A Comparative Analysis of Private Health Insurance Provisions of H.R. 3962 and Senate-Passed H.R. 3590

Congressional research reportJan 8, 2010

Ask Donna

What actually matters in this document.

Text

A Comparative Analysis of Private

Health Insurance Provisions of H.R. 3962

and Senate-Passed H.R. 3590

Chris L. Peterson, Coordinator

Specialist in Health Care Financing

Hinda Chaikind

Specialist in Health Care Financing

Bernadette Fernandez

Analyst in Health Care Financing

Paulette C. Morgan

Specialist in Health Care Financing

Janemarie Mulvey

Specialist in Aging Policy

Mark Newsom

Analyst in Health Care Financing

Jon O. Shimabukuro

Legislative Attorney

January 8, 2010

Congressional Research Service

7-5700

www.crs.gov

R40981

CRS Report for Congress

Prepared for Members and Committees of Congress

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Summary

On November 7, 2009, the U.S. House of Representatives approved health insurance reform

legislation, H.R. 3962, the Affordable Health Care for America Act. On December 24, 2009, the

U.S. Senate passed its version of health insurance reform, the Patient Protection and Affordable

Care Act, in H.R. 3590, as amended by the Senate (hereafter referred to simply as H.R. 3590).

Individuals currently receiving health insurance through a large employer would likely see the

least direct impact from the bills. The largest changes would occur in the private health insurance

market for small businesses and for nongroup coverage (currently, insurance obtained directly

from an insurance company, broker or agent). The most substantial of these reforms would not

take effect until 2013 under H.R. 3962, and in 2014 under the Senate bill. At full implementation,

the required private health insurance market reforms should be fully in place, along with

subsidies to certain low- and moderate-income individuals ineligible for Medicaid. At full

implementation, the bills would require most individuals to obtain and, in the House bill, for

larger employers to offer and contribute toward health insurance. Although the Senate bill does

not have an explicit “employer mandate,” employers who do not offer coverage could face

substantial penalties.

Shortly after enactment of either of the bills, all private health insurance would be subject to some

new requirements. For example, health insurers could not offer coverage with unreasonable

annual or lifetime limits on benefit payouts, and they could not cancel (“rescind”) policies unless

the policyholder had committed fraud. Many other provisions are detailed in the report.

After full implementation, although prior coverage could generally continue without meeting new

requirements (at least for a period of time), new coverage would have to meet federal standards

stipulated in the bills—and different requirements may apply depending, for example, on whether

the coverage is nongroup or employment-based. The bills also call for an exchange available in

each state, through which individuals not enrolled in (or, primarily in the Senate bill, not eligible

for) other coverage, as well as small businesses, could choose from private health insurance

plans. In addition, under the House bill, individuals obtaining coverage through an exchange

could also choose a “public option” established by the Secretary of Health and Human Services

(HHS). The public option would be appropriated start-up funding, but would ultimately have to

be self-sustaining through the premiums charged. Payments to providers (doctors, hospitals)

would be established through negotiations with the Secretary. The Senate bill would not include a

public option. However, the Director of the Office of Personnel Management would enter into

contracts with health insurance issuers to offer at least two multi-state qualified health plans

(MSQHPs) through each exchange in each state to provide individual, or in the case of small

employers, group coverage. Both bills also provide start-up funding for cooperatives, which

would be new, member-run, nonprofit entities that could offer health insurance through

exchanges.

Under the Senate bill, any participation in the exchange requires verifying citizenship or legal

residence status. Under H.R. 3962, such verification is only required for premium and costsharing subsidies. Under both bills, such subsidies would only be available through an exchange,

for qualifying low- to moderate-income individuals. Both bills would prohibit the subsidies from

paying any part of elective abortions. The House bill would also prohibit subsidies from going to

a plan that covers elective abortions. Besides the subsidies to individuals, small businesses would

be eligible for tax credits to help them pay toward their employees’ coverage. The Congressional

Budget Office (CBO) estimated the bills’ costs would be fully offset in both the 5- and 10-year

budget windows by increased excise taxes and other revenues and decreased spending.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Contents

Introduction ................................................................................................................................1

Reforms Prior to Full Implementation .........................................................................................4

Private Health Insurance Market Reforms at Full Implementation Date .......................................6

Essential Benefits........................................................................................................................7

Individual Mandate .....................................................................................................................8

Employer Mandate......................................................................................................................8

Small Business Tax Credit......................................................................................................... 10

Health Insurance Exchanges...................................................................................................... 12

Premium and Cost-Sharing Subsidies ........................................................................................ 13

Public Health Insurance Option/Multi-State Qualified Health Plans........................................... 16

Consumer Operated and Oriented Plan (CO-OP) Program......................................................... 17

Selected Revenue Provisions..................................................................................................... 19

Abortion ................................................................................................................................... 20

Verification of Immigration Status and Treatment of Noncitizens for Exchange Coverage

and Subsidies ......................................................................................................................... 22

Figures

Figure 1. Two Examples of Employer Penalties for Not Offering Coverage ............................... 11

Figure 2. Maximum Out-of-Pocket Premiums for Eligible Individuals, by Federal

Poverty Level......................................................................................................................... 15

Figure 3. Actuarial Values Reflective of Cost-Sharing Subsidies, by Federal Poverty

Level ..................................................................................................................................... 16

Tables

Table 1. Reforms Prior to Full Implementation .......................................................................... 24

Table 2. Private Health Insurance Market Reforms at Full Implementation Date........................ 42

Table 3.Essential Benefits ......................................................................................................... 58

Table 4. Individual Mandate...................................................................................................... 61

Table 5. Employer Mandate....................................................................................................... 64

Table 6. Small Business Tax Credit ........................................................................................... 68

Table 7. Health Insurance Exchanges ........................................................................................ 69

Table 8. Premium and Cost-Sharing Subsidies........................................................................... 74

Table 9. Public Health Insurance Option/Multi-State Qualified Health Plan ............................... 77

Table 10.Consumer Operated and Oriented Plan (CO-OP) Program........................................... 82

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Table 11. Selected Revenue Provisions...................................................................................... 85

Table 12. Abortion .................................................................................................................... 91

Table 13. Verification of Immigration Status and Treatment of Noncitizens for Exchange

Coverage and Subsidies ......................................................................................................... 94

Table 14. Other Provisions ........................................................................................................ 95

Contacts

Author Contact Information .................................................................................................... 104

Acknowledgments .................................................................................................................. 104

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Introduction

On November 7, 2009, the U.S. House of Representatives approved health insurance reform

legislation, H.R. 3962, the Affordable Health Care for America Act.1

Two Senate committees of jurisdiction also approved major health insurance reform legislation.

The Senate Health, Education, Labor and Pensions (HELP) Committee reported S. 1679,2 and the

Senate Finance Committee reported S. 1796.3 These bills were consolidated as S.Amdt. 2786,

further amended on the Senate floor, and passed in the Senate on December 24, 2009, as H.R.

3590, the Patient Protection and Affordable Care Act (hereafter simply referred to as H.R. 3590,

or the Senate bill).

This report compares many of the private health insurance provisions of H.R. 3962 and H.R.

3590. For each of the major private health insurance reforms, the report first gives a narrative

description of the context and current law, then describes where the House and Senate bills make

similar reforms and how their approaches differ. The narrative is then followed by more detailed

tables comparing these provisions under the following major topics, with the primary CRS

contact listed for each:

•

Table 1. Reforms prior to full implementation. Mark Newsom, 7-1686.

•

Table 2. Private health insurance market reforms at full implementation date.

Bernadette Fernandez, 7-0322.

•

Table 3. Essential benefits. Bernadette Fernandez, 7-0322.

•

Table 4. Individual mandate: the requirement on individuals to maintain health

insurance, with penalties and taxes for noncompliance. Hinda

Chaikind, 7-7569.

•

Table 5. Employer requirements to provide health insurance or potentially pay

penalties. Hinda Chaikind, 7-7569.

•

Table 6. Small business tax credit. Hinda Chaikind, 7-7569.

•

Table 7. Health insurance exchanges [Chris Peterson, 7-4681], through which the

following two items can only be offered:

•

Table 8. Premium and cost-sharing subsidies. Chris Peterson, 7-4681.

•

Table 9. Public health insurance option. Paulette Morgan, 7-7317;

Multi-state qualified health plans. Hinda Chaikind 7-7569.

•

Table 10. Cooperatives. Mark Newsom, 7-1686.

•

Table 11 Selected revenue provisions. Janemarie Mulvey, 7-6928.

•

Table 12. Abortion. Jon Shimabukuro, 7-7990.

CRS Report R40885, Private Health Insurance Provisions of H.R. 3962.

CRS Report R40861, Private Health Insurance Provisions of S. 1679.

CRS Report R40918, Private Health Insurance Provisions of S. 1796, America’s Healthy Future Act of 2009.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

•

Table 13. Verification of immigration status and treatment of noncitizens for

exchange coverage and subsidies. Ruth Wasem, 7-7342.

•

Table 14. Other provisions.

When possible, the tables were formatted to make comparisons easier between the bills and thus

may not follow the order of the legislative language. However, at the end of nearly every cell is

the specific bill reference of the provision described and, if applicable, the portion of current law

that is amended.

The first two tables (reforms prior to full implementation and private health insurance market

reforms) and the last table contain columns describing current law. However, the other tables do

not contain a current law column because little or no relevant current law exists. To the extent

some context or current law exists for these other topics, it is provided in the narrative.

In this report, “the Secretary” refers to the Secretary of Health and Human Services (HHS),

unless specified otherwise. Under H.R. 3962, “the Commissioner” refers to the Senate-confirmed

Commissioner of the Health Choices Administration, a new executive branch agency

(independent, similar to the Social Security Administration, SSA) who would establish standards

for certain health insurance plans, establish and operate the federal health insurance exchange

(though states would be permitted to create their own), and administer premium and cost-sharing

subsidies for qualifying individuals. Other terms and acronyms used throughout this report are the

following, with a description of how each applies to health insurance and financing under current

law:

•

ERISA: The Employee Retirement Income Security Act of 1974 provides for the

federal regulation of private-sector employee benefit plans. 4 Besides the

regulation of pension plans, ERISA also regulates welfare benefit plans that may

provide, among other things, medical, surgical and other health benefits. ERISA

applies to health benefit coverage offered through health insurance or other

arrangements (e.g., self-funded plans). In general, while ERISA regulates privatesector employee benefit plans and health insurance issuers providing group

health coverage, it does not cover governmental plans, church plans, or plans

with less than two participants.

•

IRC: The Internal Revenue Code of 1986 is the primary source of U.S. tax law,

pertaining to individuals, employers and others. The IRC regulates group health

plans, including church plans, but does not regulate health insurers.

•

PHSA: The Public Health Service Act includes many health related federal grant

programs, but it also regulates group health plans, health insurance issuers

providing group health coverage, coverage in the individual market, as well as

some governmental plans.

•

HIPAA: The Health Insurance Portability and Accountability Act of 1996 has

numerous provisions affecting private health insurance, insurers, and employerprovided plans. HIPAA was the first major federal law to make numerous

requirements specific to health insurance (e.g., restrictions on pre-existing

condition exclusions, guaranteed availability and renewability of plans for certain

CRS Report RL34443, Summary of the Employee Retirement Income Security Act (ERISA).

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

employers and individuals). HIPAA instituted its changes by amending ERISA,

the PHSA, and the IRC to create analogous requirements pertaining to preexisting conditions, for example, across the broadest spectrum of private health

coverage.

•

SSA: The Social Security Act contains the statutory requirements for certain

federal domestic social programs, including Medicare (Title XVIII), Medicaid

(Title XIX) and the Children’s Health Insurance Program (CHIP, Title XXI).

•

Group health insurance: Health insurance obtained by a group of people drawn

together by an employer or other organization, such as a trade union. To affect

group health insurance, federal law is typically amended in ERISA, the PHSA,

and the IRC.

•

Nongroup health insurance: Health insurance that individuals purchase not

through a group, but directly from an insurer or through an insurance broker or

agent. Sometimes referred to as “individual” or “individual market” insurance.

To affect nongroup health insurance, federal law is typically amended in the

PHSA.

•

Small group health insurance: Group health insurance typically obtained by firms

with between 2 and 50 workers, although some self-employed individuals are

considered “groups of one” for health insurance purposes in some states. To

affect small group health insurance, federal law is typically amended in ERISA,

the PHSA, and the IRC.

•

Self-insured health plans: A self-insured health plan is an employee benefit plan

under which an employer provides health benefits directly to plan participants, as

opposed to offering benefits through health insurance. Because self-insured plans

do not provide benefits though an insurer, they cannot be regulated by the states

(due to ERISA preemption). These plans are sometimes referred to as “selffunded plans.” (Many employers with self-funded plans use insurers, for a fee,

solely to assist with the administration of the health plan benefits—for example,

to pay doctors and hospitals the insurer’s negotiated rates—but the employer

bears the financial risk.) To affect self-insured plans, federal law is typically

amended in ERISA, the PHSA, and the IRC.

•

Health insurance issuer: Under ERISA and the PHSA, a health insurance issuer is

an insurance company, service, or organization that is licensed to engage in the

business of insurance in a state and is subject to state laws that regulate

insurance. This term does not include self-insured plans.

•

Group health plans: A term general enough to include self-insured plans.

•

NAIC: The National Association of [state] Insurance Commissioners.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Reforms Prior to Full Implementation

Health insurance reform is a major issue in the 111th Congress, driven predominantly by longterm and growing concerns around access, cost, and quality of care.5 The practices of some health

insurance companies have been cited as meriting immediate reform, such as unreasonable annual

or lifetime limits,6 rescissions,7 and discrimination against individuals with pre-existing

conditions.8 The cost, reflected in rising health insurance premiums, and the quality of care have

also been noted as significant concerns requiring immediate attention.9 These issues and other

items are featured in the immediate reform sections of both bills.

Some Common Features Between the Bills

As detailed in Table 1, both bills have provisions for immediate reforms that are either intended

to be permanent (e.g., prohibition on rescissions) or are temporary programs before the main

reforms take effect (e.g., high-risk pool program run by the Secretary). Both bills deal with the

aforementioned concerns around abusive health insurance practices and would include:

•

Restrictions on annual or lifetime limits on benefits for group or individual health

plans.

•

Prohibiting the practice of rescissions unless the member or policyholder has

committed fraud.

•

Creating a high-risk pool program for individuals with pre-existing conditions.

Both bills would also attempt to address cost issues involving health insurance premiums by

requiring rebates when non-claims costs exceed a defined percentage. Health insurers would also

have to publicly report financial data around their usage of premiums for coverage of services

versus administrative costs, and would have to provide justification for premium rate increases.

Other provisions would extend coverage in the group and individual markets to certain currently

ineligible dependents, and would create a reinsurance program to assist employer plans with the

cost of providing benefits to retirees who are 55 and older.

For an in-depth review of health reform issues see CRS Report R40517, Health Care Reform: An Introduction.

Annual or lifetime limits refer to the maximum dollar amount that a health plan will pay toward individuals’ covered

health care expenses.

