A Step Forward
The health care proposals under consideration would take an important step towards expanding access to affordable health care for all Americans. Both the House and the Senate bills would reform the health insurance market so that no one could be denied coverage or charged higher prices based on pre-existing conditions. They place new standards on health insurance. They would significantly expand Medicaid coverage, and provide subsidies to low- and middle-income families to purchase coverage through the new health insurance exchanges.
The UC Berkeley Center for Labor Research and Education, in collaboration with NORC and Watson Wyatt, has released a series of reports on the impacts of the proposed bills on California which provide important context for the debate. We estimate that in California 4 million people would qualify for Medi-Cal or subsidies in the exchange under each of the bills. The exchanges would also serve to bring down cost and offer greater choices of plans for employees of small businesses. Ninety-five percent of California businesses, employing 44 percent of all workers would be eligible to purchase coverage through an exchange by 2015. One out of five businesses would be eligible for tax credits towards the purchase of that coverage.
For those 2 million Californians who would be eligible for subsidies in the exchange, the savings over the current cost of coverage in the individual market would be substantial. Using simulated claims data we estimated the total health spending, including premiums and out of pocket expenses, for Californians at different income levels under the House and Senate bills. We found that:
- Californians with an income of $16,245 a year (150 percent of the Federal Poverty Level) who purchase individual coverage would save $5,053 on average on premiums and out-of-pocket costs under the House bill compared to what they would spend in the current non-group market; the savings would be $4,116 under the Senate bill.
- Individuals with an annual income of $43,320 (400 percent FPL) would save $838 a year under both plans compared to what they would spend in the non-group market.
Finally, we looked at the new standards that would be established for the 18.4 million Californians enrolled in employer-based coverage. While the vast majority of employees work for firms that currently comply with most of the new requirements for employer-based insurance included in the bills, reform legislation, if passed, would increase protection for many insured workers and their families in California. Many workers would have their coverage improved under these bills:
- 23 percent of workers with employer-based insurance are enrolled in a plan either without an out-of-pocket limit or a limit exceeding the $5,000 standard in the House bill.
- Over 40 percent of employees with job-based coverage are enrolled in a plan with a lifetime limit, which would be prohibited under both proposals.
- About 10 percent of California insured workers are enrolled in a plan where preventive benefits are subject to a deductible, which would likewise be prohibited.
It is true that the bills are much weaker on cost containment. The Senate’s decision to remove the public option eliminates an important instrument for driving costs down. The Senate bill does better than the House bill in moving Medicare away from incentivizing volume over value, which could help to set a pattern for the private insurance market.
The weak employer requirement in the Senate bill also makes it more expensive for the federal government to provide sufficient subsidies to low- and middle-income families that do not have job-based coverage.
At this point, this most important step is for the Senate to pass the bill and get it into conference with the House which has better provisions for guaranteeing affordability and a fairer system for financing the cost of expanding coverage. The final bill will not be what many of us hoped would be achieved earlier this year. In terms of access to affordable coverage, it would be a major advance over where we are today.
The Labor Center’s new issue briefs on the impact of health reform proposals on California can be found here.