain dollar amount (TBD). Any employer that did not would pay a new
tax. Again, the amount and structure of the tax is left to the
discretion of the Secretaries of Treasury and HHS. Small employers
(TBD) would be exempt.
- In the Kennedy-Dodd bill, the government would define a qualified plan:
- All health insurance would be required to have guaranteed issue and
renewal, modified community rating, no exclusions for pre-existing
conditions, no lifetime or annual limits on benefits, and family
policies would have to cover “children” up to age 26.
- A qualified plan would have to meet one of three levels of
standardized cost-sharing defined by the government, “gold, silver, and
bronze.” Details TBD.
- Plans would be required to cover a list of preventive services approved by the Federal government.
- A qualified plan would have to cover “essential health benefits,” as defined by a new Medical Advisory Council (MAC),
appointed by the Secretary of Health and Human Services. The MAC would
determine what items and services are “essential benefits.” The MAC
would have to include items and services in at least the following
categories: ambulatory patient services, emergency services,
hospitalization, maternity and new born care, medical and surgical,
mental health, prescription drugs, rehab and lab services,
preventive/wellness services, pediatric services, and anything else the
MAC thought appropriate.
- The MAC would also define what “affordable and available coverage”
is for different income levels, affecting who has to pay the tax if
they don’t buy health insurance. The MAC’s rules would go into effect
unless Congress passed a joint resolution (under a fast-track process)
to turn them off.
- All health insurance would be required to have guaranteed issue and
- Health insurance plans could not charge higher premiums for risky
behaviors: “Such rate shall not vary by health status-related factors,
… or any other factor not described in paragraph (1).” Smokers,
drinkers, drug users, and those in terrible physical shape would all
have their premiums subsidized by the healthy.
- Guaranteed issue and renewal combined with modified community
rating would dramatically increase premiums for the overwhelming
majority of those Americans who now have private health insurance. New
Jersey is the best example of health insurance mandates gone wild. In
the name of protecting their citizens, premiums are extremely high to
cover the cross-subsidization of those who are uninsurable.
- The bill would expand Medicaid to cover everyone up to 150% of
poverty, with the Federal government paying all incremental costs (no
State share). This means adding childless adults with income below
150% of the poverty line.
- People from 150% of poverty up to 500% (!!) would get their health
insurance subsidized (on a sliding scale). If this were in effect in
2009, a family of four with income of $110,000 would get a small
subsidy. The bill does not indicate the source of funds to finance
- People in high cost areas (e.g., New York City, Boston, South
Florida, Chicago, Los Angeles) would get much bigger subsidies than
those in low cost areas (e.g., much of the rest of the country,
especially in rural areas). The subsidies are calculated as a
percentage of the “reference premium,” which is determined based on the
cost of plans sold in that particular geographic area
- There would be a “public plan option” of health insurance offered
by the federal government. In this new government health plan, the
federal government would pay health care providers Medicare rates +
10%. The +10% is clearly intended to attract short-term legislative
support from medical providers. I hope they are not so naive that they
think that differential would last.
- Group health plans with 250 or fewer members would be prohibited from self-insuring. ERISA would only be for big businesses.
- States would have to set up “gateways” (health insurance exchanges)
to market only qualified health insurance plans. If they don’t, the
Feds will set up a gateway for them.
- Health insurance plans in existence before the law would not have
to meet the new insurance standards. This creates a weird bifurcated
system and means you would (probably) be subject to a different set of
rules when you change jobs.
- The bill does not specify what spending will be cut or what taxes
will be raised to pay for the increased spending. That is presumably
for the Finance Committee to determine, since it’s their jurisdiction.
- The bill defines an “eligible individual” as “a citizen or national
of the United States or an alien lawfully admitted to the United States
for permanent residence or an alien lawfully present in the United
- The bill would create a new pot of money for state gateways to pay
“navigators” to educate people about the new bill, distribute
information about health plans, and help people enroll. Navigators
receiving federal funds “may include … unions, …”
This would have severe effects on the more than 100 million Americans who have private health insurance today:
- The government would mandate not only that you must buy health insurance, but what health insurance counts as “qualifying.”
- Health insurance premiums would rise as a result of the law, meaning lower wages.
- A government-appointed board would determine what items and
services are “essential benefits” that your qualifying plan must cover.
- You would find a tremendous new disincentive to switch jobs,
because your new health insurance may be subject to the new rules and
would therefore be significantly more expensive.
- Those who keep themselves healthy would be subsidizing premiums for those with risky or unhealthy behaviors.
- Far more than half of all Americans would be eligible for subsidies, but we have not yet been told who would pay the bill.
- The Secretaries of Treasury and HHS would have unlimited discretion
to impose new taxes on individuals and employers who do not comply with
the new mandates.
- The Secretary of HHS could mandate that you provide him or her with “any such other information as [he/she] may prescribe.”
Kennedy-Dodd Health Care Reform Bill (First Draft)
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