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House Passes Health Care Reform H.R. 3590 Patient Protection and Affordable Care Act

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As you’ve no doubt heard, last night the House of Representatives passed H.R. 3590 Patient Protection and Affordable Care Act in a vote of 219-212. 3590 then heads to President Obama’s desk for his signature into law. The House also passed HR 4872 Reconciliation Act of 2010, which now heads to the Senate for a vote, needing only a simple majority. Regardless of how you feel about health care reform in general and the bill specifically, it’s important to understand what’s inside because it will affect you and your family.

Fortunately, we can rely on a straightforward recap by Reuters plus a few details from the Tax Foundation. There will be no commentary on my part to get in the way of the facts, just what’s in the bill if it’s signed by law.

Retroactive

  • Exclusion for assistance provided to participants in State student loan repayment programs for certain health professionals (retroactive to Jan. 1, 2009)
  • Qualifying therapeutic discovery project credit (retroactive to Jan. 1, 2009) – provision expires at end of 2010
  • Modification of section 833 treatment of certain health organizations (retroactive to January 1, 2010)
  • Make the adoption credit refundable; increase qualifying expenses threshold, and extend the adoption credit through 2011 (retroactive to Jan. 1, 2010)
  • Small Business Tax Credit for certain small businesses providing health insurance to employees (retroactive to Jan. 1, 2010). In 2013, restricted only to insurance purchased through an exchange and only available for two consecutive years
  • Exclusion of unprocessed fuels from the cellulosic biofuel producer credit (retroactive to January 1, 2010)

Changes within the first year

Many of these take effect six months after the bill is signed into law.

  • Insurance companies will be barred from dropping people from coverage when they get sick. Lifetime coverage limits will be eliminated and annual limits are to be restricted.
  • Insurers will be barred from excluding children for coverage because of pre-existing conditions.
  • Young adults will be able to stay on their parents’ health plans until the age of 26. Many health plans currently drop dependents from coverage when they turn 19 or finish college.
  • Uninsured adults with a pre-existing conditions will be able to obtain health coverage through a new program that will expire once new insurance exchanges begin operating in 2014.
  • A temporary reinsurance program is created to help companies maintain health coverage for early retirees between the ages of 55 and 64. This also expires in 2014.
  • Medicare drug beneficiaries who fall into the “doughnut hole” coverage gap will get a $250 rebate. The bill eventually closes that gap which currently begins after $2,700 is spent on drugs. Coverage starts again after $6,154 is spent.
  • A tax credit becomes available for some small businesses to help provide coverage for workers.
  • A 10 percent tax on indoor tanning services that use ultraviolet lamps goes into effect on July 1.

Changes for 2011

  • Medicare provides 10 percent bonus payments to primary care physicians and general surgeons.
  • Medicare beneficiaries will be able to get a free annual wellness visit and personalized prevention plan service. New health plans will be required to cover preventive services with little or no cost to patients.
  • A new program under the Medicaid plan for the poor goes into effect in October that allows states to offer home and community based care for the disabled that might otherwise require institutional care.
  • Payments to insurers offering Medicare Advantage services are frozen at 2010 levels. These payments are to be gradually reduced to bring them more in line with traditional Medicare.
  • Employers must report value of health benefits on W-2′s.
  • An annual fee is imposed on manufacturers and importers of branded drugs according to market share, does not apply to companies with less than $5 million of sales.
  • Increase in additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses to 20%.

Changes for 2012

  • Physician payment reforms are implemented in Medicare to enhance primary care services and encourage doctors to form “accountable care organizations” to improve quality and efficiency of care.
  • An incentive program is established in Medicare for acute care hospitals to improve quality outcomes.
  • The Centers for Medicare and Medicaid Services, which oversees the government programs, begin tracking hospital readmission rates and puts in place financial incentives to reduce preventable readmissions.

Changes for 2013

  • $500,000 deduction limitation on taxable year pay to officers, employees, directors, and service providers of covered health insurance providers (goes into effect in 2013, but applies to compensation for services performed from Jan. 1, 2010 forward)
  • A national pilot program is established for Medicare on payment bundling to encourage doctors, hospitals and other care providers to better coordinate patient care.
  • The threshold for claiming medical expenses on itemized tax returns is raised to 10% of income. The threshold remains at 7.5% for the elderly through 2016.
  • Medicare Hospital Insurance tax increased by 0.9%, thus the Medicare payroll tax is raised to 2.35% from 1.45% percent for individuals earning more than $200,000 and married couples with incomes over $250,000.
  • Unearned Income Medicare Contribution on 3.8% on investment income for taxpayers with AGI in excess of $200,000/$250,000.
  • A 2.3 percent excise tax in imposed on the sale of medical devices. Anything generally purchased at the retail level by the public is excluded from the tax.
  • Limit health flexible spending arrangements (FSAs) in cafeteria plans to $2,500; indexed to CPI-U after 2013. Over the counter drugs will no longer be reimbursed without a prescription.