Rescission refers to the practice of health insurance companies dropping coverage, sometimes after a member or

policyholder has become very sick and has filed claims for a substantial amount. Generally, in these cases the insurer

carefully reviews the member or policyholder’s application for coverage, and cites a discrepancy that permits canceling

the contract. Rescission applies not only at the time of cancellation but for the entire period the policy was in effect,

leaving the previously-enrolled individual financially responsible for all medical services received as if she was never

covered.

U.S. Congress, House Committee on Ways and Means, hearing on Health Reform in the 21st Century, 111th

Congress, 1st Session, April 22, 2009 (Washington: GPO, 2009). U.S. Congress, House Committee on Education and

Labor, hearing on Ways to Reduce the Cost of Health Insurance for Employers, Employees, and their Families, 111th

Congress, 1st Session, April 23, 2009 (Washington: GPO, 2009).

“American’s Health Future Act of 2009,” S.Rept. 111-89, Committee on Finance.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Some Differences

In general, the implementation dates prior to full implementation differ between the bills—with

most of the House provisions taking effect for plan years beginning with 2010, and in the Senate

bill for plan years beginning on or after the date that is six months after enactment. As detailed in

Table 1, there are also several provisions in one bill, but not in the other. Only H.R. 3962 has

immediate provisions that would reduce the look-back and exclusions periods for pre-existing

conditions, define domestic violence as not being considered a pre-existing condition, prohibit

plans from denying or delaying treatment for children with deformities, establish wellness

program grants, and extend coverage under the Consolidated Omnibus Budget Reconciliation Act

of 1985 (COBRA) until the exchange is operational in 2013. Only the Senate bill would, for

example, do the following:

•

Group health plans and health insurance issuers would be required to provide

coverage for preventive health services.

•

The Secretary would be required to develop standards for plans in the group and

individual markets for providing their enrollees with a summary of benefits and

coverage.

•

Sponsors of group health plans (other than a self-insured plan) would be

prohibited from establishing eligibility rules based on the salary of the employee.

•

The Secretary would be required to develop regulations for the group and

individual markets governing acceptable provider reimbursement structures that

improve quality of care.

•

Hospitals would be required to establish a list of standard charges for items and

services in accordance with guidelines published by the Secretary.

•

Group and individual plans would be required to have an effective appeals

process as part of an immediate reform.

•

Grants would be provided to states to establish supports to assist consumers with

filing complaints and appeals regarding enrollment, and to resolve problems with

obtaining premium credits.

•

The plan or issuer would be required to permit the designation of any

participating primary care provider or pediatrician who is available to accept the

individual.

•

If a group health plan or health insurance issuer covers emergency services they

would be required to cover those services without the need for any prior

authorization and without the imposition of coverage limitations irrespective of

the provider’s contractual status with the plan.

•

Centers established to collect medical reimbursement data would be required to

develop, and make publicly available, fee schedules and other database tools that

fairly and accurately reflect market rates for medical services.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Private Health Insurance Market Reforms at Full

Implementation Date

States are the primary regulators of the private health insurance market, though some federal

regulation applies, mostly affecting employer-sponsored health insurance.

Both bills would establish new federal standards and requirements applicable to the private

market, with the aim of increasing consumer access to health insurance, especially for persons

with pre-existing health conditions and for other higher-risk groups. These standards and

requirements relate to the offer, issuance, and renewal of insurance, applicable consumer

protections, and costs borne by consumers, employers, and health plans. The effective date of

these provisions is considered the “full implementation date,” when exchanges must be available,

premium subsidies are available to certain individuals, and mandatory Medicaid expansions must

be instituted—under H.R. 3962, January 1, 2013, and under the Senate bill, January 1, 2014.

Some Common Features Between the Bills

As detailed in Table 2, both bills would establish federal market reforms, including a prohibition

on coverage exclusions for pre-existing health conditions, guaranteed issue and renewability of

insurance, rating restrictions, nondiscrimination based on health factors, and other issues.

Nonetheless, both bills would allow for the application of state law to the private market, as long

as such laws do not interfere with the application of the federal reforms. Both bills would

establish consumer protections that impact the adequacy of provider networks, marketing

practices of health insurers, grievance and appeals processes, and disclosure of plan information.

Both bills would allow states to form compacts to facilitate the sale and purchase of health plans

across state lines.

Some Differences

Under H.R. 3962, the effective date for most of these provisions would be January 1, 2013; under

the Senate bill, the effective date would be January 1, 2014. Many of the market reforms

specified in the Senate bill would amend Title XXVII of the Public Health Service Act. H.R.

3962 would not amend an existing statute for purposes of reforming the private market.

While each bill would establish a type of qualified plan that meets new federal standards, H.R.

3962 would require more plans to meet the qualified plan requirements than the Senate bill (see

Table 2). Under H.R. 3962, all private health plans would eventually be subject to the qualified

plan rules, except for grandfathered individual health insurance plans. The Senate bill would

require only plans offered through the exchange to be qualified plans. The Senate bill would also

provide an innovation waiver for states with respect to requirements relating to qualified health

plans (QHPs), exchanges, cost-sharing reductions, tax credits, the individual responsibility

requirement, and shared responsibility for employers.

While both bills include consumer protections (e.g., establishing processes to appeal coverage

determinations, and providing consumers with plan information and assistance), many such

protections under the Senate bill would become effective prior to full implementation of the

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

private market provisions. In contrast, H.R. 3962 would make effective its consumer protections

at full implementation.

The Senate bill would establish a few programs to address the distribution of risk borne by health

plans: reinsurance, risk corridors, and risk adjustment. In general, these programs would provide

higher or extra payments to plans that experience greater claims relative to other plans, in order to

encourage the offer to and enrollment of high-risk individuals. The Senate bill also would

establish an option for states to contract to private plans to provide a basic health plan for lowincome individuals not eligible for Medicaid.

Essential Benefits

While there are a handful of federal benefit mandates for health insurance that apply to group

coverage, there are more than 2,000 cumulative benefit mandates imposed by the states. For

example, federal law requires that group health plans and insurers that cover maternity care also

cover minimum hospital stays for the maternity care, and if plans cover mastectomies they also

must offer reconstructive breast surgery. States have adopted mandates requiring coverage of

certain benefits (e.g., mammograms), health care providers (e.g., pharmacists), and populations

(e.g., adopted children).

Each bill specifies categories of benefits that must be covered under qualified plans, including

exchange plans. Also, each bill imposes cost-sharing limits, out-of-pocket spending limits, and

special rules regarding annual and lifetime limits that are applicable to essential benefits.

Some Common Features Between the Bills

As detailed in Table 3, both bills would define benefit packages that would be provided by

qualified plans. Such benefit packages would specify coverage for certain categories of essential

benefits, and impose rules regarding cost-sharing, benefit limits, and actuarial values based on

essential benefits.

Both bills would require the Secretary to adopt or specify essential benefits, based on broad

categories of benefits listed in the bills. Most of the categories listed are the same in both bills:

hospitalizations, outpatient/ambulatory services, prescription drugs, rehabilitation, mental health

care, substance use disorder services, preventive services, maternity care, and pediatric care.

Some Differences

The Senate bill would specify maximum deductible amounts applicable to the essential health

benefits package offered by small group plans, and would prohibit application of a deductible on

preventive services (see Table 3). In contrast, H.R. 3962 would prohibit any cost-sharing on

certain preventive services and vaccines recommended by specified federal entities.

While both bills would impose out-of-pocket spending limits, they specify the limits using

different methods. H.R. 3962 would establish out-of-pocket limits for individual and family

coverage during the first year of full implementation, then adjust them annually for inflation. The

Senate bill, in contrast, would use the amounts specified in the tax code applicable to certain

high-deductible health plans in those years.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

H.R. 3962 would prohibit the application of an annual limit on essential benefits. The Senate bill

would prohibit “restricted” annual limits from applying to essential benefits.

Individual Mandate

Currently federal law does not require individuals to have health insurance. Massachusetts, for

example, requires certain individuals to have health insurance. The state imposes a penalty for

each month individuals are without insurance, equal to 50% of the lowest premium for which

they would have qualified, to be collected through withholding of state income tax refunds (with

some exemptions allowed).

Most people in the United States have employer-sponsored health insurance. In 2008, 60% of the

U.S. population had employment-based health insurance. Other individuals may choose to obtain

coverage on their own in the nongroup market. Still others qualify for health coverage through

Medicare, Medicaid and other government programs.

Some Common Features Between the Bills

As detailed in Table 4, both bills would mandate most individuals to have health insurance, with

penalties for noncompliance for the first year of full implementation. Both bills would provide

qualified low-income individuals with subsidies to help pay for the costs of their premiums and

cost-sharing, while exempting other individuals such as non-resident aliens, individuals living

and working outside of the United States, individuals residing in possessions of the United States,

those with qualified religious exemptions, and others granted an exemption by the Secretary.

Some Differences

As detailed in Table 4, the penalty for non-compliance is different in the bills. The House bill

would impose a potentially larger penalty, tied to the lesser of (1) 2.5% of the taxpayer’s modified

adjusted gross income (MAGI) over the amount of income required to file a tax return, and (2)

the national average premium for applicable single or family coverage. The Senate bill would

impose a penalty, when fully phased in (2016), of no more than $750 for the year for each

individual, or up to 300% of the individual amount for the total for a family, indexed for inflation.

Employer Mandate

There is currently no federal requirement that employers offer health benefits. However, as noted

above, many employers choose to provide health insurance as part of the total compensation

package for their employees and, in many cases, their dependents. While ERISA does not require

an employer to offer health benefits, it does mandate compliance with certain requirements if an

employer chooses to offer health benefits, such as compliance with plan fiduciary standards,

reporting and disclosure requirements, and procedures for appealing denied benefit claims.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Some Common Features Between the Bills

As detailed in Table 5, both bills impose requirements on employers who offer health insurance

and on those who choose not to, effective in the first year of full implementation. Some

businesses would be exempt from the requirements, based on payroll or number of employees.

Some Differences

As detailed in Table 5, the House bill would mandate employers to provide health insurance, with

penalties for non-compliance. Employers with aggregate wages under $500,000 that chose not to

offer coverage would not be subject to penalties. The penalty would be phased in so that a firm

with aggregate wages above $750,000 would pay 8% of its average wages. While the Senate bill

would not specifically impose a mandate, it would create an employer responsibility that could

also result in penalties for non-compliance. Only firms with more than 50 full-time employees

could be subject to a penalty—but only if at least one of its full-time employees enrolled in an

exchange plan and received a premium subsidy. A special rule would apply to those employers

whose substantial annual gross receipts were attributable to the construction industry. For these

employers, instead of using the 50 full-time employee count for the employer requirement,

employers who employed an average of at least 5 full-time employees on business days during

the preceding calendar year and whose annual payroll expenses exceeded $250,000 for such

preceding calendar year would be subject to the employer requirements. The penalty imposed on

an employer that did not offer coverage would be $750 per employee for all the full-time

employees in 2014.

Figure 1 provides simplified examples for the first year of full implementation of how the bills’

penalties could differ for an employer that did not offer health insurance. (This figure does not

include the special rule for construction workers.) The top portion assumes that all the employer’s

workers are full time with annual wages of $50,000. The bottom portion is the same, but assumes

annual wages of $14,872, which is the annual wage of an individual working 40 hours per week

at $7.15 an hour, the current federal minimum wage. Given those wage levels, the figure

illustrates how the penalty for not offering coverage would differ, depending on firm size. (Not

illustrated in the figure is that under the Senate bill, an employer that did not offer coverage

would not be subject to a penalty if none of its employees obtained federally subsidized exchange

coverage. Thus, the figure assumes at least one employee obtains exchange subsidies.) While the

example assumes a 40-hour workweek for employees in each bill, under the Senate bill, “full

time” is defined as working on average at least 30 hours per week, and under the House bill “full

time” would be determined by the Commissioner.

Even employers offering health insurance could be subject to penalties or fees under each bill. In

the Senate bill, a firm offering health insurance with more than 50 full-time employees could pay

a penalty if any of its full-time employees received a premium credit in the exchange (which

could only occur in limited circumstances, described below in the section on premium and costsharing subsidies). In 2014, the annual penalty assessed to the employer for each such employee

would be $3,000 ($250 per month). However, the total annual penalty for an employer would be

limited to the total number of the firm’s full-time employees times $750 ($62.50 per month). In

the House bill, beginning in second full year of implementation, those employers with aggregate

wages above $750,000 would be assessed 8% of average wages for the number of employees who

decline the employer’s health insurance and obtain exchange coverage, regardless of whether or

not they receive a premium credit, with adjustments for small employers.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Small Business Tax Credit

Small businesses that choose to provide health insurance could be eligible for a credit toward

their cost of health insurance. Depending on the bill, these businesses may be exempt from any

employer responsibility to provide health insurance or any penalties for non-compliance. The

bills would offer an incentive to small businesses by helping pay for their employees’ coverage,

by offering a credit toward the purchase of health insurance.

Some Common Features Between the Bills

As detailed in Table 6, in the first year of full implementation, both bills would offer their full

credit to small businesses with 10 or fewer full-time employees and with average taxable wages

of $20,000 or less. Both bills would phase out the tax credit for average employee compensation

over $40,000 and as number of employees increased from 10 to 25.

Some Differences

As detailed in Table 6, the amount and duration of the credits are different in the two bills. The

House bill would begin to phase out the credit as average employee compensation exceeded

$20,000, while the Senate bill would begin to phase out the credit at $25,000. Additionally, only

the Senate bill would also provide credits to non-profit organizations. Only the House bill would

allow self-employed individuals to receive a credit.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Figure 1.Two Examples of Employer Penalties for Not Offering Coverage

Annualized tax penalty per employee

$5,000

$4,000

$3,000

H.R. 3962: Passed by

House

$2,000

H.R. 3590: Passed by

Senate

$1,000

100

Number of employees,

assuming all are full time with $50,000 annual wages

Anuualized tax penalty per employee

$5,000

$4,000

$3,000

H.R. 3962: Passed by

House

H.R. 3590: Passed by

Senate

$2,000

$1,000

100

Number of employees,

assuming all are full time with $14,872 annual wages

Source: CRS analysis.

Notes: Potential penalties shown are for 2013 under H.R. 3962 and for 2014 under H.R. 3590. Additionally,

analysis of Senate bill does not include the provisions relating to construction workers.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Health Insurance Exchanges

In addition to federalizing private health insurance standards, both bills would create health

insurance exchanges, similar in many respects to existing entities like the Massachusetts

Connector and eHealthInsurance, to facilitate the purchase of health insurance by certain

individuals and small businesses.

Some Common Features Between the Bills

An exchange would not be an insurer; it would provide eligible individuals and small businesses

with access to insurers’ plans in a comparable way (in the same way, for example, that

Travelocity or Expedia are not airlines but provide access to available flights and fares in a

comparable way). As detailed in Table 7, exchanges would have additional responsibilities as

well, such as negotiating with plans and determining eligibility for and administering premium

and cost-sharing subsidies.

Available exchange plans would be required to cover essential benefits and to limit costsharing/benefit-package options to a few standardized benefit tiers, designed for easier

comparison (though the bills differ in the specific levels). States could establish their own

exchanges or the federal government could establish exchanges in the states. In both bills,

multiple states could form a single exchange. Exchanges could work with other entities,

including state Medicaid agencies, to handle certain tasks, such as outreach, enrollment, and

eligibility determinations.

