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Bronze plans to pay 65% of medical expenses

Health Care 2009

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#1 Palisades

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Posted 18 September 2009 - 10:54 AM

There was some discussion in an earlier thread about whether the 65% referred to the minimum percentage of medical expenses health care plans would be required to pay or if it instead referred to the percent of premiums that had to go towards paying medical expenses. We have our answer in the Chairman's Mark:

Quote

p. 18

Definition of Levels. The bronze benefit package, which would represent minimum creditable coverage (MCC), would be equal to the actuarial value of 65 percent with an out-of-pocket limit up to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010) indexed to the per capita growth in premiums for the insured market as determined by the Secretary of HHS. The silver benefit package would have an actuarial value of 70 percent with the out-of-pocket limits for MCC. The gold benefit package would have an actuarial value of 80 percent with the out-of-pocket limits for MCC. The platinum benefit package would have an actuarial value of 90 percent with the out-of-pocket limits for MCC. A separate "young invincible" policy would be available for those 25 years or younger. This plan would be a catastrophic only policy in which the catastrophic coverage level would be set at the HSA current law limit, but prevention benefits would be exempt from the deductible.

For those between 100-200 percent of FPL, the benefit will include an out-of-pocket limit equal to one-third of the HSA current law limit. For those between 200-300 percent of FPL, the benefit will include an out-of-pocket limit equal to one-half of the HSA current law limit.
(Presumably, insurers would pay less than 65% of medical expenses for medical bills below the out-of-pocket limit so that overall payouts would equal the required actuarial value of 65%.)


Quote

pp. 20-21

Premium Credit. The Chairman‘s Mark would provide a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges...

Beginning in 2013, tax credits would be available on a sliding scale basis for individuals and families between 134-300 percent of FPL to help offset the cost of private health insurance premiums. Beginning in 2014, the credits are also available to individuals and families between 100-133 percent of FPL. However, individuals subject to a five-year waiting period under Medicaid or CHIP are eligible for the tax credit beginning in 2013. The credits would be based on the percentage of income the cost of premiums represents, rising from three percent of income for those at 100 percent of poverty to 13 percent of income for those at 300 percent of poverty. Individuals between 300-400 percent of FPL would be eligible for a premium credit based on capping an individual‘s share of the premium at a flat 13 percent of income. For purposes of calculating household size, illegal immigrants will not be included in FPL. Liability for premiums would be capped at 13 percent of income for the purchase of a silver plan. The share of premium enrollees pay would be held constant over time. The premium credit amount would be tied to the second lowest-cost silver plan in the area where the individual resides (by age according to standard age factors defined by the Secretary of Health and Human Services) plan.


Quote

p. 22

Cost-sharing Subsidy. A cost-sharing subsidy would be designed to buyout any difference in cost sharing between the insurance purchased and the actuarial values specified below. For individuals between 100-150 percent of FPL, the subsidy brings the value of the plan to 90 percent actuarial value. For those between 150-200 percent of FPL, the subsidy brings the value of the plan to 80 percent actuarial value. For individuals above 200 percent of FPL, no subsidy for cost sharing is provided. The amount received by an insurer in cost-sharing subsidy on behalf of an individual, as well as any spending by the individual out-of-pocket, counts towards the out-of-pocket limit. As with the premium credit, the IRS is authorized to disclose to the state exchange limited tax return information to verify a taxpayer‘s MAGI based on the most recent return information available.

Edited by Palisade, 18 September 2009 - 11:14 AM.

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#2 Shalamar

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Posted 18 September 2009 - 02:56 PM

Can some one explain that in simpler terms?

It sounds to me - on the so called Bronze package - that if ones medical bill was $100 that the person would pay $35 and the insurance $65? yes/no?
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#3 Palisades

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Posted 18 September 2009 - 03:31 PM

View PostShalamar, on Sep 18 2009, 01:56 PM, said:

Can some one explain that in simpler terms?

It sounds to me - on the so called Bronze package - that if ones medical bill was $100 that the person would pay $35 and the insurance $65? yes/no?

That's the general idea, except the the out-of-pocket limit complicates things.

Let's say the medical bill were $50,000. 35% of $50,000 = $17,500, which is above the out-of-pocket limit. For individuals at 250% of the federal poverty level, the out-of-pocket limit would be $5,950 * (1/2) = $2,975. For individuals at 350% of the federal poverty level, we do not multiply by 1/2 so the out-of-pocket limit would be $5,950. For families at 350% of the federal poverty level, we similarly don't multiply by 1/2 so the out-of-pocket limit would be $11,900. (According to the text I quoted, the $5,950 and $11,900 are "indexed to the per capita growth in premiums for the insured market as determined by the Secretary of HHS".)

So in the cases we've examined, the total bill is $50,000, and the insuree would pay $2975, $5950, or $11,900. Each of those three amounts is less than the 35% of $50,000 so the insurance company is paying more than 65% in those cases. So that the insurance company can offer the lowest premiums listed on the exchange, it would want its overall payments to be only 65% of medical bills. Since for large bills the insurance company pays more than 65%, it would presumably pay less than 65% for smaller bills.

Edit: In one of my examples, I originally neglected the cost-sharing subsidy. The cost-sharing subsidy applies to individuals and families at or below 200% of the poverty-level. For individuals and families at 149% of the poverty-level, the insuree pays 10% of medical expenses on average, while the insurance company pays 65% and the government pays the remaining 25%.

10% of $50,000 is $5000. For families at 149% of the poverty-level, the out-of-pocket limit would be $11,900 * (1/3) or  $3,967, so they pay the out-of-pocket limit of $3,967. (In this particular case, the amount the insuree pays isn't affected by the cost-paying subsidy.)

Edited by Palisade, 18 September 2009 - 05:32 PM.

"When the Fed is the bartender everybody drinks until they fall down." —Paul McCulley

"In truth, 'too big to fail' is not the worst thing we should fear – our financial institutions are now on their way to becoming 'too big to save'." —Simon Johnson

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#4 Spectacles

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Posted 18 September 2009 - 05:25 PM

Is this from the Baucus proposal?

I confess that it's all gobbledygook to me and I don't understand actuarial values. But it looks like it's describing the different kinds of insurance available under the "health exchange," where the uninsured would choose which insurance they wanted and how much they could pay for premiums, with better insurance costing more and the cheapest option being a catastrophic-only policy for people 25 and younger. The policies with the most coverage (highest actuarial value) would presumably have higher premiums.

The Baucus proposal overall looks like an awful deal for the average uninsured person. But the insurance companies love it. No one else, does, though, including Baucus's committee. All that compromising and not only did he not get any GOP support but he also lost at least one Democrat on his committee, Jay Rockefeller, who says it's awful and he won't vote for it.
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#5 Palisades

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Posted 18 September 2009 - 05:28 PM

View PostSpectacles, on Sep 18 2009, 04:25 PM, said:

Is this from the Baucus proposal?

Yes
"When the Fed is the bartender everybody drinks until they fall down." —Paul McCulley

"In truth, 'too big to fail' is not the worst thing we should fear – our financial institutions are now on their way to becoming 'too big to save'." —Simon Johnson

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#6 Rhea

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Posted 18 September 2009 - 10:40 PM

View PostShalamar, on Sep 18 2009, 12:56 PM, said:

Can some one explain that in simpler terms?

It sounds to me - on the so called Bronze package - that if ones medical bill was $100 that the person would pay $35 and the insurance $65? yes/no?

I'm glad it's not just me. My brain shut down somewhere after the first sentence. ;)

Edited by Rhea, 18 September 2009 - 10:40 PM.

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