Changes for 2014

  • State health insurance exchanges for small businesses and individuals open.
  • Most people will be required to obtain health insurance coverage or pay a fine if they don’t. Healthcare tax credits become available to help people with incomes up to 400 percent of poverty purchase coverage on the exchange.
  • Health plans no longer can exclude people from coverage due to pre-existing conditions.
  • Employers with 50 or more workers who do not offer coverage face a fine of $2,000 for each employee if any worker receives subsidized insurance on the exchange. The first 30 employees aren’t counted for the fine.
  • Health insurance companies begin paying a fee based on their market share.

Changes for 2015

  • Medicare creates a physician payment program aimed at rewarding quality of care rather than volume of services.

Changes for 2018

  • The Cadillac health care tax: 40% excise tax on health coverage in excess of $10,200/$27,500 (subject to adjustment for unexpected increase in medical costs prior to effective date) and increased thresholds of $1,650/$3,450 for over age 55 retirees or certain high-risk professions, both indexed for inflation by CPI-U plus 1%; adjustment based on age and gender profile of employees; vision and dental excluded from excise tax; levied at insurer level; employer aggregates and issues information return for insurers indicating amount subject to the excise tax; nondeductible.

If you want to read the entire bill, it’s available here from the Library of Congress.

US healthcare bill would provide immediate benefits [Reuters]
Timeline of Tax Provisions in the House Health Care Bill [Tax Foundation]

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123 Responses to “House Passes Health Care Reform H.R. 3590 Patient Protection and Affordable Care Act”

  1. cubiclegeoff says:

    Thanks for providing a great timeline of how the bill will work without mudding it up with commentary. It’s nice to see the facts laid out without assumptions.

  2. tom says:

    I agree, very comprehensive overview and timeline. Thank you, Jim.

    I do look forward to debating the bill in the “Your Take” segement later this week.

    In the meantime, I will say this… I actually find myself agreeing with more of the bill than I thought, however, I do not agree with the total package.

    • kevjohn says:

      Nearly every poll that’s come out says that “most Americans” are against this bill. But when it was broken down and the individual facets of the bill were actually laid out for them, the majority were in favor of them. There’s never been a perfect bill enacted into law, and this will not be the first.

      • billsnider says:

        You completely miss the point.

        People are concerned about the huge and growing debt. This is another program that will contribute to it. It will one day force us to back off on our military muscle and cease being the number one super power and all other kinds of ramifications.

        You can play what happens from there.

        Bill Snider

        • Jim says:

          The point of saying “most Americans are against the bill” is to actually mean most people are concerned that it increases debt? I don’t see how you can get to that conclusion when most people actually love debt. They love getting stimulus checks and other credits and are less concerned with growing debt, just look at credit card bills. If people were concerned about debt then there wouldn’t be any.

          The reality is that it’s all politics and for one party to point their finger at the other calling them fiscally reckless is in and of itself reckless. Both sides spend and to make this your Alamo on government spending is a joke. It’s just politics and politicians tricking you into believing their rhetoric. Were you outraged prior to the engagement of war in Iraq and Afghanistan? What about the Bush era tax cuts on investment income? Government spending is not wasteful unless you don’t benefit from it. :)

        • @cubiclegeoff:

          Regarding CBO estimate. I have a bridge to sell you in Brooklyn. Would you be willing to make a bet it will not be deficit neutral in 10 years?

          Oh read a NYT article from a former CBO director:

          http://www.nytimes.com/2010/03/21/opinion/21holtz-eakin.html?ref=opinion

          • cubiclegeoff says:

            No entity is perfect. If it was really deficient, then it would have been ignored ages ago and Congress wouldn’t listen. You have to have some entity come up with this information and private industry can’t be trusted, so the CBO is the best we’re going to get.

  3. saladdin says:

    Fine, I’ll say it.

    Any way we can all leave politics out of this discussion? Can we please have a civil talk amongst friends?

    saladdin

    • Jim says:

      It’s hard to logically argue in favor of rescission and exclusion based on pre-existing conditions, hence the frequent muddying of the waters with emotional outbursts (politics). :)

    • Chris says:

      Wouldn’t that be nice. We might actually get somewhere with it or learn something.

    • Well it’s kinda hard when you are discussing a government created policy. Civil yes, no politics kinda hard.

  4. neerpatel says:

    Jim,
    I was hoping you would do a break down of the bill! Thanks for the post!!

  5. zapeta says:

    Thank you for putting this together. Its interesting to see what they actually got accomplished.

  6. Thanks for putting this together…it’s the most clear and comprehensive list of the bill’s main points I’ve seen.

    Looking forward to your commentary.

  7. Chris says:

    Thank you. We were talking about this at lunch, as is probably everyone else.

  8. Ryan says:

    Maybe it’s just me, but I still don’t understand half of the items. And by understand, I mean there’s too much jargon. I need some layman’s description, and I bet most average citizens would too. Yet it’s funny that so many people can have an opinion on it, yet most don’t know what any of it means. Of course, it could just be me.

    • Jim says:

      You’re right, there are plenty of things I don’t fully understand (I don’t understand half the Medicare/Medicaid stuff because it involves things I have no experience with (the donut hole, freezing payments, etc.)) but I also don’t have an extremely passionate belief about the bill either.

      • Ryan says:

        Exactly, but most of the people the news corporations find or “poll” do have the extreme passionate belief, and I bet they know as little as we do.

        • Jim says:

          It always bothered me when pundits say “the American people” when they only mean a subset of the American people.