Similar criteria between the bills for individuals’ eligibility to enroll in an exchange plan are that

individuals would have to reside in the state and not be eligible for Medicaid. Certain small

employers could make coverage available to their workers through an exchange. Individuals

eligible for coverage offered directly by an employer (that is, not through an exchange plan)

could not apply their employer’s contribution toward coverage in an exchange plan, which would

deter people from dropping employer-sponsored insurance for exchange coverage.

Premium and cost-sharing credits for low- and moderate-income individuals (described in Table

8) would only be available through an exchange.

Some Differences

As detailed in Table 7, under the Senate bill, grants toward state exchanges would be awarded

within one year of enactment (even though federal premium subsidies, fully implemented market

reforms, and mandatory Medicaid expansions would not be in place until 2014); under H.R. 3962,

exchanges with fully implemented market reforms and premium subsidies would be functioning

in 2013. Under the Senate bill, after some start-up funding, exchanges would ultimately have to

be self-sustaining through assessments on participating plans or premiums; under H.R. 3962, the

exchanges would have permanent federal funding. After the exchange is fully operational, H.R.

3962 would require that new nongroup insurance be offered only through an exchange; the Senate

bill permits nongroup plans to be offered outside an exchange.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Unlike the House bill, the Senate bill would require individuals seeking to obtain exchange

coverage to prove they were lawful residents, even for individuals paying the entirety of their

insurance premiums.

The Senate bill would initially permit states the option to either define “small employers” eligible

to obtain exchange coverage as those with 100 or fewer employees or as those with 50 or fewer

employees; H.R. 3962 would initially permit employers with up to 25 employees to be exchangeeligible. When eligible small employers opt for exchange coverage, employers could not limit

workers’ choice of plans under the House bill, but could limit plan selection to a particular benefit

tier (e.g., silver) under the Senate bill.

Premium and Cost-Sharing Subsidies

Under current law, direct federal subsidies toward the purchase of private health insurance are

often narrow in scope—for a limited group of individuals (usually based on some hardship, such

as unemployment, or financial need) and/or for a particular amount of time. For example, the

Health Coverage Tax Credit (HCTC) is for certain workers displaced by international trade and

for retirees whose private pension plans were taken over by the Pension Benefit Guaranty

Corporation. 10 The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 as

amended by the Department of Defense Appropriations Act, 2010, P.L. 111-118) included

provisions to provide premium subsidies of 65% for health insurance coverage through COBRA

for the unemployed; the subsidy is available for up to 15 months to certain unemployed

individuals involuntarily terminated between September 1, 2008, and February 28, 2010. Both the

HCTC and the COBRA subsidies are paid to individuals as tax credits.

Particularly under health insurance reform proposals where individuals may be required to obtain

coverage, some individuals may need premium subsidies to help pay for coverage. However,

even when individuals have health insurance, they may be unable to afford the cost-sharing

(deductible and copayments) required to obtain health care. Thus subsidies may also be necessary

to lower the cost-sharing.

Some Common Features Between the Bills

As detailed in Table 8, both H.R. 3962 and the Senate bill would make certain individuals

eligible for premium and cost-sharing subsidies. Common eligibility criteria between the bills are

that individuals must have income below 400% of the federal poverty level (FPL),11 be enrolled

in an exchange plan (not through a qualifying employer), and be citizens or lawful residents12

who are not eligible for Medicaid.13 Under both bills, when the premium and cost-sharing credits

are first made available, they would only be available to individuals enrolled in the benefit tier

CRS Report RL32620, Health Coverage Tax Credit.

For a family of three in the 48 contiguous states in 2009, 400% FPL is $73,240. CRS computation based on “Annual

Update of the HHS Poverty Guidelines,” 74 Federal Register 4200, January 23, 2009, http://aspe.hhs.gov/poverty/

09fedreg.pdf.

See Table 13 for more information about the citizenship, lawful residence, and verification requirements.

Under H.R. 3962, citizens and qualifying aliens would be eligible for Medicaid up to 133% FPL in 2013, when the

premium credits would be available. Under the Senate bill, citizens and qualifying aliens would be eligible for

Medicaid up to 150% FPL by 2014, when the bill’s premium credits would be available.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

with an actuarial value of approximately 70% (a “basic” plan in the House bill and a “silver” plan

in the Senate).

Premium credits would be calculated to ensure that qualifying individuals pay no more than a

certain percentage of their income toward one of the less expensive basic or silver exchange

plans. If individuals choose a plan with a more expensive premium, they would be responsible

for paying the difference.

Individuals eligible for premium subsidies would also be eligible for cost-sharing subsidies.

Some Differences

As detailed in Table 8, like the required exchange, market reform and exchange provisions, the

premium and cost-sharing subsidies would be made available in 2013 under H.R. 3962 and in

2014 under the Senate bill. Under H.R. 3962, premium subsidies would be made directly from

the federal government to insurers, while the Senate bill provides the premium subsidies in the

form of advanceable, refundable tax credits to individuals.

Under H.R. 3962, individuals are not eligible for subsidies if they are eligible for employersponsored coverage as a full-time employee, or if they are enrolled in Medicare, Medicaid,

coverage related to military service, an employer-sponsored plan, a grandfathered plan, or other

coverage recognized by the Commissioner. Under the Senate bill, individuals are not eligible for

subsidies if they are eligible for that coverage—Medicare, Medicaid, CHIP, coverage related to

military service, an employer-sponsored plan, a grandfathered plan, or other coverage recognized

by the Secretary. An exception to the exclusion for those eligible for employer-sponsored

coverage in 2014 and after exists in H.R. 3962, if the employee’s contribution would exceed 12%

of income in 2014, and in the Senate bill, if the employee’s contribution would exceed 9.8% of

income or if the plan pays for less than 60% of covered expenses.

The percentage of income that credit-eligible individuals would have to pay toward premiums

differs between the bills. Below about 250% FPL, H.R. 3962 requires a smaller contribution (and

thus larger credits) than under the Senate bill; however, between roughly 250% and 400% FPL,

the Senate bill requires a smaller contribution by qualifying individuals toward premiums, as

illustrated in Figure 2.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Figure 2. Maximum Out-of-Pocket Premiums for Eligible Individuals,

by Federal Poverty Level

For first year credits are in effect—2013 for H.R. 3962, 2014 for H.R. 3590

12%

11%

Maximum % of income

paid out of pocket for premiums

10%

H.R. 3962: Passed by

House

H.R. 3590: Passed by

Senate

100%

150%

200%

250%

300%

350%

400%

Federal Poverty Level

Source: CRS analysis.

Notes: Under the Senate bill, citizens and qualifying legal residents at or below 133% FPL would be eligible for

Medicaid rather than premium credits. H.R. 3962 would extend Medicaid coverage to 150% FPL.

Compared to the Senate bill, H.R. 3962 would generally provide greater cost-sharing subsidies, as

illustrated in Figure 3, which shows the percentage of covered expenses to be paid by the plan

(i.e., actuarial value) after the cost-sharing subsidies are taken into account.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Figure 3. Actuarial Values Reflective of Cost-Sharing Subsidies,

by Federal Poverty Level

For first year credits are in effect—2013 for H.R. 3962, 2014 for H.R. 3590

100%

H.R. 3962: Passed by House

H.R. 3590: Passed by Senate

90%

80%

Actuarial value

70%

60%

50%

40%

30%

20%

10%

Up to 150%

151% 200%

201% 250%

251% 300%

301% 350%

351% 400%

Federal Poverty Level

Source: CRS analysis.

Public Health Insurance Option/Multi-State

Qualified Health Plans

One issue that has received congressional attention is whether or not to include either a publicly

sponsored health insurance plan or plans similar to those offered to Members of Congress and

federal employees through the Federal Employees Health Benefits Program (FEHBP), and if so,

to what extent should such offerings be required to follow the same rules as private insurers.

Currently, Medicare is an example of a federal public health insurance program for the aged and

disabled. Under Medicare, Congress and the Department of Health and Human Services (HHS)

Centers for Medicare and Medicaid Services (CMS) determine many parameters of the program.

These include eligibility rules, financing (including determination of payroll taxes and

premiums), required benefits, payments to health care providers, and cost-sharing amounts.

However, even within this public plan, CMS subcontracts with private companies to carry out

much of the administration of the program.

Under FEHPB, the Office of Personnel Management (OPM) is authorized to contract with

insurance carriers; approve qualified health benefits plans for participation in the program;

negotiate with plans about benefit and premium levels; determine the times and conditions for

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

open seasons during which eligible individuals may elect coverage or change plans; make

information available to employees concerning plan options; apply administrative sanctions to

health care providers who have committed certain violations; and administer the financing of the

program. OPM is responsible for maintaining the funds that hold contingency reserves for the

plans and the fund that receives premium payments from enrollees and employing agencies, from

which premiums are disbursed to participating plans.

Some Common Features Between the Bills

The public option in the House bill and the multi-state health qualified health plans in the Senate

bill could only be offered through the exchange.

Some Differences

As detailed in Table 9, the House bill would require the Secretary to establish a public health

insurance option available only to individuals eligible to purchase insurance through an exchange.

The Secretary would be given start-up funding and the authority to enter into contracts for the

establishment and administration of the public option. Premiums for the public option would be

set according to new market reform rules at a level sufficient to cover the cost of medical claims,

administration, a contingency margin, and repayment of the start-up funding. Payment rates for

providers would be established through negotiations with the Secretary. The House bill would

not allow states to opt out of the public option. Under H.R. 3962, the provider network for the

public option would be established by deeming Medicare-participating providers to also be

providers under the public option, unless the providers opted out in a process established by the

Secretary. The House bill would allow providers to participate in the public option either as

preferred or non-preferred providers, which would allow non-preferred providers to bill for

amounts above the established payment rates in a manner similar to physician participation rules

under Medicare.

The Senate bill does not include a public option. The Director of OPM would enter into contracts

with health insurance issuers to offer at least two multi-state qualified health plans (MSQHPs)

through each exchange in each state. Such plans would provide individual, or in the case of small

employers, group coverage. A health insurance issuer would be required to agree to offer a

MSQHP that met the requirements in each exchange in each state. States could require additional

benefits, but there would be no additional premium tax credit provided for the state-only

mandated benefits. Enrollees in a MSQHP would be treated as a separate risk pool from FEHBP.

Consumer Operated and Oriented Plan (CO-OP)

Program

Non-profit health insurance cooperatives have been promoted as entities that could help address

concerns around health care cost, quality, and consumer focus.14 The incentives of a cooperative

Health insurance cooperatives can either be collectively owned or governed. The former is a mutual insurance

company, and the latter is a non-profit health insurance company with a member controlled board of directors that

cooperatively governs the organization, but is neither compensated nor holds an equity stake in the firm.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

are assumed to align with members’ interests around lower cost and higher quality. However,

according to the National Cooperative Business Alliance (NCBA), there are very few health

insurance cooperatives currently operating.15 There are no current law incentives or funds for the

creation of new health insurance cooperatives.

Advocates of the CO-OP program argue that cooperatives would address the three categories of

concern by returning retained earnings16 directly to its members, or by investing in plan members

via lower premiums, lower cost-sharing, expanded benefits, and innovations such as wellness

programs, chronic disease management, and integrated care.17 This model of health insurance has

shown some promise with respect to quality in case studies of Group Health Cooperative of

Seattle and HealthPartners of Minnesota.18

Opponents assert that cooperatives have not been successful in most of the country and that

evidence is lacking that cooperatives would make health insurance more affordable. 19 Citing the

recent management issues at Blue Cross Blue Shield of North Dakota (BCBS-ND), which is a

cooperative (in particular, a mutual insurer), some consumer advocates have noted that

cooperatives do not always work in the interests of consumers.20 North Dakota Insurance

Commissioner Adam Hamm, after a recent investigation of BCBS-ND, stated that “[t]he bottom

line is that health care premiums are for health care, they are not for expensive retirement parties,

corporate jets, risky hotel investments or a compensation structure that rewards senior

management regardless of BCBS's financial performance.”21

Some Common Features Between the Bills

Both the Senate bill and H.R. 3962 propose establishing the CO-OP program to encourage the

creation of new health insurance cooperatives. As detailed in Table 10, both the Senate bill and

H.R. 3962 would appropriate funding, $6 billion and $5 billion respectively, to assist with

cooperatives’ start-up costs and to meet solvency requirements. Ultimately, the goal of the

program would be to foster the creation of new non-profit, health insurance cooperatives in one or

more states. Both bills propose that:

•

Grants would only be made to qualified plans.

August 5, 2009, NCBA letter to Senator Rockefeller

http://commerce.senate.gov/public/_files/NCBACoopResponseLetter080509.pdf.

Retained earnings are the net earnings not paid out as dividends, but retained by the company to be reinvested in its

core business or to pay debt.

Senator Kent Conrad, “FAQ about the Consumer-Owned and -Oriented Plan (CO-OP),” available online at

http://conrad.senate.gov/issues/statements/healthcare/090813_coop_QA.cfm.

D. McCarthy, K. Mueller, and I. Tillmann, “Group Health Cooperative: Reinventing Primary Care by Connecting

Patients with a Medical Home,” The Commonwealth Fund, July 2009, and D. McCarthy, K. Mueller, and I. Tillmann,

“HealthPartners: Consumer-Focused Mission and Collaborative Approach Support Ambitious Performance

Improvement Agenda,” The Commonwealth Fund, June 2009.

CNN, “Negotiations over health insurance co-ops at impasse,” June 23, 2009, available online at

http://www.cnn.com/2009/POLITICS/06/23/health.care/index.html.

“North Dakota Scandal Raises Concerns About Health Co-op Route,” Karl Vick, Washington Post, October 10,

2009, available online at http://www.washingtonpost.com/wp-dyn/content/article/2009/10/09/AR2009100904085.html.

“Hamm releases Blue Cross Blue Shield target exam report,” available online at

http://www.nd.gov/ndins/communications/pressreleases/detail.asp?newsID=204.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

•

Grants would only be made to cooperatives operating as a not-for-profit,

member-run insurance company.

•

Cooperatives that offered insurance on or before July 16, 2009, would be

prohibited from receiving funds.

•

Cooperatives would be required to incorporate ethical and conflict of interest

standards designed to protect against insurance industry involvement and

interference.

•

State governments would be prohibited from sponsoring a cooperative that could

receive grants under the proposed program.

•

Cooperatives receiving grants from the CO-OP program would be required to be

governed by the majority vote of their membership.

•

Cooperatives receiving grants from the program would be required to operate

with a strong consumer focus, including timeliness, responsiveness, and

accountability to their members.

Some Differences

As detailed in Table 10, the two bills differ primarily around the administrative structure and

oversight of the grant program. Under the Senate bill, the HHS Secretary would be charged with

administration and oversight of the program, whereas H.R. 3962 would establish the

Commissioner in that role. The Senate bill would also establish an Advisory Board to assist the

Secretary in making grant decisions. This provision does not exist in the House bill. The Senate

bill alone would also permit CO-OP grantees to establish a private collective purchasing council

to increase cost efficiencies.

