<nobr>Oct 6, 2009</nobr>

Senate Finance Committee Completes Amendment Process; May Vote This Week

The Senate Finance Committee in the early morning (after 2 a.m.) of October 2 finally finished marking up the America's Healthy Future Act.

The proposal -- which still is in "conceptual" (i.e., no bill language) form -- is in the hands of the Congressional Budget Office (CBO) for an informal score to indicate how much revenue the bill would raise or lose. After the revenue estimates are completed, the Finance Committee will reconvene and vote on the bill – possibly by the middle to end of this week.

Meanwhile, Senate Majority Leader Harry Reid (D-NV) has already begun merging the Finance Committee bill and the bill approved by the Senate Health, Education, Labor and Pensions (HELP) Committee. Although Senator Reid has indicated he would like to take the combined bill to the floor during the week of October 12, this seems ambitious. The CBO needs approximately two weeks to calculate a final score on the combined bill; some Senators from both parties have signaled a demand to see both the final legislative language and the CBO score before voting on a bill.

Senator Ron Wyden (D-OR) withdrew his Free Choice amendment in the face of certain defeat by the committee. Senator Wyden's amendment would have created two options for employer coverage: 1) offer a voucher option, whereby employees could either stay in the employer's plan or get a voucher for the cost of the employer's plan and buy a plan through an exchange; or 2) offer two or more health plans where at least one has a premium that is less than or equal to the average of the premiums for the two lowest cost "gold level" health plans in the exchange.

Wyden's amendment was almost the last one offered at the mark-up. He made an impassioned plea for giving employees a "choice" of health plans and said that CBO had scored this provision as raising $1 billion. He went on to claim that the CBO had found that his amendment would not result in a significant shift in the sources of coverage (e.g., from employer plans to plans in the exchange.) Several senators, most notably Senators John Kerry (D-MA), Jeff Bingaman (D-NM), Kent Conrad (D-ND), and Chair Max Baucus (D-MT), defended the advantages of the employer-based system and argued that the Wyden amendment would result in adverse selection against employer plans. Tipping the balance against the amendment, however, was the effect of Senator Conrad reading a BlackBerry message from CBO saying, in fact, that CBO had not scored the voucher element of Sen. Wyden's amendment. Although Sen. Wyden raised a spirited defense of his assertion that CBO had scored the entire measure, sufficient damage had been done to the amendment that he withdrew it.

Other amendments:

Excise tax on high-cost plans: Approved an amendment by Senator Kerry to bump up the excise tax thresholds applying to seniors over age 55 and individuals in high-risk professions. Both of these categories would be subject to higher thresholds before an excise tax would be imposed on them; the new thresholds would be raised by $1,850 for individuals and $5,000 for families. Presumably, this would set the new thresholds at $9,850 for singles and $26,000 for families. Senator Baucus also told Senator Kerry during the discussion of the amendment that he would be open to further increases in the thresholds; this increase could occur when the two Senate bills are combined or as an amendment to the combined bill on the Senate floor.

Floor on itemized deductions for medical expenses: Under current law, an individual who itemizes deductions on his or her federal income tax return may deduct medical expenses that exceed 7.5% of adjusted gross income (AGI). The SFC mark would raise this AGI threshold for medical expenses to 10%. An amendment by Sen. Bill Nelson (D-FL) was approved by a vote of 14 to 9 that would keep the threshold at 7.5% for seniors through 2016. Thus, individuals age 65 and over would be able to continue to deduct medical expenses that exceeded 7.5% of income.

To pay for this change, the Nelson amendment would change the "free rider" penalty that employers pay from a deductible business expense to a nondeductible business expense. (Under the free rider penalty, employers must pay a set amount for employees who are able to leave the employer's plan and buy subsidized insurance through an exchange.) This change would raise approximately $7 billion.

State coverage plans: The committee approved an amendment introduced by Senator Maria Cantwell (D-WA) that would permit the states to negotiate with private insurers to provide coverage for individuals earning between 133% and 200% of the federal poverty level.

Affordability waivers: The committee approved an amendment by Senator Charles Schumer (D-NY) to lower the threshold – from premiums exceeding 10% of adjusted gross income to those exceeding 8% - at which an individual is deemed not to be able to afford to purchase health insurance and, thus, is exempt from the penalty associated with the individual mandate. The amendment also delayed imposition of the penalty for all individuals.

Seasonal workers: Sen. Olympia Snowe (R-ME) and others offered an amendment, which was approved by the committee, to permit fixed indemnity plans purchased with after-tax employee income to be excluded from the excise tax on high-cost plans. Another element of this amendment was an exemption of the wages and hours of seasonal workers (such as those employed by summer camps) from the tax credit available to small employers.

The big question now is two-fold: 1) when the Senate Finance and Senate HELP bills are merged, will there be a public plan option or a co-op? and 2) if the SFC co-op provision is included in the unified bill, will it be amended on the Senate floor to replace the co-op with a public plan option? Right now it does not appear that Democrats can garner the 60 votes needed to include a public plan option, but any bets would be premature before all the public plan amendments have been considered. In all likelihood, however, there will be a major effort -- and compromise -- to obtain Republican support.

Questions or comments on health reform legislation should be addressed to either Gretchen Young (gyoung@eric.org) or Adam Solander (asolander@eric.org).

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Websites:

Senate Finance Committee Mark as Amended

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