          • daenyll says:

            statistics don’t lie, but can easily be manipulated based on the sample used.

        • ziglet19 says:

          I am finding a lot of people with strong opinions on this don’t necessarily have a clue on what it includes!

          • cubiclegeoff says:

            This is pretty typical for politics in this country in general. People are not educated and believe people that either lie or bend the truth, or just stick to their political affiliation or some other affiliation which may not be what they really believe, or just have an idea of what the other political affiliation stands for and hate it, and therefore have a general hatred for anything associated with that party. Like certain individuals on the right believe the government should stay out of our lives, except when it comes to issues of who should be allowed to marry whom, or more humorously, when it comes to issues on Medicare. Or my own parents that don’t like democrats, and so complain about anything they do, yet if you dig a bit, they’ll admit they actually support the issue, but still will be against it based on it being a democrat issue.

      • Donut holes are a type of pastry. Quite tasty.

    • echidnina says:

      Yeah, a lot of the language is Greek to me. But at least I have a slightly more clear idea of what’s actually happening now.

      • saladdin says:

        One of the funniest things I’ve ever hear.

        Sitting in literature class with my cousin and the class was discussing Homer. The teacher looked at my cousin and asked him a question. Without missing a beat he says “I don’t know. It’s Greek to me.”

        Still gets me when I think about it.

        saladdin

  9. Ryan says:

    Also, just a random question that doesn’t necessarily pertain to this specific bill/act. Is it written in bills/acts like this, that they cannot be overwritten? Like say the next president/congress (or future pres./congress) wants to disregard the current bill/act. Couldn’t this go back and forth every 4 or 8 years forever? As an example for the health care reform act, say something that is to be implemented in 2018 (or at some point after current president/congress leaves), can that not be changed?

    • Jim says:

      No you can’t and theoretically it could go back and forth.

    • Texas Wahoo says:

      “Is it written in bills/acts like this, that they cannot be overwritten?”

      The only way that can be done is by amending the Constitution, which would require 3/4ths of the state legislatures to ratify it. Although you never know, if 37 states are truly considering suing the federal government over this, perhaps they could make this law unconstitutional if they wanted to (assuming they lose their constitutional lawsuits in the first place).

      • saladdin says:

        I don’t understand. Aren’t you talking about amending the Constitutional? Totally different thing?

        saladdin

        • Jim says:

          I think he means that you have to amend the Constitution in order to make a law immune to repeal by future laws.

          • saladdin says:

            Gotcha. Read it too fast the first time.

            saladdin

          • NateUVM says:

            Even then, you can pass a subsequent amendment to repeal the initial amendment. Things can always change…

  10. CK says:

    Any word on the effect on HSAs?

    • 2013 you can only have $2500 per year instead of $5k max.

      • saladdin says:

        My take is HSA’s will be hit hard in $ and claimable stuff.

        saladdin

      • Chris says:

        What sense does that make. If you have to have a high deductible health care plan to qualilfy for an HSA, why would you lower the limit of what you can apply towards the plan?

        • Jim says:

          I didn’t read the text of the bill but the summary seemed to only discuss flexible spending arrangements, not health savings accounts.

          • saladdin says:

            Now you have me doubting my memory. Can’t recall now if it was HSA of FSA.

            saladdin

          • Infinion says:

            My understanding is that most of the bill talk is about FSAs. I don’t know much about those really. Some quick Google research shows that most people in the know think that HSA and their associated High deductible plans will remain in strong demand. I think there might need to be some minimal changes in some plans to meet the minimum coverage imposed by the bill. I think the bill aims to phase out FSA usage, but aims to increase HSA usage. Of course, with more people opting to use the HSA, there will likely be more strict reporting for tax purposes. Start saving those receipts if you’re not already. All I’ve seen about HSAs and attached plans are just about the increase in penalty for using the HSA for non-authorized purchases. Also, there’s some wording about how much *more* an older person’s premium can be compared to a young person, or something like that. Since insurance companies are unlikely to lower the highest premiums to meet that, they are going to need to increase the lowest premiums, which tends to be young people with HSA and High deductible plans that make more sense for them. I guess we’ll see. Maybe my insurance broker will send us something soon.

          • Chris says:

            Gonna be pissed if I can’t use my FSA for OTC now. Gotta get some perscription Jack Daniels.

        • Anthony says:

          You wouldn’t want to, assuming your healthy. However, the lawmakers of the bill would like you to have a lower contribution limit = high premium. Thus forcing you to pay a higher premium that goes into the larger pool. Basically, they want to limit contributions so “wealthy” individuals/families have to pay into their plan.

      • ecosta says:

        Are these limits per person or per household?

  11. Fred says:

    I had NO idea adoption credits were even mentioned in this bill – and I listen to a lot of pundits on both sides…

    And, not to doubt you Jim, but I wonder how much of the bill isn’t listed here. The list seems small for a 2000+ page bill. I realize a lot of that is details and “legislative language.”

    I also suspect there will be a number of legal challenges to the bill and a steady stream of continuing partisan fighting – so for those of us who watch it like its sports, there’s still room for betting.

    I am glad that the majority party didn’t resort to “deeming” the bill passed via a rule. This way seems more transparent and less mincing of words.