There are also important differences with respect to appropriations, the tax code, and the

relationship of CO-OP plans to the exchange and the reformed market. Under the Senate bill, $6

billion, $1 billion more than the House bill, would be appropriated to fund the program. In both

bills, CO-OP grantees would be required to be not-for-profit plans, but under the Senate bill, the

IRC would be amended so that a CO-OP grantee’s tax-exempt status would be contingent upon

compliance with the regulations of the CO-OP program. Under the Senate bill, insurers’ plans

offered inside an exchange could also be offered outside the exchange; thus, CO-OP plans could

potentially be offered outside of an exchange. In the House bill, however, CO-OP program grants

would be specifically limited to health insurance cooperatives that provide insurance through an

exchange.

Selected Revenue Provisions

The House and Senate bills include a number of provisions to raise revenues in order to pay for

expanded health insurance coverage. Some of these provisions are directly related to current

health insurance coverage, and some are indirectly related. The bills’ revenue provisions are

similar in that they include a combination of excise taxes, high-income surcharges, and

limitations on tax-advantaged health accounts. They differ largely in how these taxes are levied

and the magnitude of tax.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Some Common Features Between the Bills

Both the House and Senate proposals modify current tax advantaged accounts used for health care

spending. As detailed in Table 11, they both limit flexible spending account (FSA) contributions

to $2,500 per account, increase penalties for non-qualified health savings account (HSA)

distributions from 10% to 20% for those under age 65, and change the definition of medical

expenses for FSAs, HSAs and health reimbursement accounts (HRAs) to exclude over-thecounter prescriptions not prescribed by a physician.

Some Differences

While both bills impose excise taxes, they vary based on whom the tax is levied on and the extent

of the tax. As detailed in Table 11, the Senate bill imposes a 40% excise tax on insurers of highcost health plans (defined as those with premiums exceeding $8,500 for single coverage and

$23,000 for family coverage in 2014) as well as an additional tax on health insurers based on their

market share. The Senate bill also imposes an excise tax on pharmaceutical manufacturers, while

the House bill does not. While both proposals levy an excise tax on medical device

manufacturers, the House bill imposes a sales tax of 2.5% on each non-retail sale of devices; the

Senate version levies an excise tax of $2 billion in the first few years of implementation, and each

device manufacturer pays a share based on the size of their sales. The House does not have this

provision. Finally, the Senate bill imposes a 10% excise tax on indoor tanning services; this

provision is not in the House bill.

Further, while both impose tax surcharges on high-income taxpayers, they vary in whether tax is

through the federal income tax or through payroll taxes. As detailed in Table 11, the House bill

imposes a 5.4% surcharge on individuals with modified gross income over $500,000 for singles

and $1 million for families. The Senate bill increases the Hospital Insurance portion of the

payroll tax by 0.9 percentage points on wages in excess of $200,000 for singles and $250,000 for

joint filers.

Abortion

H.R. 3962 and H.R. 3590 include provisions that address the coverage of abortion by health

benefits plans that would be available through an exchange. H.R. 3962 also discusses coverage by

a government-run health insurance option. Both measures distinguish between two types of

abortions: abortions for which federal funds appropriated for HHS may be used, based on the law

in effect six months prior to a plan year; and abortions for which such funds may not be used,

based on the law in effect six months prior to a plan year. The distinction between the two types

of abortions is premised on an existing funding restriction commonly referred to as the “Hyde

Amendment.” In 1976, Representative Henry J. Hyde offered an amendment to the Departments

of Labor and Health, Education, and Welfare Appropriation Act, 1977, that restricted the use of

appropriated funds to pay for abortions provided through the Medicaid program. 22 Since 1976,

similarly restrictive provisions have been included annually in the appropriations measures for the

Departments of Labor, HHS, and Education.

P.L. 94-439, § 209, 90 Stat. 1418, 1434 (1976) (“None of the funds contained in this Act shall be used to perform

abortions except where the life of the mother would be endangered if the fetus were carried to term.”).

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Section 507 of the Consolidated Appropriations Act, 2010, restricts the use of FY2010 funds

appropriated for HHS. Section 507(a) states: “None of the funds appropriated in this Act, and

none of the funds in any trust fund to which funds are appropriated in this Act, shall be expended

for any abortion.”23 An exception to the general prohibition on using appropriated funds for

abortions is included in section 508(a) of the measure:

The limitations established in the preceding section shall not apply to an abortion –

(1) if the pregnancy is the result of an act of rape or incest; or

(2) in the case where a woman suffers from a physical disorder, physical injury, or physical

illness, including a life-endangering physical condition caused by or arising from the

pregnancy itself, that would, as certified by a physician, place the woman in danger of death

unless an abortion is performed.24

In other words, FY2010 funds appropriated for HHS could be used to pay for an abortion if a

pregnancy is the result of an act of rape or incest, or if a woman’s life would be endangered if an

abortion were not performed. Such funds are unavailable, however, for elective abortions.

Some Common Features Between the Bills

As detailed in Table 12, H.R. 3962 and H.R. 3590 would restrict the use of federal funds to pay

for elective abortion services. Federal funds could be used, however, for abortions for which the

expenditure of federal funds appropriated for HHS is permitted. Both measures include

provisions to prohibit discrimination against health care providers and health care entities that

refuse to provide, pay for, provide coverage of, or refer for abortions. In addition, both measures

would preserve state laws regarding the prohibition or requirement of coverage or funding for

abortions, and state laws involving abortion-related procedural requirements. Federal conscience

protection and abortion-related antidiscrimination laws, including Title VII of the Civil Rights

Act of 1964, would not be affected by either measure.

Some Differences

As detailed in Table 12, H.R. 3962 would restrict coverage for elective abortions by a qualified

health benefits plan. If a plan includes such coverage, the entity that offers the plan would be

required to offer another plan that is identical in every respect, except that it does not cover

elective abortions. Under H.R. 3962, individuals would be permitted to purchase separate

supplemental coverage for elective abortions, but such coverage would have to be paid for

entirely with funds not authorized or appropriated by the measure. Because H.R. 3962 does not

permit any federal funds, including exchange premium subsidies, to be used to purchase either a

plan that includes coverage for elective abortions or supplemental coverage for elective abortions,

the measure does not include fund segregation requirements. In contrast, H.R. 3590 would allow

coverage of elective abortions by exchange plans, but would require enrollees in plans that

include such coverage to make two separate premium payments: one payment that reflects an

amount equal to the portion of the premium for coverage of services other than elective abortions;

H.R. 3288, 111th Cong. § 507(a) (2009).

H.R. 3288, 111th Cong. § 508(a) (2009).

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

and another payment that reflects an amount equal to the actuarial value of the coverage of

elective abortions.

Verification of Immigration Status and Treatment of

Noncitizens for Exchange Coverage and Subsidies

Among the many difficult issues in health reform are those surrounding noncitizen eligibility and

verification provisions.25 A noncitizen is anyone who is not a citizen or national of the United

States and is synonymous with the terms alien and foreign national. Noncitizens include those in

the United States permanently (e.g., legal permanent residents, refugees), those in the country

temporarily (e.g., students, temporary workers), and those who are in the country without

authorization.26 The Immigration and Nationality Act (INA) defines which noncitizens are legally

present in the United States.27

Some Common Features Between the Bills

As detailed in Table 13, legal permanent residents (LPRs) are treated similarly to U.S. citizens

under both bills. LPRs are mandated to obtain health insurance, are eligible to purchase insurance

through the exchange, and are eligible for the premium and cost-sharing subsidies if they meet the

other eligibility requirements. This consistency of treatment holds regardless of when they

entered the United States or whether they came initially as refugees or asylees.

Unauthorized aliens would not be eligible for the federal premium and cost-sharing subsidies in

either of the bills.

Both bills would use the individual’s name, social security number, and date of birth and would

rely on the Social Security Administration and the Department of Homeland Security to verify

citizenship and immigration status. The actual mechanics of the verification would differ as

discussed below.

Some Differences

As detailed in Table 13, H.R. 3962 would expressly require the Commissioner to verify

citizenship and immigration status of individuals seeking premium and cost-sharing subsidies.

(Under the House bill, such verification would not be required of exchange-participating

individuals who are not seeking federal subsidies.) The House bill would extend, with

modifications, the citizenship verification procedures as well as the noncitizen verification

procedures that currently apply to Medicaid and other federal means-tested programs to the

citizenship and immigration determination for the proposed premium and cost-sharing

CRS Report R40889, Noncitizen Eligibility and Verification Issues in the Health Care Reform Legislation, by Ruth

Ellen Wasem.

The three main components of the unauthorized resident alien population are (1) aliens who overstay their

nonimmigrant visas, (2) aliens who enter the country surreptitiously without inspection, and (3) aliens who are admitted

on the basis of fraudulent documents.

8 U.S.C. §1101 et seq.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

subsidies. 28 Among the modifications would be to enable the Commissioner to make the

eligibility determination. The Senate bill would rely on procedures currently used by Medicaid

(§1902(e) of the SSA) for individuals whose claims of citizenship or immigration status are not

verified with federal data.29 (The Senate bill would require such verification of all individuals

seeking exchange coverage, regardless of whether they would be federally subsidized or would

pay premiums entirely on their own.)

H.R. 3962 would exempt nonresident aliens from the individual mandate to obtain health

insurance; however, H.R. 3962 would require all noncitizens who meet the IRC definition of

resident alien (i.e., nonimmigrants, and unauthorized aliens who meet the substantial presence

test) to obtain health insurance. The House bill contains no express restrictions on noncitzens—

whether legally or illegally present, or in the United States temporarily or permanently—

accessing and paying for coverage available through an exchange. The Senate bill expressly

exempts unauthorized aliens from the mandate to have health coverage and bars them from the

health insurance exchange.

The proposed policies toward nonimmigrants (those admitted temporarily for a limited purpose,

such as students, visitors, or temporary workers) are more nuanced, in large part because some

classes of nonimmigrants reside legally in the United States for extended periods of time, some

are employed and taxed as a result of those earnings, and some are on a track to become LPRs.

§1137(d) of the SSA. For further discussion of current law on Medicaid citizenship verification, see CRS Report

RS22629, Medicaid Citizenship Documentation, by Ruth Ellen Wasem.

Section 1411 of H.R. 3590.

Congressional Research Service

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Table 1. Reforms Prior to Full Implementation

Topics for Table 1

Current Law

Primary location in bill

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Sections 101-115

Sections 1001-1105

Laws amended

ERISA, IRC, PHSA, SSA

PHSA

Effective date, unless

otherwise specified

For plan years beginning on or after January

1, 2010

For plan years beginning on or after the

date that is 6 months after enactment.

The bill would require that group or

individual coverage would not have an

aggregate dollar lifetime limit with respect

to essential benefits payable under the plan

or coverage.

Group health plans and health insurance

issuers offering group or individual plans

would be prohibited from establishing

lifetime or annual limits on the dollar value

of benefits for any participant or

beneficiary.

No lifetime or annual limits

States have the primary responsibility of

regulating the business of insurance and

may define state benefit mandates.

However, federal law requires that private

health insurance include certain benefits

and protections, for services covered by a

plan. HIPAA requires, for example, that

group health plans and insurers provide

parity in annual and lifetime limits for any

offered mental health benefits. However,

there are no specific prohibitions on

unreasonable lifetime or annual limits.

Aggregate dollar lifetime limits would be

defined as a dollar limitation on the total

amount that may be paid with respect to

benefits under the plan or health insurance

coverage for an individual or other

coverage unit on a lifetime basis.

§109: ERISA §716, IRC §9815, and PHSA

§§2709 and 2756

With respect to plan years beginning prior

to January 1, 2014, group health plans and

health insurance issuers may only establish

a restricted annual limit with respect to the

scope of benefits that are essential health

benefits as determined by the Secretary. In

defining the restricted annual limit, the

Secretary would ensure that there is access

to needed services available with minimal

impact on premiums.

Nothing in this section would prohibit a

group health plan or health insurance

coverage from placing annual or lifetime

limits on specific covered benefits that are

not essential health benefits to the extent

that such limits are otherwise permitted by

federal and state law. §1001as amended by

§10101 : PHSA § 2711

CRS-24

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Prohibition on rescissions

HIPAA permits nonrenewal or

discontinuation of coverage due to, among

other things, fraud or intentional

misrepresentation. Health insurers have

been found to use this provision to rescind

coverage based on answers given in the

application that are deemed to be

inaccurate. Some states regulate the

application process.

No later than 90 days after enactment, the

Secretary would issue guidance

implementing the prohibition on rescission

in the group and individual markets. This

guidance would limit the situations in which

an insurer may rescind, or cancel, a

person’s health insurance policy.

Rescissions would still be permitted in

cases where the covered individual

committed fraud.

The bill would generally prohibit rescissions

for a group health plan and a health

insurance issuer offering group or individual

health insurance coverage. Rescissions

would still be permitted in cases where the

covered individual committed fraud or

made an intentional misrepresentation of

material fact as prohibited by the terms of

the plan or coverage.

If a health insurance issuer determines to

rescind coverage they would be required

to provide the individual with notice prior

to the effective date of the rescission, and

would be required to provide the

opportunity for a review by an

independent, external third party under

procedures specified by the Secretary. If

individuals request a review, their coverage

would remain in effect until the

independent reviewer determines that the

coverage may be rescinded. §103: PHSA

§§2703, 2712, 2742, and 2746

A cancellation of coverage in this case

would require prior notice to the enrollee.

§1001: PHS §2712

The House bill contains a preventive health

services provision conceptually similar to

the Senate bill in terms of utilizing the

evidence based recommendations of the

United States Preventive Services Task

Force and the recommendations of the

Centers for Disease Control and

Prevention. However, the House bill would

not be part of the immediate reforms,

would not include the Health Resources

and Services Administration (HRSA), would

not include the breast cancer provisions,

and would not provide specific authority to

the Secretary to promulgate guidelines

allowing a group health plan and a health

insurance issuer to utilize value-based

insurance designs. The House provision

would take effect beginning in plan year

Under the bill, group health plans and

health insurance issuers in the group and

individual markets would be required to

provide coverage for preventive health

services and would not impose any cost

sharing requirements for them. These

preventive services would include:

● evidence-based items or services that

have in effect a rating of ‘A’ or ‘B’ in the

current recommendations of the United

States Preventive Services Task Force

(USPSTF);

● immunizations that have in effect a

recommendation from the Advisory

Committee on Immunization Practices of

the Centers for Disease Control and

Prevention (CDC);

● for infants, children, and adolescents,

Coverage of preventive

health services

CRS-25

Mandated benefits regulation of the private

health insurance market is primarily done

at the state level. State regulatory authority

is broad in scope and can include

requirements involving preventive health

services. Such rules vary from state to

state.

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

2013. See §222 Table 3- Categories of

essential benefits.

evidence-informed preventive care and

screenings provided for in the

comprehensive guidelines supported by the

Health Resources and Services

Administration (HRSA); and

● with respect to women, such additional

preventive care and screenings not

described by the USPSTF as provided in

comprehensive guidelines supported by

HRSA.

