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Baucus proposes revisions to health care reform bill

Posted On: Sep. 22, 2009 12:00 AM CST

WASHINGTON—Revisions proposed Tuesday by Senate Finance Committee Chairman Max Baucus, D-Mont., to his sweeping health care reform bill would increase the amount of an excise tax he wants to impose on costly health insurance plans but also would make it less likely that plans would bump up against the threshold triggering the tax.

The excise tax change—along with numerous other changes, including a proposed federal reinsurance program for employers with retiree health care plans—came as the Finance Committee began its formal consideration of Sen. Baucus’ reform bill.

The measure, intended to move the nation closer to universal coverage, also would provide federal health insurance premium subsidies to the low-income uninsured and would fine individuals who do not enroll in a health insurance plan.

Last week, Sen. Baucus proposed a tax on insurance companies and administrators of self-funded plans whose premiums or claims costs exceed a certain level. Under the original proposal, a 35% excise tax would apply to health insurance premiums or claims costs that exceed $8,000 year for individual coverage and $21,000 for family coverage. The excise tax would be imposed starting in 2013. Beginning in 2014, the threshold amounts would be increased to match the annual rise in the Consumer Price Index for urban areas.

Sen. Baucus now wants to boost the excise tax to 40%. However, under an amendment that Sen. Baucus has agreed to accept, the threshold amounts would be linked to increases in the CPI for urban areas plus one percentage point.

In addition, the $8,000 and $21,000 threshold amounts for retirees age 55 and older would be increased by $750 for those opting for individual coverage and $2,000 for those with family coverage.

The $750 and $2,000 increases in the threshold amounts also would apply to employees working in “high-risk” professions. Employees considered to be in high-risk professions are defined in the legislation as, among others, law enforcement officers, firefighters, miners, construction workers and members of rescue squads or ambulance crews.

Another change would allocate $5 billion for a new federal reinsurance program to partially reimburse employers offering health care coverage to retirees between the ages of 55 through 64. The program would reimburse employers for 80% of claims between $15,000 and $90,000. A similar provision is included in reform legislation previously approved by three House committees.

The revised bill also would cap at $2,500 the maximum pretax contribution employees can make each year to their health care flexible spending accounts, beginning in 2011. Under the original proposal, FSA contributions would have been capped at $2,000, with the limit imposed beginning in 2013.

Under current law, employees can contribute as much as their employers allow to their FSAs.