    • Jim says:

      There is a TON of stuff related to student loans, income based repayment, etc. not included in this summary, it just stuck to the health care pieces (excluding that bit on student loans under retroactive) as far as I know.

      This bill will be law once President Obama signs it, the fix it portion has to be accepted by the Senate, but this stuff is on its way to the President’s desk.

      • Fred says:

        Completely agree with you here. However, several states are mounting “constitutional challenges” to the bill. Whether any will be successful is a mystery…

        One thing I would like to know is – if by chance the Supreme Court declared a portion of the bill unconstitutional (for instance, by saying the FG can’t require individuals to buy healthcare), does the entire bill get whacked or just that portion of the bill?

        • Jim says:

          An interesting question and I couldn’t find a clear answer but I found examples where courts declared parts of a law unconstitutional. I’m assuming they can declare a portion unconstitutional while keeping the balance intact.

          • saladdin says:

            And we are assuming the Supreme Court would hear the case. They don’t have to. And then, if they do, how does the Court lean? It could be years before (if they decide to) hear the case.

            saladdin

        • saladdin says:

          My opinion is , I don’t think it’s a mystery. I just don’t think a legal appeal gets to the SC.

          The states can pass all the laws they want. Federal trumps it. Ask California about its “weed” laws. You can still be arrested by The Man.

          saladdin

          • This has been a very conservative court, though (reference, for instance, the recently overturned portions of McCain-Feingold)…

            My guess is that the SC will decide to hear the case on appeal, but I’m honestly not certain where they would fall. You are right, though – it could take years before they hear it.

          • Chris says:

            By the time it gets heard, if it does it could have made a huge impact.

          • George says:

            I think you’re being naive here. 37 states are planning to challenge the bill. The SC court will hear these cases. Many as a group and within the first year.

        • tom says:

          The bill will not work without mandated insurance. The bill relies on the healthy and young to pay for the old and sick, regardless of their income.

          If the requirement is found unconstitutional, the first group to drop out of the insurance pool, will be those same individuals, thus causing rates to skyrocket for the old and sick, who will eventually be unable to afford the premiums causing the government to step in and the whole system will collapse.

          So, if the SC does find that specific portion, the bill has to be scrapped, because it just won’t work.

      • Wow, I briefly heard about the adoption portion, but none of those other pieces. It’s always crazy that they include all these other parts to a bill just to get support for it to pass.

  12. The Quibbler says:

    Two minor corrections:

    H.R. 3590 was not passed by a “party-line” vote. Technically a party-line vote occurs when all members of a party vote the same way. Since some Democrats voted against the bill, it was not a party-line vote.

    H.R. 3590 was already passed by the Senate on 12/24/2009. As such, the next step is not for the Senate to pass it; rather it goes to the President to be signed. H.R. 4872 is the reconciliation bill that makes changes to H.R. 3590 which the Senate still needs to pass.

    • Jim says:

      You’re totally correct, I had it wrong originally and had been fixing my explanation for this Friday’s Your Take post and forgot to edit it here. Thanks for the corrections.

    • saladdin says:

      Which the Senate has already said they will pass. And can not be filibustered.

      51 is all that is needed.

      saladdin

    • tom says:

      The biggest lesson of this whole process is that the federal legislature needs to be overhauled.

      Wouldn’t it be very cool if requirements were passed that said: in order to pass a law, 50% of each party must vote in favor?

      It would cause a congressional gridlock for a while, but would also force each party to work together, or face your constituents in the next election (i.e. be fired for doing nothing).

      It’s wishful thinking, but with so many party-line votes lately, these laws do not represent the true will of the people.

      • Jim says:

        A novel idea but it wouldn’t work because if you had 98 Democrats in the Senate and 2 Republicans, the Republicans would have all the power since nothing could get passed without at least one of their votes even if all 98 Democrats voted in favor of something. Plus, if 98 Democrats vote in favor of something, isn’t that the will of the people?

        • tom says:

          I see what you’re saying.

          The last time the Senate had a large gap between Democrats and Republicans was back in the 60s. The country as a whole is moderate. Maybe a different percentage would be more appropriate, tied to the percentage of each party in the House or Senate.

          Frankly, I’m sick of the politics. The House and Senate both have patheticly low approval ratings. Party line vots are becoming the norm. The new financial overhaul bill looks to follow the same path. Something drastic needs to happen to have unity. I can tell you this much, in the next local election, I’m not voting for the incumbent, he’s been in office way too long.

          • Jim says:

            I only pointed out that one extreme example because it’s an example of how that particular idea sounds like a good idea but has a lot of boundary cases where it leads to imbalances.

            I’m sick of politics too, I don’t like how Republicans made it a strategy to just be obstructionist in everything after the last election. Instead of working with Democrats to get a bill more people will accept, they decided to be divisive and make things more partisan.

            I once heard a very compelling argument for the figurehead monarch, as they have in England. You separate the politics from the patriotism, which really does clean up a bit of the emotional mess we often see in politics.

          • tom says:

            You have to give credit to the Republicans though. They did introduce their own bill that had a lot of great ideas, open state lines, tort reform being a few, why not put those in? Paul Ryan had an extremely comprehensive plan that did not get even a look by Democrats. Obama himself could not counter the arguements Paul Ryan had at the Health Care Summit. Ryan came at him with detailed evidence, numbers, figures, justifying his position.