A plan or issuer would be permitted to

cover or deny additional services not

recommended by the USPSTF. For the

purposes of this section the current

recommendations of the USPSTF regarding

breast cancer screening, mammography,

and prevention would be considered the

most current other than those issued in or

around November 2009.

The Secretary would be permitted to

develop guidelines to allow a group health

plan and a health insurance issuer offering

group or individual health insurance

coverage to utilize value-based insurance

designs. §1001, as amended by S. Amdt.

2791 and 2808 : PHSA §2713

CRS-26

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Extension of dependent

coverage

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Federal law does not define who qualifies

for dependent coverage under employer

sponsored insurance or individual health

insurance policies. Under federal law, fully

insured and self-insured group plans can

define dependency in the group health plan.

However, some states have defined who is

eligible for dependent coverage under fully

insured group health plans, as well as

individual health insurance policies.

A group health plan and a health insurance

issuer offering coverage in the group or

individual markets that provided dependent

coverage would extend that coverage until

the individual is 27 years of age.

A group health plan and a health insurance

issuer offering coverage in the group or

individual markets that provided dependent

coverage would extend that coverage to

unmarried adult children until the individual

is 26 years of age.

A health plan or a health insurance issuer

would not be required to make coverage

available for a child of a child receiving

dependent coverage.

The group health plan or health insurance

issuer would be permitted for dependent

coverage to increase premiums consistent

with the standard established by the

Secretary for family coverage. §105: PHSA

§§2703 and 2746, ERISA §704, and IRC

§9804

The Secretary would be required to

promulgate regulations to define the

dependents to which coverage would be

made available.§1001: PHS §2714

Development of uniform

explanation of coverage

documents

States may regulate the summary of

benefits documents that plans send to their

members. Federal law regulates these

documents for federal programs such as

Medicare Advantage, but there are no

broad federal standards for private plans in

the group and individual markets.

No provision.

No later than 12 months after enactment,

the Secretary would develop standards for

plans in the group and individual markets

for providing their enrollees with a

summary of benefits and coverage. These

standards would preempt state law. Each

plan would provide the summary to an

applicant at the time of application, to an

enrollee prior to the time of enrollment or

re-enrollment, and to a policyholder or

certificate holder at the time of issuance of

the policy or delivery of the certificate.

§1001: PHS §2715

Prohibition of

discrimination based on

salary

Section 105 of the IRC permits certain

amounts received under accident and

health plans to be excluded from the

computation of taxable income. This

exemption is only permissible if, in general,

70% or more of all employees are eligible

to benefit under the plan, and all benefits

provided for participants who are highly

compensated individuals are also provided

No provision.

Under the bill, the sponsor of a group

health plan (other than a self-insured plan)

would be prohibited from establishing rules

relating to health insurance eligibility of any

full-time employee that are based on the

total hourly or annual salary of the

employee. In no way would eligibility rules

be permitted to discriminate in favor of

higher wage employees. The rules and

CRS-27

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

for all other participants.

H.R. 3590 (Senate-passed)

definitions of section 105(h) of the IRC

would similarly apply to this provision.

§1001as amended by §10101: PHSA §2716

Certain employees may be excluded

including: employees who have not

completed 3 years of service; employees

who have not attained age 25; part-time or

seasonal employees; employees not

included in the plan who are included in

unit of employees covered by an agreement

between employee representatives and one

or more employers which the Secretary

finds to be a collective bargaining

agreement, and employees who are

nonresident aliens and who receive no

earned income from the employer which

constitutes income from sources within the

United States.

Highly compensated individuals are defined

as one of the 5 highest paid officers, a

shareholder who owns more than 10% in

value of the stock of the employer, or

among the highest paid 25% of all

employees eligible to participate.

Ensuring the quality of care

CRS-28

Among other federal laws intended to

prevent discrimination, HIPAA established

certain requirements that are intended to

prevent group health plans and group

health insurance issuers from discriminating

against individual participants or

beneficiaries based on a health factor. In

particular, HIPAA prohibits a group health

plan or health insurance issuer from basing

coverage eligibility rules on health-related

factors including health status (physical or

mental), claims experience, receipt of

health care, medical history, genetic

information, evidence of insurability, or

disability. In addition, a group health plan or

health insurance issuer may not require

that an individual pay a higher premium or

contribution than another “similarly

No provision.

Under the bill, no later than two years after

enactment, the Secretary, in consultation

with certain experts, would be required to

develop and implement reporting

requirements for use by plans in the group

and individual markets with respect to

coverage benefits and health care provider

reimbursement structures that:

● improve health outcomes through use of

quality reporting, case management, care

coordination and chronic disease

management;

● implement activities to prevent

hospitalization readmissions;

● implement activities to improve patient

safety and reduce medical errors through

the use of best clinical practices, evidence

based medicine, and health information

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

situated” participant, based on these

health-related factors.

technology; and

● implement wellness and health

promotion activities.

HIPAA also clarifies that group health plans

and health insurance issuers offering group

health coverage may establish premium

discounts or rebates or modify otherwise

applicable copayments or deductibles (i.e.,

rewards) in return for adherence to

wellness programs. HIPAA regulations

provide a framework for structuring these

wellness programs and divide wellness

programs into two categories. First, if a

wellness program provides a reward based

solely on participation in a wellness

program, or if it does not provide a

reward, the program complies with HIPAA

without having to satisfy any additional

standards, as long as the program is made

available to all similarly situated individuals.

Second, if a reward is based on an

individual meeting a certain standard

relating to a health factor, then the

program must meet additional

requirements. Among these additional

requirements, a reward offered by this type

of wellness program must not exceed 20%

of the cost of employee coverage under

the plan (i.e., the amount paid by the

employer and the employee for that

employee for coverage).

Reducing health insurance

premiums and increasing

value

CRS-29

Many states require public reporting of

health insurance financial data such as

medical loss ratios (MLR), and require

approval of premium rate increases and

public release of the justification for the

requested increase. Medical loss ratios

generally refer to the percentage of

premium dollars that are spent on medical

care as opposed to administrative costs

H.R. 3590 (Senate-passed)

The Secretary would be required to

promulgate regulations that provide criteria

for determining whether a reimbursement

structure meets these elements.

This section also contains provisions

relating to gun rights. A wellness or

promotion activity could not require

disclosure or collection of any information

relating to lawfully possessed firearms or

ammunition. The authority provided to the

Secretary under the amendment (or an

amendment to the proposed legislation)

could not be construed to authorize and

could not be used for the collection of

information relating to the lawful

ownership, possession, use, or storage of a

firearm or ammunition, or to maintain

records of individual ownership or

possession of a firearm or ammunition. A

health plan would be prohibited from

increasing premium rates, denying health

insurance coverage, and reducing or

withholding a discount, rebate, or reward

offered for participation in a wellness

program on the basis of or on reliance on

the lawful ownership, possession, use or

storage of a firearm or ammunition.

§1001as amended by §10101: PHSA §2717

The bill would create a requirement that

each health insurance issuer that offers

coverage in the small or large group

markets would provide a rebate to its

enrollees if the coverage has a medical loss

ratio (MLR) below a level specified by the

Secretary (but not less than 85%).

The Secretary would establish a uniform

definition of the MLR including a

Issuers in the group and individual markets

(including a grandfathered health plan)

would be required to submit to the

Secretary a report concerning the ratio of

incurred loss (or incurred claims) plus the

loss adjustment expense (or change in

contract reserves) to earned premiums.

The report would also include the

percentage of total premium revenue, after

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

including profit. State regulations around

accounting procedures for calculating MLRs

vary.

methodology for calculating it. The

methodology would take into account the

special circumstances of smaller plans,

different types of plans, and newer plans.

The MLR would exclude state taxes and

licensing and regulatory fees. The method

for calculating a MLR would be established,

with exceptions if necessary, to ensure

adequate participation by issuers,

competition in the health insurance market,

and value for consumers.

accounting for risk adjustment, risk

corridors, and payments for reinsurance,

that the coverage expends on:

● reimbursement for clinical services;

● for activities that improve health care

quality; and

● on all other non-claims costs including an

explanation of the nature of such costs and

excluding federal and state taxes, licensing,

or regulatory fees.

The provisions of this section would also

apply to the individual market, except to

the extent that the Secretary determined

that the application of the MLR provision

would destabilize the existing individual

market. The provisions would sunset once

plans are offered via the exchange. §102:

PHSA §§2714 and 2754

Beginning on January 1, 2014 , this

calculation would be based on the averages

of the premiums expended on the costs for

each of the previous 3 years for the plan.

The Secretary would make these reports

available to the public.

Beginning not later than January 1, 2011, a

health insurance issuer offering group or

individual health insurance coverage

(including grandfathered health plans)

would provide an annual rebate to each

enrollee on a pro rata basis if the ratio of

the amount of premium revenue expended

by the issuer on clinical claims and health

quality costs, after accounting for taxes,

regulatory fees, risk adjustment, risk

corridors, and reinsurance, is less than 85%

in the large group market and 80% for the

small group and individual markets. States

would be permitted to increase the

percentages, but the Secretary may adjust

the state percentage for the individual

market if it is determined that the

application of 80% would destabilize the

market.

The Secretary would promulgate

regulations enforcing the provisions of this

section not later than January 1, 2011.

§1001 as amended by §10101: PHSA §2718

CRS-30

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Sunshine on health

insurance premium rates

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

States have broad authority to regulate

health insurance premiums and many have

sunshine provisions with respect to rate

increases.

As an initial review process, beginning in

2010, health insurance issuers would be

required to submit a justification for any

premium increases prior to implementation

of the increase following a process

developed by the Secretary and the states.

The Secretary would ensure the public

disclosure of information on premium rate

increases and their justifications. For a

continuing premium review process, state

insurance commissioners would provide

data to the Commissioner of the Health

Choices Administration on premium

increases and trends. States would make

recommendations to the Commissioner

concerning the exclusion of certain health

insurance issuers from participation in the

exchange based on a pattern of excessive

or unjustified premium increases.

The Secretary would, in conjunction with

the states, establish a process for the

annual review of unreasonable increases in

premiums for health insurance coverage

beginning in the 2010 plan year. Health

insurance issuers would be required to

submit to the Secretary, and the relevant

state, a justification for an unreasonable

premium increase prior to implementation

of the premium.

Beginning in 2014, the Commissioner in

conjunction with the states would, in the

place of the initial review process

conducted by the Secretary, monitor

premium increases of health insurance

coverage inside and outside of the

additional larger employers eligible to

participate in the exchange.

Reducing other health costs

and increasing value

CRS-31

Beginning with plan year 2014, the

Secretary, in conjunction with the states,

would monitor premium increases of

health insurance coverage within and

outside of the exchange.

From 2010-2014 the Secretary would

provide grants to the states for premium

monitoring activities. There would be

appropriated to the Secretary $1 billion to

be available for expenditure for these

grants. §104

The Secretary would carry out a program

of grants to states during the 5-year period

beginning with FY 2010 for carrying out the

premium review. There would be

appropriated to the Secretary $250 million

available for these grants. §1003: PHSA

§2794

No provision.

Each hospital would for each year establish

and update a list of the hospital’s standard

charges for items and services provided in

accordance with guidelines developed by

the Secretary. The list of charges would be

made public. §1001: PHS §2718

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Appeals process

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Section 503 of ERISA (codified at 29 CFR §

2560.530-1) requires that employee benefit

plans provide adequate notice in writing to

any participant or beneficiary whose claim

for benefits under the plan has been

denied, setting forth the specific reasons

for such denial, written in a manner

calculated to be understood by the

participant, and to afford a reasonable

opportunity to any participant whose claim

for benefits has been denied for a full and

fair review by the appropriate named

fiduciary of the decision denying the claim.

The House bill has an appeal process

provision similar to the Senate bill, except

that it would not build upon the

procedures set forth 29 CFR § 2560.530-1

and it would not involve the states. The

House provision is not part of the

immediate reforms and would take effect

beginning in the plan year 2013. See §232

Table 2-Grievance and appeals.

The bill would require that a group health

plan and a health insurance issuer in the

group or individual markets would

implement an effective appeals process for

coverage determinations and claims. The

process would at a minimum:

● have in effect an internal claims appeals

process;

● provide notice to enrollees of available

internal and external appeals processes,

and the availability of any applicable

assistance; and

● allow an enrollee to review their file,

present evidence and testimony and to

receive continued coverage pending the

outcome.

To comply with the requirements, group

plans would be expected to initially

incorporate the claims and appeals

procedures set forth at 29 CFR § 2560.5301 and would update their processes in

accordance with any standards established

by the Secretary of Labor. To comply with

the requirements, issuers offering individual

health coverage would provide internal

claims and appeals procedures set forth

under applicable law and updated by the

Secretary of HHS. §1001as amended by

§10101: PHSA §2719

CRS-32

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

Health insurance consumer

information

High-risk pools for

individuals with a preexisting condition

CRS-33

Traditionally, the states have operated their

own high-risk pools. Federal funding, most

recently via the Omnibus Appropriations

Act of 2009 (P.L. 111-8), has been available,

but the operation of high-risk pools

remains with the states.

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

No provision.

Authority is granted upon enactment, and

applicable to FY2010, for the Secretary to

award grants to states to establish, expand,

or provide support to states that choose

either to implement an Office of Health

Insurance Consumer Assistance or Health

Insurance Ombudsman. There would be

$30 million appropriated for the first fiscal

year of the program and an authorization

for appropriations, in such sums as

necessary. The Secretary would establish

criteria for the grant, and the Office of

Health Insurance Consumer Assistance or

Health Insurance Ombudsman would:

● assist with the filing of complaints and

appeals;

● collect, track, and quantify problems and

inquires;

● assist consumers with enrollment in a

group health plan or health insurance

coverage; and

● resolve problems with obtaining premium

tax credits. §1002: PHSA §2793

The Secretary would establish a temporary

national high-risk pool program to provide

health benefits to eligible individuals during

the period beginning on January 1, 2010,

and ending January 1, 2013. Individuals

would be eligible if they reside in the State

and are not covered by creditable

coverage, and who, during the 6-month

period ending on the date the individual

applies for the high-risk pool coverage,

applied for individual health insurance

coverage and:

● was denied because of a pre-existing

condition or health status; or

● was offered terms that limit the coverage

for such a pre-existing condition; or

● was offered coverage at a premium rate

that is above the premium rate for the

Not later than 90 days after enactment, the

Secretary would establish a temporary

high-risk pool program to provide health

insurance coverage for eligible individuals

during the period beginning on the date the

program is established and ending on

January 1, 2014. Appropriations would be

made in the amount of $5 billion for the

period of the program implementation to

January 1, 2014 to pay claims and the

administrative costs of the high-risk pool.

Individuals would be eligible if they are a

citizen or national, or lawfully present in

the US, have not been covered under

creditable coverage during the six-month

period prior to application for coverage in

the high-risk pool, and have a pre-existing

condition as determined following guidance

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

high-risk pool.

Appropriations would be made in the

amount of $5 billion for fiscal years during

the period of January 1, 2010 until the date

on which the Exchange is established to pay

claims and the administrative costs of the

high-risk pool. The Secretary would

establish criteria for determining whether

health insurance issuers and employmentbased health plans discouraged an individual

from remaining enrolled in prior coverage

based on that individual’s health status.

