PRELIMINARY PLAN SUMMARY
The Health Security plan guarantees comprehensive health benefits
for all American citizens and legal residents, regardless of health or
employment status. Health coverage is seamless; it continues with no
lifetime limits and without interruption if Americans lose or change
jobs, move from one area of the country to another, become ill or
confront a family crisis.
Every American citizen will receive a Health Security Card that
guarantees comprehensive benefits that can never be taken away.
Fundamental principles underlie health care reform:
* The guarantee of comprehensive benefits for all Americans.
* Effective steps to control rising health care costs for
consumers, business and our nation.
* Improvements in the quality of health care.
* Increased choice for consumers.
* Reductions in paperwork and a simplified system.
* Making everyone responsible for health care.
Americans and their employers are asked to take responsibility
for their health coverage and, in return, they are guaranteed the
security that they will always be covered under a comprehensive
The Health Security plan creates incentives for health care
providers to compete on the basis of quality, service and price. It
unleashes the power of the market and puts American consumers in the
driver's seat. Consumers choose from whom and how they get their care.
The plan empowers each state to set up one or more "health
alliances" that contract with health plans and bargain on behalf of
area consumers and employers. Health plans must meet national
standards for coverage, quality, and service set by the National Health
Board. But each state tailors its approach to local needs and
The Health Security plan frees the health care system of much of
the paperwork and regulation, allowing doctors, nurses, hospitals and
other health providers to focus on providing high-quality care. It
cracks down on and abuse, reforms malpractice law and policy and
outlaws insurance practices that hurt small businesses and imposes the
first national standards for the protection of patient privacy and
confidentiality in medical information and records.
The Health Security plan guarantees every American and legal
resident health coverage that can never be taken away:
* The comprehensive benefits have no lifetime limits on
medical coverage and provides a full range of medically
necessary or appropriate services.
* No health plan may deny enrollment to any applicant
because of health, employment or financial status, nor may
it charge some patients more than others because of age,
medical condition or other factors related to risk.
* All health plans must meet national quality standards and
provide reliable information to consumers so they can
choose their health plans and providers.
* Americans have a broad choice of health plans and
* Elderly and disabled Americans receive outpatient
prescription drug benefits under Medicare for the first
time and expanded access to home and community-based long-
term care services.
* Self-employed workers are able to deduct the full cost of
their health coverage from their federal income taxes.
* Workers older than 55 who retire before they are eligible
for Medicare receive comprehensive coverage for the
guaranteed benefit but continue to pay only the employee
share of the premium.
* New investments and loans help improve the availability and
quality of health care in rural communities and inner-city
* School-based and community clinics expand access to care in
areas with inadequate health services.
* Financial incentives and expansion of the National Health
Services Corps attract health professionals to areas with
shortages of doctors and nurses.
The Health Security plan cuts the projected growth in health care
costs by increasing competition in health care, reducing administrative
costs and imposing budget discipline. Health plans compete to provide
affordable, quality care:
* Uniform, comprehensive health benefits and reliable
information about the price and performance of health plans
encourage informed choices.
Consumers may choose to pay less for lower-cost
health plans or more for higher-cost plans, creating
incentives for cost-conscious decisions.
* Payments to health plans are fixed, providing incentives to
spend resources wisely. Payments are adjusted based on the
risk characteristics of each health plan's participants.
If savings attained through competition and reductions in
administrative burden fail to contain costs, limits on the rate of
growth of insurance premiums provide an emergency brake -- or backstop
-- to ensure that premiums remain in line with inflation.
Health reform also reduces the projected rate of growth in
federal and state spending for Medicare, Medicaid, and other government
programs. Resources conserved from those steps are applied to other
aspects of the health care system, particularly the expansion of
Medicare benefits to include prescription drugs and for new long-term
The Health Security plan cracks down on providers and
institutions that overcharge or engage in health care fraud. It sets
tough new standards and imposes stiffer penalties that include:
* New criminal penalties for health care and for the payment
* of bribes or gratuities to influence the delivery of health
* services and coverage.
* New civil financial penalties against providers who submit
* false claims.
* Tighter restrictions to eliminate referral "kickbacks" in
* the private sector and new standards that prohibit
* physicians from sending their patients to get services at
* institutions in which they have financial interests.
* Strong accountability standards that make provider and
* other misconduct automatic grounds for exclusion from all
* health plans.
The Health Security plan guarantees consumers a choice of health
plans and enhances the patient-doctor relationship.
* Alliances offer an array of competing health plans from
which individuals and families choose their health
coverage, expanding the range of choice for many Americans.
* Alliances must offer a traditional fee-for-service
option in which every patient can see any physician he or
* Consumers -- rather than their employers -- choose their
health plan from among a menu of plans offered by
* Doctors and other health care providers also have a choice
of health plans and delivery systems in which they may
choose to practice medicine.
* Separate programs increase federal support for long-
term care and improve the quality and reliability of
private long-term care insurance.