            The Democrats had the majority and didn’t need a bi-partisan bill, so why bother with further negotiations. I argue that the Republicans had no other option, but to obstruct and complain. It was a reaction. The Democrats kept them out because they did not need them.

            I hate to be so political, but it is what happened. I argue that it’s the responsibility of the party in power to negotiate and compromise its way to bi-partisan bills however long it takes.

          • cubiclegeoff says:

            tom, the republican bill had some ok ideas, but most would have had little impact. The overall bill would have only covered an additional 3 million people, a lot less than 30 million. some of their ideas should be added, but their bill overall would have done nothing to cure the problem (and this bill won’t cure the problem as well, but is at least a first step and even that’s a big deal with our current politics).

  13. Mark says:

    This bill effectively will end private health insurance. Only a matter of time till we figure it out. With the exclusion of pre-existing conditions, what is the reason to have health insurance if you are healthy? You only need insurance if you are sick.
    I will pay the fine (2% of my pay) and just work with my physician for routine health care. It will be MUCH cheaper than insurance premiums. If I end up with some condition, I buy health insurance. Can’t be denied, viola!

    It is only a matter of time before the sheeple figure it out. Congress is going to spend years and years trying to contain the unintended consequences of this bill.

    • cubiclegeoff says:

      This may work for some individuals, but probably not for families which can require a lot of visits to the doctor which gets expensive no matter what. Also, most people already get insurance through their employer so that means fewer people would bother with this method. Finally, people are lazy and your method takes too much work.

      • tom says:

        Obama stated that employer paid/co-paid health insurance will not change, but who’s to say that all major corporations will not automatically drop coverage?

        $2,000 fine per employee is nothing compared to $14,000 per employee that my company pays.

        Or… who’s to say that companies don’t start passing the majority of insurance costs on to the employees? The bill only says they have to offer coverage, it doesn’t say in what capacity.

        • Jim says:

          So why do companies offer insurance today? Before the bill, there was a $0 fine. To say that companies will act differently afterwards is to assume there are only financial incentives to offer coverage in the first place, which is incorrect. There are social pressures as well and they are clearly more potent than any financial reason.

          • Anonymous says:

            I think that it is the 1973 ERISA law. This bill just changed that requirement. Tom is correct that employers will pay the fine rather than the premium.

            BUT, also, companies DON’t pay the premium. YOU DO! It comes out of your salary, we just break it apart so that you don’t see it.

        • freeby50 says:

          Jim’s right. THe reform adds no reasons for employers to drop insurance that don’t already exist yet the bill adds a penalty if they do so.

          ERISA does not require employers to give people health insurance.

        • Chris says:

          Exactly, and what happens within orgs whose policy is a self insured one. This make it easier to drop than to pay out.

    • tom says:

      Exactly. The bill ultimately relies on the young and healthy to pay for the old and sick. If the young and healthy just decide to pay the fine, setup an FSA, and have no coverage, insurance premiums for those that need insurance the most will be huge.

      The taxpayer will ultimately be on the hook for a lot of that bill.

      So, if buying health insurance is a requirement and the Supreme Court finds that unconstitutional, the system completely fails.

      • Jim says:

        All health insurance relies on that principle. All insurance relies on the less risky to pay for the more risky, minus any gains the company can earn on the float.

        • NateUVM says:

          Precisely. The insurance market is an imperfect one. For it to work at all, you need people buying in that will never need it.

          • tom says:

            Now they are requiring, by law, that you buy in.

            If I did not have employer paid insurance, I might not even buy health insurance. I get yearly check-ups, am in good shape, and am in the low risk pool. Why should I spend hundreds, if not, thousands a month on something I really don’t need?

            It’s that mindset, coupled with the possibility that employers will drop health insurance from their benefits packages and citizens will need to buy their own insurance, that makes this entire bill hinge on the requirement to buy insurance.

            If the SC finds that unconstitutional (who knows if they will or if they take on that case) then the system will fail.

            My main arguement against this bill is that it does nothing to curb health CARE costs at the source. Indirectly, with all the new requirements on insurers, costs may go down, but will a pill of Tylenol still cost $20 or an MRI cost $5,000? In order to do that, you need to target the costs incurred by hospitals and doctors. Use the 80/20 rule, what constitutes 80% of a hospital or Dr office costs?

        • Fred says:

          Jim, this isn’t really correct.

          Insurance companies try to bucket similar potential losses into risk categories that have different costs, just like mortgage lenders.

          If they know that someone/something is a higher risk, they go into a higher category, which pays more for the coverage.

          Life insurance is a great example of this, and potentially another entitlement the Government will consider after healthcare. If I’m on my deathbed, I can’t get insurance (at least not for any reasonable price). If I’m a smoker, I pay more than a non-smoker. The non-smokers do not pay for the smokers… that wouldn’t make sense – because another company could just spring up and cover only non-smokers for cheaper.

          There’s a lot of philosophical questions tied up in the healthcare debate – like should you have a right *not* to have healthcare coverage if you don’t want to pay for it? (e.g., are you permitted to take that kind of risk with your own life?) Seatbelt laws come under that same philosophical question area – why can’t I choose to risk my life in a car if I want to? The reason is because insurance costs would be higher for everyone and–even worse–its hard to segregate those who wear seat belts from those who don’t at coverage issuance.