§101

Limitations on pre-existing

conditions exclusions

Under HIPAA, a plan is allowed to “look

back” 6 months for a condition that was

present before the start of coverage in a

group health plan. Coverage may be

excluded for pre-existing conditions found

via this look-back process for a period.

HIPAA limits the preexisting condition

exclusion period for most people to 12

months (18 months for late enrollment).

The term ‘‘late enrollment’’ means, that a

participant or beneficiary enrolls under the

plan other than during the first period in

which the individual is eligible to enroll

under the plan, or during a special

enrollment period. Special enrollment

periods are generally afforded to an

individual that did not enroll in coverage

because he/she had other coverage at the

time, but has now lost that other coverage.

For group coverage, the bill would reduce

the look back period for preexisting

conditions from 6 months to a 30-day

period. The bill would also reduce the

preexisting exclusion period from 12 to 3

months for timely enrollments, and 18 to 9

months for late enrollments.

The immediate provisions would take effect

for plan years beginning on or after January

1, 2010, but in the case of a group health

plan maintained by 1 or more collective

bargaining agreements, ratified before the

date of enactment, this section would not

apply to plan years beginning before the

earlier of the date on which the last of the

collective bargaining agreements terminates

or 3 years after the date of enactment.

§106: ERISA §701(a), IRC §9801(a), and

PHSA §2701(a)

H.R. 3590 (Senate-passed)

issued by the Secretary. The Secretary

would establish criteria to prevent issuers

and plans from dumping members into the

high-risk pool. §1101

The bill has a prohibition on preexisting

conditions exclusions provision, but it

would not be part of the immediate

reforms. This provision would not involve

reductions in the look back and exclusion

periods like the House. The Senate

provision would be part of the general

reforms for plan years beginning on or after

January 1, 2014. See §1201 Table 2Coverage for pre-existing health

conditions.

The immediate provisions sunset at the full

implementation date. See Table 2Coverage for pre-existing health

conditions.

Prohibition against postretirement reductions in

coverage

CRS-34

ERISA does not restrict an employer’s right

to reduce, eliminate, or make changes to

health insurance coverage. The only

H.R. 3962 would require that every group

health plan contain a provision that

expressly bars the plan from reducing the

No provision.

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Reinsurance for early

retirees

Current Law

H.R. 3962 (House-passed)

protections a retiree, or an employee,

might have are any contractual or union

agreements that specify any requirements

of health insurance.

benefits provided under the plan to a

retired participant, or beneficiary of such

participant, if such reduction affects the

benefits provided to the participant or

beneficiary as of the date the participant

retired, unless such reduction is also made

with respect to active participants. Nothing

in this section would prohibit a plan from

enforcing a total aggregate cap on amounts

paid for retiree health coverage that is part

of the plan at the time of retirement. §110:

ERISA §716

The Secretary would be required to create,

within 90 days after enactment, a

temporary reinsurance program to assist

participating employment-based plans with

the cost of providing health benefits to

eligible retirees who are 55 and older and

their dependents. A trust fund would be

created and funds appropriated in an

amount requested by the Secretary as

necessary, except that the total would not

exceed $10 billion. The Secretary would

reimburse the plan for 80% of the portion

of a claim above $15,000 and below

$90,000 (adjusted annually for inflation).

Amounts paid to the plan would be used to

lower costs directly to participants in the

form of premiums, co-payments, and other

out-of-pocket costs, but could be not used

to reduce the costs of an employer

maintaining the plan.

The Secretary would have the authority to

stop taking applications for participation in

the program or take such other steps in

reducing expenditures under the

reinsurance program in order to ensure

that expenditures under the reinsurance

program do not exceed the funds

available.§111

CRS-35

H.R. 3590 (Senate-passed)

Same as H.R. 3962 except that there

would be appropriated $5 billion to carry

out this program and the Secretary would

have the authority to stop taking

applications for participation in the

program based on the availability of

funding, but not the broader authority to

take other steps in reducing expenditures

in deficit situations. §1102 as amended by

§10102

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Immediate information to

identify affordable coverage

CRS-36

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Under the House bill, consumer

information to make coverage choices

would be provided by the Commissioner

under the outreach and enrollment

provisions for the exchange. The House

provision would not be part of the

immediate reforms. See §305.

The Secretary would be required, in

consultation with the states, to establish,

not later than July 1, 2010, an Internet

portal for beneficiaries to easily access

affordable and comprehensive coverage

options. This portal would implement a

standardized format for the presentation of

information including eligibility, availability,

premium rates, cost sharing, and the

percentage of total premium revenues

spent on health care compared to

administrative costs. The Internet website

would, to the extent practicable, provide

ways for residents of, and small business in,

any state to receive information on at least

the following coverage options:

● health insurance coverage offered other

than coverage that provides reimbursement

for the treatment of a single disease or

condition or an unreasonably limited set of

diseases as determined by the Secretary;

● Medicaid coverage and CHIP;

● a state high-risk pool (if applicable);

● the high-risk pool program under section

1101; and

● coverage within the small group market

for small businesses and their employees,

including reinsurance for early retirees

under section 1102, tax credits available

under section 45R of the IRC, and other

information specifically for small businesses

regarding affordable health care options.

§1103 as amended by §10101

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Domestic violence not

considered a pre-existing

condition

Under the PHSA, individuals cannot be

excluded from enrolling into coverage

because of evidence of insurability

(including conditions arising out of acts of

domestic violence). However, the PHSA

permits limitations or exclusions of benefits

relating to a preexisting condition. There is

no exception for acts of domestic violence

in the definition of a preexisting condition.

The bill would require that in the group

and individual markets, acts of domestic

violence would be prohibited from being

treated as a preexisting condition. §107:

ERISA §701(d)(3), PHSA §§2701(d)(3) and

2754, and IRC §9801(d)(3)

The Senate bill has a prohibition on

preexisting conditions exclusions, including

a specific prohibition against exclusions

based on domestic violence. The Senate

provision however, would not be part of

the immediate reforms. The Senate

provision would be part of the general

reforms for plan years beginning on or after

January 1, 2014. See §1201 Table 2.

Coverage for pre-existing health

conditions

Prohibiting denials and

delays of necessary

treatment for children with

deformities

States have broad authority to make

coverage mandates and requirements vary

between states. There are a limited number

of federal coverage mandates such as those

for mental health parity at section 2705 of

the PHSA.

The bill would require for both the group

and individual markets, coverage of any

outpatient and inpatient diagnosis and

treatment for a minor child’s congenital or

developmental deformity, disease, or injury.

A minor child would include any individual

who is 21 years of age or younger.

No provision.

Treatment would be defined to include

surgical procedures performed to improve

function or to approximate a normal

appearance. Such a term would not include

cosmetic surgery performed to improve

appearance or self-esteem. §108: ERISA

§715, IRC §9814, and PHSA §§2708 and

2755

CRS-37

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Wellness program grants

HIPAA clarifies that group health plans and

health insurance issuers offering group

health coverage may establish premium

discounts or rebates or modify otherwise

applicable copayments or deductibles (i.e.,

rewards) in return for adherence to

wellness programs. HIPAA regulations

provide a framework for structuring these

wellness programs and divide wellness

programs into two categories. First, if a

wellness program provides a reward based

solely on participation in a wellness

program, or if it does not provide a

reward, it complies with HIPAA without

having to satisfy any additional standards, as

long as the program is made available to all

similarly situated individuals. Second, if a

reward is based on an individual meeting a

certain standard relating to a health factor,

then the program must meet additional

requirements. Among these additional

requirements, a reward offered by this type

of wellness program must not exceed 20%

of the cost of employee coverage under

the plan (i.e., the amount paid by the

employer and the employee for that

employee for coverage).

By July 1, 2010, the Secretaries of HHS and

Labor would jointly award wellness

program grants to small employers in an

amount equal to 50% of the costs paid or

incurred in connection with a qualified

wellness program during the plan year.

Would largely codify an amended version

of the HIPAA wellness program

regulations.

CRS-38

Allowable costs would be those

attributable to the wellness program

(excluding the cost of food), and not to the

health plan or health insurance coverage

offered in connection with such a plan.

Grants for a given plan year would be

capped at $150 per employee, could be

provided for up to three years and would

be capped at $50,000, in total, for an

employer.

A qualified wellness program means a

program that is jointly certified by the

Secretaries of HHS and Labor meets at

least three out of four required

components. These components pertain to

health awareness, health education,

periodic screenings, employee engagement,

and listed behavioral change activities

(including smoking cessation and weight

reduction) and having supportive work

policies regarding tobacco use, food

choices, stress management, and physical

activity. §112

Wellness programs that do not require an

individual to satisfy a standard related to a

health factor as a condition for obtaining a

reward (or do not offer a reward) would

not violate HIPAA, so long as participation

in the programs is made available to all

similarly situated individuals.

Wellness programs with conditions for

obtaining a reward that are based on an

individual meeting a certain standard

relating to a health factor, must meet

additional requirements. Among these

requirements, the reward must be capped

at 30% of the cost of the employee-only

coverage under the plan (instead of 20%

under the current regulations), but the

Secretaries of HHS, Labor, and the

Treasury would have the discretion to

increase the reward up to 50%.

The HHS Secretary, in consultation with

the Secretaries of the Treasury and Labor,

would establish a 10-state pilot program in

which participating states would be

required to apply the wellness program

provisions to health insurers in the

individual market. §1201: PHSA §2705

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Extension of COBRA

Current Law

COBRA provides certain former

employees, retirees, spouses, former

spouses, and dependent children the right

to temporary continuation of health

coverage at group rates. Group health

coverage for COBRA participants is usually

more expensive than health coverage for

active employees, because the employer

usually pays part of the premium and they

do not under COBRA continuation.

However, COBRA continuation is typically

less expensive compared to insurance in

the individual market.

COBRA establishes required periods of

coverage for continuation health benefits.

COBRA plans may provide longer periods

of coverage beyond those required.

COBRA beneficiaries generally are eligible

for group coverage during a maximum of

18 months for qualifying events due to

employment termination or reduction of

hours of work. Certain qualifying events, or

a second qualifying event during the initial

period of coverage, may permit a

beneficiary to receive a maximum of 36

months of coverage.

CRS-39

H.R. 3962 (House-passed)

The bill would allow individuals to keep

their COBRA coverage until exchange

plans are available, in 2013.

As soon as practicable after the date of

enactment, the Secretary of Labor in

consultation with the Secretaries of HHS

and Treasury, and with plan administers

that provide or administer COBRA

continuation coverage, would establish

rules for continued availability of COBRA

continuation coverage.

This provision would supersede any state

(or political subdivision) law that would

have the effect of limiting or precluding

access to a state health benefits risk pool

solely by reason of the extension of the

COBRA coverage. §113

H.R. 3590 (Senate-passed)

No provision.

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

State Health Access

Program Grants

Current Law

H.R. 3962 (House-passed)

The State Health Access Program is a grant

program created and funded under the

Omnibus Appropriations Act of 2009 (P. L.

111-8). The program, operated by HHS,

awards grants to states to help them

expand access to affordable healthcare

coverage for people who are uninsured.

States may take a number of approaches,

including:

The Secretary would provide grant

program incentives for states to move

forward with a variety of health reform

initiatives prior to 2013. Grants could be

used for state insurance exchanges,

community coverage programs, reinsurance

plan programs, transparent marketplace

programs, automated enrollment programs,

innovative strategies, and purchasing

collaborative programs. §114

● shared community coverage;

● reinsurance plans that subsidize a certain

share of insurance carrier losses within a

certain risk corridor;

● subsidized high-risk insurance pools;

● health insurance premium assistance;

● insurance connector authority that

develops new, less expensive, portable

benefit packages for small employers, parttime, and seasonal workers;

● automated enrollment systems for public

assistance programs; and

● innovative strategies to insure lowincome childless adults.

Grants are made for 1 year and may be

extended to 4 additional years, based on

the availability of funds. Each state submits

an annual report to the Secretary, assessing

the state's use of funds and describing

progress in meeting project goals.

CRS-40

H.R. 3590 (Senate-passed)

No provision.

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 1

Patient protections

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Many states have laws defining network

adequacy or the number and distribution of

health care providers required to operate a

health plan. States may also have “any

willing provider” laws that require a health

plan to contract for the delivery of health

care services with any provider in the area

who would like to provide such services to

the plan's enrollees.

The House bill would require that QHBPs

that use a provider network would meet

the network adequacy standards

established by the Commissioner to ensure

enrollee access to services. The House bill

has no specific provisions with respect to

designation of a primary care provider,

emergency services, or obstetrical and

gynecological care as the Senate bill has.

The House network adequacy provision

would not be part of the immediate

reforms, but would take effect for plan

years beginning in 2013. See § 215

Under the bill, if a group health plan or

health insurance issuer in the group or

individual markets requires or provides for

designation by a participant, beneficiary or

enrollee of a participating primary care

provider, then the plan or issuer would be

required to permit the designation of any

participating primary care provider who is

available to accept the individual. This same

provision would apply for pediatric care.

Mandated benefits regulation of the private

health insurance market is primarily done

at the state level. State regulatory authority

is broad in scope and can include

requirements involving preventive health

services. Such rules vary from state to

state.

Traditionally, health insurance plans pay

out-of-network providers based on their

usual and customary rate (UCR). The UCR

is defined generally as the usual fee for a

procedure charged by the majority of

physicians with similar training and

experience within the same geographical

area. Private companies, such as Ingenix,

generally collected and reported UCRs.

However, on October 27, 2009, New York

Attorney General Cuomo announced a

settlement agreement with Ingenix that

created a new not-for-profit company,

FAIR Health, Inc., and a research network

headquartered at Syracuse University to

develop a new independent database for

consumer reimbursement. There is no

federal law regulating these activities.

CRS-41

If a group health plan or health insurance

issuer in the group or individual markets

covers emergency services they would be

required to cover those services without

the need for any prior authorization and

without the imposition of coverage

limitations irrespective of the provider’s

contractual status with the plan.

Patients would also have protected access

to obstetrical and gynecological care. A

group health plan or health insurance issuer

in the group or individual markets would be

prohibited from requiring authorization or

referral by the plan, issuer, or any person in

the case of a female participant, beneficiary,

or enrollee who seeks coverage for

obstetrical and gynecological care.

The House bill has no provision with

respect to academic or other non-profit

institutions collecting medical

reimbursement data.

Centers established at academic or other

non-profit institutions to collect medical

reimbursement data would be required to

develop fee schedules and other database

tools that fairly and accurately reflect

market rates for medical services and the

geographic differences in those rates. They

would also be required to make these data

and any statistical methodologies used

publicly available. §10101: PHSA §§2719A

and 2794

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Table 2. Private Health Insurance Market Reforms at Full Implementation Date

Topics for Table 2

Location in bill

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Sections 201, 202, 211-217, 231-237, 239,

251, 309

Sections 1201, 1251, 1253, 1301, 1311,

1321, 1324,1333, 1341-1343

Law amended

Effective date of market

reforms (“full

implementation”), unless

specified otherwise)

CRS-42

Public Health Service Act (amends Title

XXVII)

Beginning January 1, 2013. §201(b)

Plan years beginning on or after January 1,

2014. §1255, as amended (and redesignated

from §1253) by §10103(f)

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Qualified plans

CRS-43

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Current law: Existing federal and state law

and regulations concerning the private

market generally distinguish between

coverage obtained from the group market

and coverage obtained from the individual

market. In turn, some laws and regulations

distinguish between small groups and large

groups. For example, the federal Health

Insurance Portability and Accountability Act

(HIPAA) defines small groups as those with

2-50 employees; however, some states

include self-employed “groups of one” in

their small group definition.