The Health Security plan improves the quality of health care. It
creates standards and guidelines for health professionals, reorienting
quality assurance programs to measuring outcomes rather than
regulation, increases the national commitment to medical research and
promotes primary and preventive care.
* Health plans are held accountable for delivering
appropriate, quality care.
* Regular surveys of consumer satisfaction are used to
measure health plans.
* Regular publication of useful and easily understood
information about quality and cost allows consumers to make
informed choices among health plans.
* A special funding mechanism strengthens the role of
academic health centers in research, training and
* Increased investment in research advances medical
* Changes in Medicare rate schedules and the allocation of
federal funds supporting graduate medical education provide
new incentives for physicians to choose primary care as the
focus of their training.
* Expanded funds for education and new federal action helps
remove artificial barriers to practice that hinder nurses
and other professionals.
* Investments in public health and medical research improve
health protection for all Americans.
The Health Security plan reduces the burden of paperwork and
administration, streamlines regulatory, billing and reporting
requirements and helps reduce confusion.
* A comprehensive benefits package that covers every American
and legal resident reduces confusion for health care
providers and consumers.
* Administrative costs caused by multiple insurance policies
with different benefits and risk selection disappear.
* Standard forms for insurance claims and billing procedures
simplify paperwork and reduce administrative costs.
* Administrative costs for small companies decline as those
firms purchase care through regional health alliances that
benefit from economies of scale.
* The plan simplifies federal regulatory requirements for
Medicare, Medicaid and programs that govern clinical
* The plan requires that health care services covered by
workers' compensation and automobile insurance be delivered
through an individual's health plan reducing duplication
* Malpractice reform reduces incentives for the practice of
"defensive medicine," including unnecessary tests and
THE HEALTH SECURITY PLAN
All American citizens and legal residents are guaranteed a
nationally defined, comprehensive package of benefits and enroll in a
health plan. Coverage continues without interruption regardless of a
change of employer, employment status, marital status or medical
Coverage goes into effect -- state by state -- beginning in 1995
and is fully implemented by 1997.
The vast majority of Americans continue to receive their health
coverage at work, as they do today. All workers have a choice of
health plans, each of which must be certified as meeting quality
standards. Unlike today, however, all employers contribute to the
purchase of health coverage for their employees, both full and part-
Employed individuals receive information about enrollment and
health plans either at work or directly from the alliance. Small
business owners and their families, employees of small business, the
self-employed and the unemployed sign up for the health plan of their
choice through the regional alliance office in their area.
Firms or Taft-Hartley Plans with more than 5000 employees may
fulfill their obligation to provide coverage for their employees by
establishing a corporate alliance or joining the regional alliances.
Corporate alliances must meet federal standards for benefits, choice
Medicare beneficiaries continue to receive all current benefits
and, in 1996, receive a new benefit covering outpatient prescription
drugs. New long-term care programs also expand access to home and
Those people who receive health care through the Department of
Defense, the Department of Veterans Affairs and the Indian Health
Service may continue to do so.
Medicaid beneficiaries receive coverage through the regional
health alliance, choosing among the health plans it offers.
The health benefits guaranteed to all Americans contain no
lifetime limits on coverage, and provide a comprehensive package of
medical services delivered in hospitals, clinics, professional offices
and other sites. One uniform, comprehensive benefit package replaces
hundreds of different insurance products in the market today.
When medically necessary or appropriate, covered services include
hospital care, emergency services, preventive care, mental health and
substance-abuse services, family planning, pregnancy-related care,
hospice care, home health and extended-care services following an acute
illness, ambulance services, outpatient laboratory and diagnostic
services, prescription drugs and biologicals, outpatient
rehabilitation, durable medical equipment, vision and hearing care,
periodic medical checkups and preventive dental services for children.
The plan includes coverage for a full range of preventive
screening and care often not covered in traditional health insurance
policies. Covered preventive care includes well-baby checkups and
immunizations for children, periodic physical examinations, routine
laboratory work and screening tests, with no charge to the patient.
Additional benefits, including preventive dental care for adults
and a more comprehensive mental health and substance-abuse benefit, are
phased into the nationally guaranteed benefits by the year 2001.
Individuals or employers who wish to purchase benefits beyond the
nationally guaranteed package may do so.
All individuals in a health plan pay the same premium for the
nationally guaranteed comprehensive benefits regardless of health
status, age, place of residence or employment status. Health plans are
prohibited from discriminating based on existing medical conditions and
other individual characteristics.
Medicare beneficiaries continue to receive all current benefits
and, in 1996, receive a new benefit covering outpatient prescription
drugs. Financial support for long-term care also expands.
Health plans adopt one of three standard cost-sharing
* Low cost-sharing: This follows the existing model for
integrated health plans, such as health maintenance
organizations. Consumers pay $10 co-payments for
outpatient and professional services and do not make
additional co-payments for inpatient services, preventive
services, or home health care following an acute illness.