          • Jim says:

            Yes and when they have claims that exceed their premiums, where does the money come from? If the riskier group in aggregate use more than the insurance company has collected, it’s paid for by float profits and the folks who have lower claim amounts. Where else could the money come from?

            The reason why you shouldn’t be allowed to go without coverage is that you won’t let yourself die if you happen to need it and not pay for it. Imagine the morally repugnant idea of a person having to sign a contract that said they would not go to the emergency room unless they were able to pay for the service up front and the hospital staff would face no legal or spiritual (or psychological) consequences for turning someone away. You accidentally get bitten by a rattlesnake but cannot prove your credit score is high enough to float you the $140,000 (or even $10,000, if you believe that figure is fabricated) for treatment. If people were willing to do that, i.e. die for their belief they shouldn’t be forced to buy healthcare, then I believe they should be. But people won’t. When sickness or death comes, they will do whatever they can to avoid it.

            So when you go in and get treatment, w/o insurance, and cannot pay for it, the other customers of the hospital bear the cost.

          • freeby50 says:

            “Life insurance is a great example of this, and potentially another entitlement the Government will consider after healthcare.”

            We already have it : Social Security survivor benefits.

    • Cindy, Spring Lake, Michigan says:

      You are exactly right. This is a house of cards that won’t take long to blow down. Why buy it if you don’t have to and are allowed to get it without worry of pre-existing conditions and wait times etc.? The penalty is too small to make people buy the insurance. The repercussions for small business are terrible. 50+ size groups who hire any low to middle income people that may offer an insurance plan will easily end up with $3000 fines. If one of their employees is a janitor and can’t afford the insurance offered and decides the subsidy is a better option for him, he can take that and then the group has to pay the $3,000 fine. Also if a the group has an employee with a couple, and the wife doesn’t work, $3,000 fine. This does not encourage growth in our small businesses. It penalizes many of the higher level management in businesses also if the other employees end up going with the subsidy, the group may end up dropping coverage entirely due to too many fines and the higher level employee will have to go out into the market to purchase on his own without benefit of subsidy help.

  14. I saw something interesting on Digg earlier today concerning the lawsuit(s) against this bill.

    They were saying that if the supreme court decides that forcing everyone to purchase insurance is unlawful or unconstitutional, then the private insurance industry will collapse.

    Why?

    Because insurance companies can’t deny coverage, people would just wait until they were sick to buy a policy.

    Obviously, this won’t be sustainable.

    Solution?

    Single payer healthcare.

  15. Heaven help us all as the nation moves from extraordinary to ordinary.

    Will we now celebrate March 23rd as National Dependence Day the same way we celebrate July 4 as Independence Day?

    • cubiclegeoff says:

      Unfortunately, this move started decades ago and has continued since. The current administration and current policies aren’t the beginning of the shift.

  16. Thanks for the informative post, Jim! It’s nice to see it broken down like that.

  17. shana says:

    Just a couple of notes:

    Dependents staying on the plan until age 26: there are actually 2 different rules about this. Within 6 months only dependents who don’t have another group health plan available to them will be eligible for coverage. In 2014, all dependents up to age 26 will be eligible. From what I’ve read however, the IRS is not planning on accordingly updating the tax code and dependents who are not eligible dependents will have to be charged the “fair market value” of the benefits attributable to them. (i.e. – the value of employee only health coverage will be added as imputed income into the employee’s paycheck)

    Over the counter drugs removed from Flexible Spending Accounts – On the Kaiser Family Foundation site, it shows that they will be removed in 2011. I don’t know which source is more accurate.

    The $2500 limit is only for Medical Flexible Spending Accounts – not HSAs. The limit is per household.

    The individual tax is the greater of $695 or 3x up to 2.5% of household income

    For some explanation of terms:

    Medicare Donut hole: For prescription costs of $2701-$6,154 – the Medicare member pays 100% of the cost. Below that members pay about 25% of the cost and above that they pay 5%.

    There’s not much else buried in the text of the bill. It’s a very, very boring read (and I enjoy that stuff!) and trying to read the reconciliation bill is a pain in the neck. It refers back to sections of the Senate bill and adds, modifies, and deletes paragraphs so you end up constantly flipping around.

  18. Nice breakdown on the points of the health care bill. I have mixed feelings about this. Personally I do not think this will do much damage to our healthcare system, because it does not work as it is.

    Some of the points I think will certainly put a burden on companies. I would like to see more in the controlling of healthcare costs, I think that is the real underlying issue.

    Think I am off base? Just look at the house your doctor lives in….

    • NateUVM says:

      Based on the number of years of training that goes into becoming a doctor and the value of the work that they do, I’d rather they keep their salaries right where they are, thank you. Makes me feel better that my Doctor/Surgeon is well paid.

  19. What about the IRS penalties on people who don’t buy or are covered by health insurance? Starting in 2014 you will be fined 1% of your gross income or $95, 2% the next year and 2.5% the year after that.

    • NateUVM says:

      Don’t forget that there is no penalty for the poor. Only those who, according to the Fed, can afford it, will have to pay a penalty.

