House May Consider Tax On High-Cost Plans

Janice Simmons, for HealthLeaders Media , September 29, 2009

While attention will be focused this week on the Senate Finance Committee healthcare reform hearings, work on reform legislation also has been proceeding on the other side of the Capitol.

House leaders are meeting behind closed doors this week to iron out—and eventually prepare for the House floor— provisions in the tri-committee versions of the House's reform measure, HR 3200.

Unlike the Senate panel, there will be no arguing over inclusion of a public insurance option—because it is already found in the bill. At her weekly press conference, House Speaker Nancy Pelosi (D-CA) reaffirmed her support for a public option, calling it "the strongest lever one can use to get the best possible outcomes."

However, there are still questions about what to pay providers in a public plan, an issue which is likely to come under intense discussion throughout the week.

The initial House bill called for a public plan that would pay providers 5% over Medicare reimbursement rates. However, in negotiations in July with the self-described fiscally conservative Blue Dog Democrats, the House Energy and Commerce Committee approved an amendment that requires the Department of Health and Human Services (HHS) Secretary to negotiate rates with providers.

Overall, that version of the plan will save $25 billion over a 10-year period. However, early estimates by the Congressional Budget Office (CBO) found that the initial formula would save approximately $85 billion over that 10-year period.

The House leaders are paying close attention to these numbers as they seek to whittle down the 10-year projected cost of the healthcare reform plans from $1.1 trillion to $900 billion—as requested earlier in the month by President Obama.

To pay for reform provisions, the House Ways and Means Committee proposed a surtax on upper income taxpayers those individuals with more than $250,000 annual income and couples earning $350,000 a year or more. However, amid protests that the surtax could impact individuals in high cost states, such as California and Illinois who are not really rich, Pelosi has suggested that the income threshold could be raised to $500,000 for individuals and $1 million for couples.

However, more revenue may be needed. Pelosi said last week that another option taxing insurance companies that offer expensive health policies known as "Cadillac" plans—might be considered. With the current provision found in the Senate Finance bill, a 40% tax would be placed on insurers offering plans valued at $21,000 for families and $8,000 for individuals.

This tax, though, is likely to meet opposition from labor groups, for instance, who say that the higher-priced insurance policies are sold to companies with employees who are involved in high risk occupations or who had given up higher pay for better benefits.

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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