FACTBOX: Major differences in House, Senate healthcare bills

Sat Nov 21, 2009 8:28pm EST

(Reuters) - Democrats in the U.S. Senate cleared the first procedural hurdle for sweeping healthcare reform on Saturday by voting to open debate on the historic legislation.

The bill resembles a measure passed by the House of Representatives on November 7, but there are some major differences that would eventually have to be ironed out.

The Senate debate due to start on November 30 is expected to last for at least three weeks.

Here is a summary of major differences between the proposed Senate bill and the legislation passed by the House.

INSURANCE MARKET REFORM

Both the House and the Senate bills would mean substantial insurance market reforms that would bar insurers from excluding people for pre-existing conditions and prevent them from arbitrarily dropping policy holders.

Both bills set minimum benefit standards for policies that would be offered in new insurance exchanges where small businesses and individuals without employer-sponsored insurance could shop for policies.

The House bill requires more generous benefits than the Senate bill. The Senate bill also allows insurers to offer less expensive catastrophic coverage to young people and those who get hardship waivers.

The House bill would allow insurers to charge older people up to twice the amount they charge younger policy holders. The Senate bill would allow insurers to charge older people up to three times what they charge younger people.

PUBLIC OPTION

Both bills would establish a new government insurance program to compete with private companies on proposed new state insurance exchanges.

The Senate bill would allow states to opt out of offering the federal health plan.

Both bills also provide for creation of nonprofit cooperatives to provide medical coverage to members.

INDIVIDUAL MANDATES

Both the Senate and the House require most individuals to obtain health insurance.

The penalties on those who fail to get coverage are different. The House would impose a 2.5 percent penalty tax on income up to the average cost of an insurance policy. The Senate would phase in a maximum $750-per-adult annual penalty. A slightly higher penalty would be imposed for failure to obtain coverage for children.

The Senate bill allows those up to age 26 to stay on parents' policies, while the House bill would allow dependent coverage up to age 27.

EMPLOYER MANDATES

The House bill requires employers with payrolls above $750,000 to provide health insurance to workers. Those who fail to do so face a penalty of 8 percent of payroll. Employers with payrolls between $500,000 and $750,000 pay fines on a sliding scale of 2 percent, 4 percent and 6 percent of payroll.

The Senate bill has no employer mandate. But firms with more than 50 workers would have to pay a fine of $750 annually per worker if any of their employees obtain federally subsidized coverage on the exchange. Workers who have employer-sponsored plans with costs that are deemed unaffordable -- exceeding 9.8 of salary -- may drop that coverage and purchase federally subsidized insurance on the exchange. In those cases, the employer would have to pay a fine up to $3,000 per worker receiving the insurance subsidy.

ABORTION

Both the Senate and the House bills bar the use of federal funds to finance abortion.

The House bill contains tougher language that would require anyone seeking coverage for elective abortions to purchase separate insurance riders.

FINANCING

The biggest difference between the two bills is in how they are financed.

The House bill would impose a 5.4 percent surtax on individuals earning more than $500,000 a year and couples making more than $1 million. It also raises money by imposing a 2.5 percent excise tax on medical devices, by ending some tax breaks for multinational companies and by closing a biofuels tax loophole for paper companies.

The Senate bill includes a 40 percent excise tax on high- cost health insurance plans. It also raises payroll taxes for Medicare, the government health insurance plan for the elderly, to 1.95 percent from the current 1.45 percent for individuals earning $200,000 or more and for couples earning $250,000 or more. The Senate bill includes special fees on insurers, drug companies and medical device makers and it imposes a 5 percent tax on elective cosmetic surgery.

(Reporting by Donna Smith; Editing by Sandra Maler)