  20. hoht says:

    Thanks for laying this out Jim.

    My eyes started getting blurry halfway through the bill.

  21. cubiclegeoff says:

    Here is some good info to kind of provide some truth about some ideas about the bill going around.

  22. ebekele says:

    Thanks for the break-down Jim!

    now we need doctors…

  23. Bonnie says:

    Jim, I normally really like your blog, but I would really prefer not to hear your political views and your drooling over what the far-left leadership that’s taken over the Democratic Party is doing to bankrupt America. As a PF blogger, I’m rather shocked that you’re all for government trying to tell us where to spend our money and diminishing our freedom to decide how to spend our own income. Entitlements are the opiates of the masses (sound familiar? If not, perhaps you shouldn’t be commenting on the role of government).

    • Bonnie,

      I agree also..

      The fact of the matter is more government involvement in our lives leads to more political discussion. Like it or not. Expect this to be more of the norm in the future and more in the PF blogosphere.

    • Jim says:

      Bonnie, I would prefer it if you didn’t insult me on my own site by claiming I’m drooling over anything. If you don’t like reading these types of posts, you are welcome to skip them. I kept politics entirely out of the content of the post. If you want to have a intelligent discussion, I would prefer if you use facts rather than claims like the government is bankrupting America on the basis of a bill that is, at least on paper, revenue neutral. Also, bankrupting America is a conservative political strategy, known as starve the beast, used to force the hand of government by burdening it with deficits. For deficits to be such a grave issue, after 8 years of Bush which included huge tax cuts and two wars, is disingenuous.

      I also think putting “pf bloggers” all in a bucket is dangerous, as many people come from all walks of life with different experiences and viewpoints. Do I like someone else telling me how to spend my money? No, but do I understand that the system, as it stands, is not sustainable? Yes. Did Republicans offer a serious alternative that we could’ve discussed? No.

      Last I remember, religion was the opiates of the masses, as stated by Karl Marx. And despite having heard that phrase before, unfortunately I missed the more popular conservative talk radio host Dennis Prager’s version of the phrase. I don’t listen to talk radio and I don’t think that’s a prerequisite to “commenting on the role of government.”

      As for drooling, I thought Bunning had a point about extending unemployment benefits without following PayGo rules, despite him voting for them previously. I don’t bucket myself into a political party, I choose what I like and I don’t let pundits fire me up over something I don’t actually understand.

      If you have facts, it makes for a more educated discussion, rather than just back and forth insults of one’s intelligence.

      • “the basis of a bill that is, at least on paper, revenue neutral.”

        So you are willing to bet me that it will not be
        deficit neutral in ten years?

        I have yet had anyone take me up on this offer. This offer is available to anyone who disagrees
        with my statement.

        Regardless if you are a R, D or I you are delusional to think this is deficit neutral. This is not just me but people, like little
        known bond trader Bill Gross. Wasn’t the Bush under estimated by the CBO?

        While I myself is more of a Libertarian, I’m not looking at it from the politics standpoint. I’m purely looking at it from an investment, economic standpoint. From that perspective, this law is awful in every aspect.

        • Jim says:

          No I won’t and I don’t think it will end up deficit neutral, but for that to be the basis of the argument by someone who cites conservative talk radio host quotes (and expects those quotes to be widely known) is unfair, wouldn’t you agree?

          When we are trending to spend 21% of our GDP in 2017 on health care and don’t rank near the top, isn’t that a bad investment of our healthcare dollars? Don’t we have to do something to hold those costs in check? For years the solution has been to do nothing and I really hoped Republicans could’ve come up with a bill to deal with these issues earlier, but they didn’t, they decided to not play ball at all.

          • HC IS broken without question. I agree about previous issues, but that’s the past. We are now stuck with law right? So IMHO it’s open game to discuss what’s in it and what it may (or may not) do in the future. We now have a known law. Like most previous law unintended results will most definitely occur. A recent example is Cash for Clunkers. The money was supposed to last 2 months? It ran out in less than a week.

            HC will still be broken, because in the end this is more of what we currently have. It’s crony capitalism at it’s best. This law will not control the HC costs. Coverage yes, control costs no.

            The only way this will occur is either the government controls all, or goes the completely reverse direction (free market). I don’t see how this existing law will keep things functional.

            The question everyone has to ask themselves, which do you prefer. A single payer, or free market system? And no what we currently have is nowhere near free market. The question you have to ask yourself who do you trust more? The “evil” government or “evil” businesses?

            If you think government is less evil, ask yourself how the process to get this bill into law went down? I can’t remember a more shameful way this law went down.

            Wouldn’t a business person be in jail for the same corrupt deals that went down? At least in a properly regulated free market you would have much better options. This law is either you pay a small fine or use your employer’s health care provider (which is usually just one provider). Some choice!

            I would like someone to explain to me how HC should not be setup like a true free market and how this would not work?

            Time will tell without question. Will I or anyone else be wrong in their predictions. Sure. One thing is for sure when you now are managing 1/6 of the economy, expect massive change. Good or bad.

            To relate back to this blog and PF. This will most definitely affect our investing, saving and tax decisions. The time is now to start planning your actions to navigate this change.

          • Jim says:

            Are you talking about the corrupt deals that are removed in the fix it bill? The Cornhusker deal for Nebraska and the union exemptions?

