December 24, 2009 / 5:40 PM / 10 years ago

FACTBOX: Major differences in Senate, House healthcare bills

(Reuters) - The U.S. Senate on Thursday passed its version of sweeping healthcare overhaul legislation that aims to extend coverage to some 30 million uninsured Americans.

The bill resembles legislation passed by the U.S. House of Representatives on November 7, but there significant differences that have to be worked out by the two chambers before a bill can be delivered to President Barack Obama for his signature.

Here is a detailed summary of the major differences between the two bills.

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 create insurance exchanges where small businesses and individuals without employer-sponsored health benefits can shop for coverage. The Senate bill creates state-based exchanges, the House bill would create a national exchange but allow states to operate state-based exchanges if they meet minimum requirements.

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.

The Senate bill would allow young people to stay on their parents’ insurance plans until the age of 26. The House provides for such dependent coverage until the age of 27.

Both bills place limits on how much insurers can spend on administrative costs and profits. The Senate bill requires insurers to spend at least 85 cents of every premium dollar on medical care in small group markets and 80 cents in large group markets. The House bill requires insurers to spend at least 85 percent of premiums on medical care.

PUBLIC OPTION

The House bill includes a new government health insurance plan that would compete with private insurers on the exchange. The public option would have to meet the same coverage requirements as private insurers.

The Senate bill has no public option. However it requires the U.S. Office of Personnel Management, which oversees the health policies for 8 million federal workers and their families, to contract with private insurance companies to offer policies on the exchanges.

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

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.

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 2.35 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 10-percent tax on indoor tanning services.

ABORTION

Another contentious issue is likely to be 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.

The Senate plan would let states opt out of including plans with abortion coverage on the exchanges and require anyone with abortion coverage to write two separate premium checks — one for the abortion coverage and one for the rest.

MEDICAID COVERAGE

The Senate would make Medicaid, the government healthcare program for the poor, available to everyone with incomes up to 133 percent of the poverty level. The House would expand the Medicaid program to everyone with incomes up to 150 percent of poverty. The poverty level for an individual in 2009 stands at $10,830 and for a family of four at $22,050. Many states have eligibility requirements well below that level.

COVERAGE MANDATES

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

Both bills impose a penalty on those who fail to get coverage. 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 $750-per-person annual penalty up to $2,250 per family or a penalty of 2 percent of taxable income, whichever is greater. The full penalty would take effect in 2016.

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 large 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 percent 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.

In some cases the Senate bill would require employers with health plans to provide cash vouchers to lower-income workers to obtain insurance on the exchange.

Reporting by Donna Smith in Washington; Editing by Xavier Briand

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