Beginning 2013, a qualified health benefits

plan (QHBP) would be a health plan that

meets the new federal requirements

regarding private health insurance

standards, essential benefits (including costsharing), as detailed in Table 3. Essential

Benefits, and consumer protections. Only

QHBPs may be offered in an exchange, but

may be offered outside of an exchange.

Existing employment-based plans must

meet the QHBP standards by 2018, except

for limited benefit plans. QHBPs include

qualified health benefits plans offered

through the CO-OP program or the Public

Health Insurance Option. The

Commissioner would allow a QHBP to

provide coverage through a qualified direct

primary care medical home plan, as long as

the QHBP meets all applicable

requirements and the medical home

coordinates with the issuer offering the

QHBP. §§201(b), 202(b), 303, 310, 321

A qualified health plan (QHP) would be a

health plan that has been certified by each

exchange through which such plan is

offered as meeting a specified list of

requirements related to marketing, choice

of providers, plan networks, and other

features, and provides the essential health

benefits package (detailed in Table 3.

Essential Benefits). A QHP issuer would

be licensed and in good standing with each

state in which it would offer coverage;

would offer at least one QHP each

providing silver and gold levels of coverage;

would charge the same premium for a plan

regardless if it was offered in or out of the

exchange (including through an insurance

agent); and would comply with regulations

applicable to exchanges. QHPs include

qualified health plans offered through the

CO-OP program or the Community Health

Insurance Option. §1301

An individual would not be compelled to

enroll, or not enroll, in a QHP or

participate in the exchange. A qualified

individual could enroll in any QHP, except

in the case of a catastrophic plan (described

below). A QHP, or exchange, would be

prohibited from imposing a penalty on an

individual who cancels enrollment in such a

plan because the individual becomes eligible

for minimum essential coverage (previously

defined) or minimum essential coverage

becomes affordable to that person.

§1312(d)(3)-(4)

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

Consumer choice and

employer offer of qualified

plans

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Individuals would be allowed to enroll in

any QHP available to them.

Grandfathered plans

Employers who are qualified to offer

coverage through the exchange may

comply with the employer mandate by

offering any QHBP offered through the

exchange. Employees of such employers

would be able to choose any QHBP

available to them. §302(e)

Employers who are qualified to offer

coverage through an exchange would be

allowed to offer any level of coverage

(bronze, silver, gold, or platinum).

Employees of such employers would be

able to choose any QHP that offers the

level of coverage elected by such

employers. §1312(a)

Existing individual health insurance plans

would be grandfathered indefinitely, as long

as there are no changes to the terms or

conditions of the coverage, except as

required by law. Grandfathered individual

health insurance plans would be prohibited

from enrolling new individuals after the full

implementation date, unless such

individuals are dependents of an enrollee

who had such coverage prior to that date.

Existing group health insurance plans would

be grandfathered until 2018 at which time

they would be required to comply with the

QHBP standards, except for limited benefit

plans. §202(a)-(b)

On date of enactment, existing individual

and group plans would be grandfathered.

Enrollees could continue and renew

enrollment in a grandfathered plan

indefinitely. Enrollment would be limited

to those who were currently enrolled,

their families, or for grandfathered

employer-sponsored insurance to new

employees and their families.

Grandfathered plans would still be subject

to a couple of market reforms: uniform

explanation of coverage documents and

reporting of medical loss ratio and other

information. See Table I,

“Development of uniform

explanation of coverage documents”

and “Reducing health insurance

premiums and increasing value.”

§1001: PHSA §§2716, 2718

Existing group plans subject to one or

more collective bargaining agreements

would be grandfathered until the date on

which the agreement terminates, at which

time the immediate reforms and private

market reforms would apply.

§1251, as amended by §10103(d)-(e)

Coverage for pre-existing

CRS-44

The federal Health Insurance Portability

and Accountability Act (HIPAA) limits the

A QHBP would be prohibited from

excluding coverage for pre-existing health

Group health plans and issuers in the

individual and group markets would be

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

health conditions

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

period of time when coverage for preexisting health conditions may be excluded

under group coverage for individuals who

meet HIPAA eligibility criteria. HIPAA

prohibits such coverage exclusions for

HIPAA-eligible individuals with coverage in

the individual market. Some states have

imposed requirements regarding coverage

for pre-existing health conditions for

covered persons who are not eligible for

HIPAA protections.

conditions, or placing limits on coverage

based on health status, medical condition,

claims experience, receipt of health care,

medical history, genetic information,

evidence of insurability, disability, or source

of injury (including conditions arising out of

acts of domestic violence) or similar

factors. §211

prohibited from excluding coverage for

pre-existing health conditions. For

enrollees under age 19, this provision

would become effective beginning 6 months

after date of enactment. §1201: PHSA

§2704, as amended by §10103(e)

A relevant provision, which would modify

current HIPAA standards applicable to preexisting coverage exclusions, would be

implemented before the full

implementation date, and sunset at the

implementation of Sec. 211. See Table 1,

“Limitations on pre-existing

conditions exclusions.” §106

Another relevant provision, which would

prohibit an act of domestic violence from

being regarded as a pre-existing condition,

would be implemented before the full

implementation date, and would not sunset.

See Table 1, “Domestic violence not

considered a pre-existing condition.”

§107

CRS-45

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Guaranteed issue,

guaranteed renewability,

and health insurance

rescissions

CRS-46

Current Law

H.R. 3962 (House-passed)

HIPAA requires that coverage sold to all

small groups (2-50 employees) must be

sold on a guaranteed issue basis—that is,

the issuer must accept every small

employer that applies for coverage. Also,

HIPAA guarantees the availability of a plan

to HIPAA-eligible individuals seeking

coverage in the individual market. HIPAA

guarantees the renewability of coverage in

the individual and group markets for all

enrollees. “Guaranteed renewal” in health

insurance is the requirement on an issuer

to renew group coverage at the option of

the plan sponsor (e.g., employer) or

individual coverage at the option of the

enrollee. Guaranteed issue and renewal

alone would not guarantee that the

insurance offered was affordable.

Individual and group health coverage would

be offered on both a guaranteed issue and

guaranteed renewal basis. Health insurance

rescissions would be prohibited, except in

cases of fraud. §212

H.R. 3590 (Senate-passed)

Individual and group health insurance

issuers would be required to offer

coverage on a guaranteed issue and

guaranteed renewal basis. §1201: PHSA

§§2702, 2703

A relevant provision, which would prohibit

rescissions except in instances of fraud,

would be implemented before the full

implementation date, and would not sunset.

See Table I, “Prohibition on

rescissions.” §1001: PHSA §2712

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Rating rules

CRS-47

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

There are no federal rating rules for the

private health insurance market. Most

states currently impose premium rating

rules on insurance carriers in the small

group market, and some states have such

rules in the individual market. The

spectrum of existing state rating rules

ranges from pure community rating to

adjusted (or modified) community rating, to

rate bands, to no restrictions. Under pure

community rating, all enrollees in a plan pay

the same premium, regardless of their

health, age or any other factor related to

insurance risk. As of December 2008, only

two states (New Jersey and New York) use

pure community rating in their nongroup

markets, and only New York imposes pure

community rating rules in the small group

market. Adjusted community rating

prohibits issuers from pricing health

insurance policies based on health factors,

but allows it for other key factors such as

age or gender. Rate bands allow premium

variation based on health, but such

variation is limited according to a range

specified by the state. Rate bands are

typically expressed as a percentage above

and below the index rate (i.e., the rate that

would be charged to a standard population

if the plan is prohibited from rating based

on health factors). Some states have

enacted rating rules in the individual and

small group markets that include geography

as a characteristic on which premiums may

vary. In these cases, the state has

established rating areas. Typically, states

use counties or zip codes to define those

areas.

A QHBP would be required to determine

premiums using adjusted community rating

rules. Premiums would be allowed to vary

based only on age (by no more than a 2:1

ratio based on age categories specified by

the Commissioner), premium rating area

(as permitted by states or the

Commissioner), and family enrollment (so

long as the ratio of family premium to

individual premium is uniform, as specified

under state law and consistent with

Commissioner rules). §213

The Senate Amendment would impose

adjusted community rating rules, but only

on issuers in the individual and small group

markets, with some exceptions. Premiums

for those markets would vary based only

on the following risk factors: self-only or

family enrollment; rating area, as specified

by the state; age (by no more than a 3:1

ratio across age rating bands established by

the Secretary, in consultation with the

National Association of Insurance

Commissioners (NAIC)), and tobacco use

(by no more than 1.5:1 ratio). If a state

allows large group issuers to offer coverage

through that state’s exchange, these rating

rules apply to all coverage in that market,

except for self-insured plans. §1201: PHSA

§2701, as amended by §10103(a)

Any issuer in the individual or small group

market would be required to consider all

enrollees in all plans offered by the issuer in

the applicable market as members of a

single risk pool, including enrollees not

enrolled in such plans offered through the

exchange. §1312(c)

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Non-discrimination in

health insurance coverage

based on health factors

HIPAA established federal rules regarding

non-discrimination based on health statusrelated factors. It prohibits group issuers

from establishing rules for eligibility and

premium contributions based on health

status-related factors. Those factors

include health status, medical condition

(including both physical and mental

illnesses), claims experience, receipt of

health care, medical history, genetic

information, evidence of insurability

(including conditions arising out of acts of

domestic violence) and disability. In

addition, the Genetic Information

Nondiscrimination Act of 2008 prohibits

issuers in the individual health insurance

market from establishing eligibility rules

(including continued eligibility) based on an

individual’s genetic information. The Paul

Wellstone and Pete Domenici Mental

Health Parity and Addiction Equity Act of

2008, as amended, requires parity in

coverage for large groups (more than 50

employees) by prohibiting disparities in the

coverage of physical illnesses and mental

health and substance abuse problems in

terms of annual or lifetime dollar limits on

mental health benefits, treatment

limitations and out-of-network coverage.

A QHBP would be required to comply with

standards established by the Commissioner

prohibiting discrimination in health benefits

and benefit structures that build on existing

HIPAA nondiscrimination rules. Existing

rules concerning (1) no requirement on

group plans to provide mental health

benefits, and (2) no impact of limited

mental health parity on terms and

conditions relating to the amount, duration,

or scope of mental health benefits, would

apply to QHBPs, regardless of whether

coverage is offered in the individual or

group market. §214

Group health plans and issuers in the

individual and group markets would be

prohibited from basing eligibility (including

continued eligibility) for coverage on health

status-related factors. Such factors include

health status, medical condition (including

both physical and mental illness), claims

experience, receipt of health care, medical

history, genetic information, evidence of

insurability (including conditions arising out

of acts of domestic violence), disability, and

any other health status-related factor

determined appropriate by the Secretary.

However, the offering of premium

discounts or rewards based on enrollee

participation in wellness programs would

be permitted, so long as the conditions for

obtaining such reward meets standards

specified in the section. §1201: PHSA

§2705

HIPAA established special rules for plans

that establish networks of health care

providers. HIPAA allows small group

issuers to (1) limit the employers that apply

for coverage to those firms with eligible

individuals who live or work in the network

service area, and (2) deny coverage to small

employers if the issuer demonstrates (if

required) to the state that it has limited

provider capacity due to obligations to

existing enrollees and is applying this

decision uniformly without regard to claims

A QHBP that uses a provider network

would be required to comply with network

adequacy standards that may be established

by the Commissioner. Such a QHBP would

provide a current listing of all providers in

its network on the plan’s website and the

exchange’s website. §215

Provider network adequacy

CRS-48

A related provision, which would prohibit

insurance eligibility rules based on salary,

would be implemented before the full

implementation date, and would not sunset.

See Table 1, “Prohibition of

discrimination based on salary.”

§1001: PHSA §2716, as amended by §10101

The Secretary would, by regulation,

establish criteria for the certification of

qualified health plans. A QHP would be

certified if it ensured a sufficient choice of

health care providers, and provided

enrollees with information on the

availability of in-network and out-ofnetwork providers, among other

requirements. §1311(c)

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

experience or health status-related factors.

HIPAA also prohibits a small group issuer

that has denied coverage in any service

area to offer small group coverage in that

area for 180 days after the denial.

Fair marketing

requirements

States have established fair marketing

standards to prohibit insurers from

marketing their insurance products only to

healthy individuals and groups.

The Commissioner would establish uniform

marketing standards for QHBPs. Such

standards would apply to QHBPs outside of

the exchange only to the extent specified

by the Commissioner. §§231, 234

A QHP offered through the exchange

would meet marketing requirements and

not employ practices that would discourage

enrollment by individuals with significant

health needs. §1311(c)

Grievance and appeals

ERISA does not require an employer to

offer health benefits, but does mandate

compliance to certain standards if an

employer chooses to offer health benefits,

such as procedures for appealing denied

benefit claims to the plan (“internal

appeals”). In addition, as of February 2008,

44 States and the District of Columbia

mandate the independent review of benefit

denials by an entity outside of the health

plan (“external review”).

A QHBP would be required to provide

timely grievance and appeals mechanisms in

compliance with standards that would be

established by the Commissioner. Internal

claims and appeals processes would

incorporate the existing ERISA

requirements. The Commissioner would

establish an external review process to

provide an independent, de novo review of

denied claims. Nothing in this section

would be construed as affecting the

availability of judicial review under state law

for adverse decisions. §232

A relevant provision, concerning internal

and external appeals processes, would be

implemented before the full

implementation date, and would not sunset.

See Table 1, “Appeals process.” §1001:

PHSA §2719

Grievance and appeals standards would

apply to QHBPs outside of the exchange

only to the extent specified by the

Commissioner. §234

Information transparency

and plan disclosure

CRS-49

ERISA requires applicable health plans (as

well as other “welfare benefit” plans) to

The Commissioner would appoint a

Qualified Health Benefits Plan Ombudsman

to receive and provide assistance with

grievances. among other responsibilities.

§,244

Another relevant provision, regarding

grants to states for the

establishment/expansion of a health

insurance ombudsman, would be

implemented before the full

implementation date; authority would be

applicable to FY 2010 only. See Table 1,

“Health insurance consumer

information.” §1002: PHSA §2793

A QHBP would be required to notify plan

enrollees of any decrease in coverage or

A relevant provision, concerning the

development of standards applicable to the

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

CRS-50

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

disclose and report certain plan

information to enrollees and regulators.

For example, plan administrators must

provide to enrollees a written summary

plan description (SPD) which contains the

terms of the plan and the benefits offered,

including any material modifications, and

the SPD must be written in a manner that

can be understood by the average enrollee.

Certain plans must file an annual report

with the Department of Labor, containing

information about the operation, funding,

assets, and investments of those plans.

increase in cost-sharing at least 90 days

prior to the effective date of such changes.

