Affordability Is Major Challenge for Reform : shailagh Murray and Lori Montgomery - By: Individual Health Insurance

Lawmakers in both parties raised concerns Thursday that the health-care reform bill offered by Senate Finance Chairman Max Baucus a day earlier would impose too high a cost on middle-class Americans and said they will seek to change the legislation to ease that potential burden.

The Baucus plan is the product of a year-long effort to find a middle ground between the expansion of government-run health care that liberal Democrats are seeking and the private insurance overhaul that many Republicans favor. But with finance panel members on both sides expressing concerns about the Baucus draft, major revisions could come through amendments in committee and on the Senate floor and in final negotiations with the House.

How to make insurance more affordable to the estimated 30 million uninsured people who would be required to buy coverage under the Baucus proposal is emerging as a central challenge as the long-awaited plan advances to full committee debate Tuesday. Democrats and Republicans alike worry that a bill intended to address one source of financial hardship -- the skyrocketing cost of health care -- could lead to another, in the form of hefty premiums.

"It's very clear that the driving issue of this debate is affordability, particularly for middle-class folks. And the Democratic caucus is very much committed to getting this issue right," said Sen. Ron Wyden (D-Ore.), a Finance Committee member who said he will offer amendments next week in an effort to improve affordability and choice.

Some Senate Democrats, along with a key moderate Republican, Sen. Olympia J. Snowe (Maine), are now discussing ways to increase assistance for individuals and families who could face premium costs of up to $15,000 per year by 2016. Sen. Charles E. Grassley (Iowa), the ranking Republican on Baucus's committee, is suggesting government assistance to insurance companies to help them control premium costs. And lawmakers in both parties are questioning whether Baucus's main revenue source, an excise tax on insurance companies for their most generous insurance policies, would simply be passed on to consumers. "They're legitimate concerns," said Baucus (D-Mont.). "I'm going to try to address them." But he added: "It's important to realize, compared to what? Today, insurance policies are so expensive, people tend to forget that, hey, this is a big improvement over the status quo."

The trick is to maintain the fiscal balance -- lowering the deficit over time -- that may be the Baucus bill's greatest selling point, as Democratic House and Senate leaders begin the arduous task of fusing five legislative efforts into a single final bill. The nonpartisan Congressional Budget Office estimates the Baucus proposal would spend $774 billion over the next decade to expand insurance coverage, while Baucus puts the cost of the entire package at $856 billion. Either way, it would be less than the $900 billion limit President Obama has set.

As his health-care overhaul slowly moves through Congress without Republican support, Obama turned to a solidly young, liberal audience on Thursday morning, rallying students at the University of Maryland to help him face the "defining struggle of this generation."

"When you're young, I know this isn't always an issue that you have at the top of your mind," he said at the university's Comcast Center. "You think you're invincible. That's how I thought."

Obama sought to ease concerns among young adults, who are now among the least likely to purchase health insurance, but who would be required to do so under the Baucus plan. Healthy 20-somethings are key to successful reform, because their payments to insurance companies would offset the costs of care for older adults.

The White House has endorsed one approach to covering more young people: allowing them to stay on their parents' insurance until age 26. Baucus chose a different approach, proposing the creation of a cheaper policy, one covering only the most dire and expensive medical emergencies, that would be offered exclusively to the same age group.

When Obama mentioned Baucus's bill Thursday, members of the crowd booed. Although moderate Democrats have expressed support for the proposal, liberal Democrats are disappointed that the senator rejected the idea of creating a government-run insurance plan to compete with private firms, and that his plan might force people to buy insurance without providing an adequate safety net. The Baucus plan attempts to make insurance more affordable through a variety of mechanisms, including lowering premiums for everyone who purchases coverage directly from an insurer rather than through their employer.

For low- and middle-income workers without access to employer-sponsored coverage, it also would create "exchanges" where people could shop for insurance at rates heavily subsidized by the government. The level of subsidy -- and therefore the amount a person would have to pay -- would vary by income.

In 2013, for example, people making 133 percent of the federal poverty level would have to pay no more than 3 percent of their income for premiums, while people earning 300 percent to 400 percent of the poverty level would have their premiums limited to 13 percent of earnings. Those caps would rise as the cost of insurance increased, however, climbing rapidly into a range that many lawmakers in both parties consider unaffordable.

In 2016, for example, the range would extend from 3.2 percent to 13.9 percent of income, pushing annual premiums to about $4,100 for an individual earning $32,400 a year, according to a preliminary estimate by the CBO. Add deductibles and co-payments, and that person could be spending $5,600 a year on health care, or 17.3 percent of his or her annual income.

For families buying insurance through the exchanges, the expenses are likely to mount even more rapidly, the CBO said. For example, a family of four making $78,000 would face insurance premiums of 13.9 percent of income, or $10,800, in 2016. Add deductibles and co-payments, the cost could rise to $15,300 -- just under 20 percent of income. Because the CBO estimate was completed early this month, before the plan was finalized, Baucus has made changes aimed at lowering the costs of some premiums, aides said.

The senator said the "most obvious" option would be to increase tax credits to households earning between 300 percent and 400 percent of the federal poverty level so their premium costs would be capped at a lower level. Some Democrats and Republicans have advocated scaling back the amount of coverage people would be required to buy, but Baucus noted, "I don't think that would be wise," because it would expose people to higher out-of-pocket costs.

The approach Grassley is recommending would create a reinsurance system under which the federal government would cover some of the claims filed by high-cost individuals. That would permit insurance companies to offer lower rates, according to Grassley, the senior Republican member of the bipartisan "Gang of Six" that had sought a consensus Finance Committee deal for months. And it could permit lawmakers to weaken the controversial mandate that requires everyone -- even the young and healthy -- to buy insurance.

All of the mechanisms under consideration, however, are likely to increase the overall price of the bill. "The numbers start to add up pretty quickly," Baucus said.

Another flashpoint among Democrats is the proposal to tax the insurance policies that cost more than $8,000 a year for individuals and $21,000 a year for families. Though the tax would affect only about 15 percent of policies, many of the beneficiaries are union workers who have bargained away wages in exchange for generous health plans.

House Speaker Nancy Pelosi (D-Calif.) said she is concerned that the cost of any excise tax would be passed on to consumers and would harm many middle-class households. But she did not reject the idea.

"I think if that is to be the model, we have to see at what cost to the person who is insured," she said.

While quibbling with some of Baucus's provisions, liberal Democrats acknowledged that his plan offers fiscal balance and comprehensive scope. Sen. Charles E. Schumer (N.Y.), a finance panel member, declined to comment on the Baucus bill, but he emerged from a meeting of Senate Democrats declaring that members were "really upbeat." He said: "We know we have to pull together. And we're feeling good."

"They're legitimate issues to talk about," Sen. Ben Cardin (D-Md.) said of the subsidies and the government-funded plan. "But quite frankly they're details to an overall plan that needs to pass."

Burden on Middle Class Is a Top Concern offers clients the easiest way to buy individual health insurance. Free services include instant online health insurance quotes, custom proposals for each client, free phone consultation, and 10-minute application by phone. Nobody does what we do for our clients!