          • The LA deal is still there. Just the fact the process even existed. Remember Obama stated no pork.

          • tom says:

            “When we are trending to spend 21% of our GDP in 2017 on health care and don’t rank near the top, isn’t that a bad investment of our healthcare dollars?”

            Yes it is, but this bill does nothing to curb health care costs. It only mandates and opens access to insurance coverage. If health care cost is the problem, then investigate what the causes are and address them. Insurance is just the payment method. Without addressing cost of care, insurance premiums will just continue to rise. There is nothing in this bill to contain that. If costs are contained and managed, insurance will drop and be more affordable.

          • Jim says:

            Do you think a public option would’ve helped curb health care costs? A lot of people were against that, though I’m not entirely sure why. You pay up front or you pay over time, in the end you still pay.

            There are a few elements that address cost of care, like freezing Medicare payments to 2010 levels and adding preventative care (which presumably helps more in the long run). I don’t fully understand the implications of a public option but my feeling is that by having universal health care, with universal participation, costs go down with the economies of scale (that’s always been the argument anyway, right?).

          • tom says:

            I would be for a public option if it eliminated Medicare and Medicaid, and it was regulated by a highly visible government or corporate entity. I do think premiums (not costs) will go down at first, but eventually start rising again. It wouldn’t control cost of care, just cost of insurance.

            As I said before, they need to get to the root of the problem. What causes health care to cost so much? Administrative costs are one, malpractice insurance is another, defensive medicine, lack of preventative care, aging population, chronic diseases are just a few of the causes I’ve found.

            I couldn’t tell you how to combat them, but I’m sure a lot of people have solid ideas. I just wish this bill incorporated them.

          • cubiclegeoff says:

            I don’t know the ins and outs of the bill, but my understanding is that the bill does deal with administrative costs and defensive medicine and preventative care (that’s the point for having minimal insurance standards so everyone is covered for regular preventative care). There are of course other ideas and other things that need to be deal with and this bill doesn’t fix it all, but it’s a start.

            Thinking about the cost of care, rather than insurance, I would think insurance companies would be able to keep costs down. After all, if they don’t want to pay the costs of the provider, than can choose not to associate with them.

          • Yes, I believe the law does away with copays for preventative care.

            Which to mean sounds like it’ll save money.

        • Cindy, Spring Lake, Michigan says:

          this is not deficit neutral. junk in junk out. CBO is only as accurate as the info it is given. Also doctor fix that is coming next will end up with huge deficit.

    • cubiclegeoff says:

      Bonnie, Jim’s original post was not political at all and most of his comments so far have not been overly political.

      As for the government “telling us where to spend out money”, the government’s role is to protect the greater good. In health care, if someone without insurance needs treatment and can’t pay and is not insured because they choose not to be, we all end up with the bill. No matter what, we all need to pay for it, at some point or another, and requiring individuals to be insured lessens the burden on all of us for these situations. After all, we don’t allow individuals to steal from stores (even if they’re hungry and stealing food), which would raise prices for all of us so the store can make up for the loss, so why should we allow a similar situation in health care?

      As for taking away our freedom, I don’t see how we have any freedom in the health care system as it is. I can choose my doctor… from a list of approved doctors; I can choose my treatments or my doctor can choose the appropriate treatments… if the insurance company says its okay; I pay for insurance… but if I get sick and the company needs to pay up, I’ll be dropped and be stuck with a bill. Freedom to me is being able to have access basic health care no matter my situation.

  24. John says:

    The focus of the bill was to get coverage on the people who don’t have or want health insurance, not really to control cost. With all of the new rules in place for the insurance companies, it will increase costs.

    And seeing how large government entitlements work, it will only increase the deficit in time. As far as stating the Republicans had their chnace, I’m sorry to say they didn’t. They were left out in the cold, the bill was created without them.

    They wanted to start over with bipartisan input. The majority wouldn’t have it. The current administration owns this bill. All of the good, the bad and the ugly of it.

    • Jim says:

      Can you cite the instances in which Republicans wanted to be involved but were “shut out?” It seemed clear their strategy was to stop everything, which is a fair strategy but not one where you can come back later and claim you were shut out. They wanted a televised dialog and all they did was state they wanted to start over. How can someone agree to start over with someone if that someone’s stated goal was to stop everything? I want to understand the position of conservatives on this and I can accept disliking it because the bill it increases spending, it raises taxes, and it forces people do things they wouldn’t otherwise do. I can accept those disagreements even though I don’t personally agree with them, but to say Republicans were entire shut out, like they wanted to be involved, is a little unfair.

  25. Tracy says:

    Oh wow, I happened on to this sight to get my friend an online copy of this bill to read. Your one of those liberals huh. Your little breakdown you have up there is leaving a hell of a lot of info out, a hell of a lot. I have read the bill, studied the bill, comprehend the bill and I assure you the bill is not good for this country. Nice touch though, I will agree there are some good things about the bill, which are the only things you have broken down, but the bad as we know always comes with the good and the bad outweighs the good by a longshot, the ramifications of this bill will be horrendous. Do people a favor instead of injustice, let them know what else is in the bill, I can smell the sugar you’ve coated this page with from way down here.


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