§217

disclosure of benefit and coverage

information, would be implemented before

the full implementation date, and would not

sunset. See Table I, “Development of

uniform explanation of coverage

documents.” §1001: PHSA §2715

QHBPs in the exchange would be required

to comply with disclosure standards

established by the Commissioner

concerning plan terms and conditions,

claims payment policies, plan finances,

claims denials, and other information as

determined appropriate by the

Commissioner. The Labor Secretary

would harmonize such disclosure standards

for application to group plans. The

Commissioner would require such

disclosures to be provided in plain language.

QHBPs would be required to disclose costsharing requirements to enrollees and

comply with standards established by the

Commissioner to ensure transparency

regarding reimbursements between the

plan and health care providers. A

pharmacy benefit manager (PBM), under

contract with a QHBP, would be required

to provide information to the

Commissioner and QHBP: volume of

prescriptions filled, aggregate average

payments per prescription for mail order

and retail sales, and other information.

Information disclosed by a PBM would be

considered confidential, and disclosure of

such information would be prohibited

except for specified purposes. On an

annual basis, the Commissioner would

develop a public report assessing the

overall impact of PBMs on prescription

drug prices and spending. Disclosure of a

specific PBM, retailer, manufacturer or

wholesaler, or other confidential or

proprietary information would be

prohibited. A PBM that fails to provide

information required under this section or

PBMs that manage prescription drug

coverage under a contract with a Medicare

Part D drug plan or a qualified health plan

offered through an exchange would be

required to share certain financial

information with the Secretary, the plans

the PBMs contract with through Medicare

Part D, or the exchanges in a manner,

form, and timeframe specified by the

Secretary. Specifically, PBMs would be

required to disclose information on: (1) the

percent of all prescriptions that are

provided through retail pharmacies

compared to mail order pharmacies, and

the generic dispensing rates for each type

of pharmacy that is paid by the PBM under

contract; (2) the aggregate amount and

types of rebates, discounts or price

concessions that the PBM negotiates on

behalf of the plan and the aggregate amount

of these that are passed through to the

plan sponsor, and the total number of

prescriptions dispensed; and (3) the

aggregate amount of the difference

between the amount the plan pays the PBM

and the amount that the PBM pays the

retail and mail order pharmacy, and the

total number of prescriptions dispensed.

This information would be considered

confidential and would be protected by the

Secretary. §6005

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

knowingly provides false information would

be subject to penalties specified in Sec.

1927(b)(3)(C) of the Social Security Act.

§233

The disclosure and transparency

requirements would apply to QHBPs

outside of the exchange only to the extent

specified by the Commissioner. §234

Timely payment of claims

Under Medicare Advantage (MA), private

health plans are paid a per-person amount

to provide all Medicare-covered benefits

(except hospice) to beneficiaries who

enroll in their plan. MA plans include

health maintenance organizations (HMOs)

and private fee-for-service (PFFS) plans.

MA PFFS plans are required to pay 95% of

"clean claims" (defined as a claim that has

no defect or impropriety, and is submitted

with all the required documentation) within

30 days of receipt. The 30-day rule also

applies to claims submitted to any MA

organization by a provider who does not

have a written contract with the plan. All

other claims from non-contracted

providers must be paid within 60 days. MA

organizations that contract with providers

(i.e., HMOs and PPOs) must include a

prompt payment provision in their

contracts.

QHBPs would be required to comply with

the prompt pay requirements used under

Medicare Advantage. §235

No provision.

Coordination and

subrogation of benefits

While there are no federal statutes

specifying primary and secondary payment

rules when individuals are covered by

multiple insurers in the private market, the

Medicare program may provide an

example. The Medicare Secondary Payer

(MSP) program identifies specific conditions

under which another party pays first and

Medicare is only responsible for qualified

secondary payments. It authorizes several

methods to identify cases when an insurer

The Commissioner would establish

standards for the coordination of benefits

and reimbursement of payments in cases

involving individual and multiple plan

coverage. §236

No provision.

CRS-51

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

other than Medicare is the primary payer

and to facilitate recoveries when incorrect

Medicare payments have been made. Under

certain conditions, the law makes Medicare

the secondary payer to insurance plans and

programs for beneficiaries covered through

(1) a group health plan based on either

their own or a spouse's current

employment; (2) auto and other liability

insurance; (3) no-fault liability insurance;

and (4) workers' compensation situations,

including the Black Lung program.

Dependent coverage

Michelle’s Law (P.L. 110-381) ensures that

dependent students enrolled in postsecondary education who take a medically

necessary leave of absence do not lose

health insurance coverage. The federal law

provides that a group health plan may not

terminate a college student's health

coverage because the student takes a leave

of absence from school or changes to parttime status due to health conditions. The

leave of absence must be medically

necessary, begin while the student is

suffering from a serious illness or injury,

and would otherwise result in a loss of

coverage. Many states currently require

carriers to extend dependent coverage

under a family policy to young adults until

those individuals reach a certain age or no

longer satisfy other eligibility criteria, e.g.,

full-time college enrollment. As of January

2009, 30 states had coverage rules for

dependent adults in either the group

market or individual market or both.

A QHBP would be required to provide to

the policyholder the option of keeping

qualified dependent children on the family’s

health insurance policy, as long as the child

is under 27 years of age and is not enrolled

in any other health plan. The QHBP would

be allowed to increase premiums to

provide coverage to such dependents, as

long as the premiums are consistent with

the rating rules specified in Sec. 213. §216

A relevant provision affecting health

insurance coverage of dependent children

would be implemented before the full

implementation date, and would not sunset.

See Table I, “Extension of dependent

coverage.” §1001: PHSA §2714

Interstate compacts

The federal McCarran-Ferguson Act affirms

that states are the primary regulators of

insurance, including health insurance. Laws

regulating health insurance vary by state

and cover a wide spectrum of issues,

including licensure, solvency, benefit

Beginning on January 1, 2015, states would

be allowed to form health care choice

compacts for the purpose of facilitating the

sale and purchase of individual health

insurance plans across state lines. The

Secretary would request the NAIC to

No later than July 1, 2013, the Secretary, in

consultation with NAIC, would promulgate

regulations for interstate health care choice

compacts, which could be entered into

beginning January 1, 2016. Under such

compacts, QHPs would be offered in all

CRS-52

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

mandates, rating rules, and consumer

protections.

CRS-53

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

develop model guidelines by January 1,

2014 for the creation of such compacts,

which would subject coverage sold in

multiple states participating in the compact

to the laws and regulations of one primary

state, but preserve the authority of each

secondary state to enforce specific rules

(e.g., consumer protection standards). By

January 1, 2015, the Secretary would make

grants available to states for activities

related to regulating health insurance

coverage sold in secondary states. H.R.

3962 would authorize for appropriations

such sums as necessary to implement the

compact provisions from FY2015 through

FY2020. §309

participating states, but insurers would still

be subject to the consumer protection laws

of the purchaser’s state. Insurers would be

required to be licensed in all participating

states and to clearly notify consumers that

a policy may not be subject to all the laws

and regulations of the purchaser’s state.

The bill would also require that states

enact a law to enter into compacts and to

obtain approval of the Secretary, but only if

the Secretary determines that the compact

will provide coverage that is at least as

comprehensive and affordable, to at least a

comparable number of residents, as would

otherwise be provided. Moreover, the bill

would require that the compact would not

increase the federal deficit or weaken

enforcement of state consumer protection

laws. §1333

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

State flexibility to establish a

Basic Health Program

There is no existing federal law providing

direct ongoing program financing to the

states for health insurance coverage of lowincome individuals not eligible for Medicaid

either under standard criteria or via

waivers. The Washington State Basic

Health (BH) Plan program administered and

financed by the Washington State Health

Care Authority (HCA) started as a pilot

program established by the Washington

State Health Care Access Act of 1987.

H.R. 3962 (House-passed)

No provision.

H.R. 3590 (Senate-passed)

Would require the Secretary to create a

state option for individuals who are not

eligible for Medicaid, have not reached the

age of 65, and whose household income

exceeds 133%, but does not exceed 200%

of the poverty line for the size of the family

involved; or in the case of an alien lawfully

present in the United States, whose income

is not greater than 133 percent of the

poverty line for the size of the family

involved but who is not eligible for the

Medicaid. A standard heath plan would be

defined as a health benefits plan that the

state contracts with that:

● would not be open for enrollment to

those outside of the program;

● provides at least the essential health

benefits; and

● has a medical loss ratio of at least 85%.

The Secretary would transfer to the state

an amount equal to 95% of the premium

tax credits under section 36B of the IRC of

1986, and the cost-sharing reductions

under section 1402, that would have been

provided for the fiscal year to eligible

individuals as if they were in the exchange.

§1331 as amended by §10104

CRS-54

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

Waiver for state innovation

Reinsurance

CRS-55

H.R. 3590 (Senate-passed)

Beginning in 2017, the bill permits states to

apply for a waiver for up to five years of

requirements relating to QHPs, exchanges,

cost-sharing reductions, tax credits, the

individual responsibility requirement, and

shared responsibility for employers. The

state applying for the waiver would be

required to enact a law, provide a 10-year

budget plan ensuring budget neutrality for

the federal government, and to comply

with regulations that ensure transparency.

The Secretary would be required to

provide to a state the aggregate amount of

tax credits and cost sharing reductions that

would have been paid to residents of the

state in the absence of a waiver. §1332

Some states have established reinsurance

policies to encourage the offer of private

health insurance to individuals and groups

of higher risk. Reinsurance typically is

thought of as insurance for insurers. When

issuing policies, an insurer faces the risk

that the premiums it collects will not be

sufficient to cover its expenses and

generate profit. For a health insurer,

unusually high health care claims could lead

to significant financial loss. Reinsurance

shifts the risk of covering such high

expenses from the primary insurer to a

reinsurer.

No later than January 1, 2014, each state

would be required to establish a

reinsurance program for the individual

health insurance market. §1341, as

amended by §10104(r)

A relevant provision, regarding

establishment of a temporary reinsurance

program, would be implemented before the

full implementation date, and would sunset

when appropriations are expended. See

Table 1, “Reinsurance for early

retirees.” §111

A relevant provision, regarding

establishment of a temporary reinsurance

program, would be implemented before the

full implementation date, and would sunset

on January 1, 2014. See Table I,

“Reinsurance for early retirees.”

§1102, as amended by §10102

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Risk corridors

Risk corridor rules are used in a program

for regional participating provider

organizations under Part D of the Medicare

program. Risk corridors refer to a

mechanism which adjusts payments to plans

according to a formula based on each plan’s

actual, allowed expenses in relation to a

target amount. If a plan’s expenses exceed

a certain percentage above the target, the

plan’s payment is increased. Likewise, if a

plan’s expenses exceed a certain

percentage below the target, the plan’s

payment is decreased.

No provision.

The Secretary would be required to

establish and administer temporary risk

corridors, under which payments to QHPs

in the individual and small group markets

would be made according to applicable risk

corridor rules, based on the Medicare Part

D program for regional participating

provider organizations. §1342

Risk adjustment

In general, plan payments under Medicare

Advantage are risk-adjusted to account for

the variation in the cost of providing care.

Risk adjustment is designed to compensate

plans for the increased cost of treating

older and sicker beneficiaries, and thus

discourage plans from preferential

enrollment of healthier individuals. The

Medicare risk adjustment models take into

account the variation in expected medical

expenditures of the Medicare population

associated with demographic characteristics

(age, sex, current Medicaid eligibility,

original Medicare eligibility due to a

disability), as well as medical diagnoses.

No provision.

Each state would be required to adopt a

risk-adjustment model, established by the

Secretary, to apply risk adjustment to

health plans and issuers in the individual

and small group markets. Plans with

enrollment of less than average risk would

pay an assessment to the state. States

would provide payments to plans with

higher than average risk. §1343

CRS-56

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Topics for Table 2

Relation to other

requirements

Current Law

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

For coverage not offered through the

exchange and employment-based plans, the

new requirements under Title II of this bill

(relating to QHBPs) would not supersede

specified federal and state laws, as long as

such laws do not prevent implementation

of provisions related to the private health

insurance market, as determined by the

Commissioner. The application of Section

514 of ERISA, regarding the federal

preemption of state laws that relate to

employee benefit plans, would not be

affected.

The private health insurance provisions

would not preempt state law, as long as

such laws do not prevent the application of

such provisions. §1321(d)

For coverage offered through the

exchange, the new requirements under

Title II of this bill (relating to QHBPs)

would not supersede any requirements

under HIPAA (including requirements

relating to genetic information nondiscrimination and mental health parity) or

state law, as long as such requirements do

not prevent implementation of provisions

related to the private health insurance

market, as determined by the

Commissioner. Individual rights and

remedies under State laws would apply.

§251

A state may require a QHP to offer

benefits in addition to “essential health

benefits.” In such instances, the state

would be required to make payments, to

the enrollee or on behalf of the enrollee, to

defray the cost of the additional benefits.

§1311(d), as amended by 10104(e) (There is

a similar provision in the House bill that

only affects state mandated benefits for

exchange plans. See Table 7, “Health

Insurance Exchanges,” Standardized

benefit tiers for exchange plans.)

QHPs in the CO-OP program, under the

Community Health Insurance Option, or as

a nationwide plan, would be subject to

certain federal and state laws applicable to

private health insurers. Such laws would

include: guaranteed renewal, rating, preexisting conditions, nondiscrimination,

quality improvement and reporting, fraud

and abuse, solvency and financial

requirements, market conduct, prompt

payment, appeals and grievances, privacy

and confidentiality, licensure, and benefit

plan material or information. §1324

State benefit mandates would continue to

apply to coverage outside of an exchange.

§1312(d)(2)

CRS-57

Private Health Insurance Provisions of H.R. 3962 and H.R. 3590

Table 3.Essential Benefits

Topics for Table 3

Primary location in bill

H.R. 3962 (House-passed)

H.R. 3590 (Senate-passed)

Sections 221-224

Sections 1201,1302

Law amended

PHSA (amends title XXVII)

Effective date

Beginning January 1, 2013 for all new private health plans. By

2018 for existing group health plans. §§201(b), 202(b)

Plan years beginning on or after January 1, 2014. §1255, as amended

(and redesignated from §1253) by §10103(f)

Benefits package

QHBPs would be required to provide the essential benefits

package. Exchange plans would be required to offer coverage

that complies with the essential benefits package standards (Sec.

222), and provides specified levels of coverage (Sec. 303). QHBPs

not offered through the exchange could offer benefits in addition

to the essential benefits package. The essential benefits package

would cover specified items and services, prohibit cost-sharing on

preventive services, limit annual out-of-pocket spending, prohibit

annual and lifetime benefit limits on covered health care items and

services, comply with network adequacy standards, and be

equivalent in its scope of benefits to the average employer health

plan in 2013 (as certified by CMS’s Office of the Actuary). §§221,

222(a)

QHPs and plans offered in the individual and small group markets

would be required to provide the essential health benefits package.

The essential health benefits package would refer to a health plan that

would provide coverage for “essential health benefits,” would not

exceed out-of-pocket and deductible limits specified in the bill, and

would not impose

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.