To obtain care from providers outside the network, plans
may offer a point-of-service option that allows patients to
visit any doctor, including those who may not belong to the
* Higher cost-sharing: Following the existing model for fee-
for-service plans, consumers may choose to see any
provider. Individuals pay $200 annual deductibles before
coverage begins; families pay a $400 deductible. Consumers
pay 20 percent co-insurance after meeting the deductible.
No individual pays more than $1500, and no family pays more
than $3000. Consumers are not charged for preventive
services included in the benefits package.
* Combination: Following the existing model for preferred
provider organizations, consumers pay low cost-sharing ($10
co-payments) when seeing physicians and other professionals
in the provider network and higher cost sharing (20 percent
co-insurance) when they consult providers who are not
participants in the network. Preventive services are
provided without charge.
CHOICE OF HEALTH PLANS
The Health Security plan allows individuals, rather than
employers, to choose their health plans on the basis of quality and
price. Today, only half of employed individuals have a choice of
health plans. For the rest, employers choose their health plans,
locking individuals and families into a system of care delivery and
determining how much they pay out of pocket.
Because the Health Security plan requires that alliances provide
at least one traditional fee-for-service plan, it preserves consumers'
ability to choose their own doctors and other health providers -- an
option that is not available to many today.
Likewise, doctors and other health providers may choose to
participate in as many or as few of an alliance's health plans as they
Individuals whose employers provide more generous benefits than
the nationally defined comprehensive benefits may continue those
benefits at their current level without
any change in coverage or cost.
Health plans may offer standardized supplemental insurance
policies to cover cost-sharing or health benefits above and beyond the
comprehensive benefits package. Employers may contribute to purchase
supplemental coverage for their employees. Health plans that adopt the
high-cost sharing option must offer their participants the opportunity
to purchase supplemental insurance policies that cover cost sharing.
Supplemental insurance policies may not duplicate coverage of any
services provided under the nationally guaranteed comprehensive benefit
Existing nursing home coverage under Medicaid continues.
Disabled Americans of all ages gain access to a wider variety of home
and community-based support services, making it possible to continue to
live at home. The Health Security plan also provides the following
expansions and improvements in coverage for long-term care:
* Improvements in Medicaid coverage for institutional care
expand eligibility for nursing home coverage. The amount
of income and assets Medicaid beneficiaries may retain
increase to $12,000 and the $30-a-month living allowance
rises to $100.
* The establishment of national standards improves the
quality and reliability of private long-term care
insurance, while tax preferences encourages its purchase.
* Tax incentives also support the efforts of people with
disabilities to work, covering 50 percent of their costs
for personal assistance and other necessary support.
Medicare recipients experience no change in how and where they
obtain health care or their existing benefits. In 1996, Medicare
benefits expand to include coverage for prescription drugs under the
Medicare Part B policy.
Medicare continues as a federally run program for individuals
over age 65. Once the new health care system is in place, individuals
have the option of enrolling in Medicare or remaining in their health
plan when they turn 65.
Medicare beneficiaries have a broader range of choice through the
expansion of managed care plans.
As the alliance system is fully implemented, states may provide
Medicare benefits through alliances, provided the interests of Medicare
beneficiaries and the Federal Treasury are safeguarded, and there is no
reduction in benefits.
Medicaid recipients under the age of 65 who are not eligible for
cash assistance either through Aid to Families with Dependent Children
or Supplemental Security Income no longer enroll in Medicaid. They
choose a health plan through their area alliance, with 80 percent of
the premium covered by employer contributions if they are employed, or
premium discounts if they are unemployed and have low incomes.
Medicaid continues to pay the cost of health insurance for
recipients of AFDC and SSI, who also pick a plan offered by the
regional alliance. They may choose any plan priced at or below the
weighted-average premium without making additional payments.
Like other members of the alliance, former Medicaid recipients
with incomes below 150 percent of poverty are eligible for discounts to
cover a portion of the cost of co-payments and deductibles if no plan
with low cost sharing is available at or below the average premium.
Health plans receive the same payment for Medicaid recipients as for
other participants, reducing any stigma associated with obtaining
coverage through Medicaid.
To pay for services covered in the comprehensive benefits to
families that receive Aid to Families with Dependent Children and
Supplemental Security Income payments, Medicaid pays health plans a
fixed rate for each participant. Payments from the alliance to health
plans are risk adjusted.
Medicaid coverage for other services, including nursing home
coverage and special services for the severely disabled and
supplemental services, continue as a public program.
Americans who retire before age 65 and were employed for at least
the amount of time used as a standard to qualify for Social Security
purchase health coverage through their regional alliance and pay only
the employee share of the premium for their health plan. The federal
government pays the 80 percent employer share.
Although they may choose to pay more, employers whose retirement
plans cover health insurance premiums for retired workers are
responsible for paying only the employee's share, or 20 percent of the
CONTROLLING COSTS: MARKETPLACE REFORMS
The Health Security plan controls rising costs and improves the
quality of health care by enlisting the power of a competitive market
and empowering consumers to make choices that suit their needs.
Reform reduces administrative costs and frees up resources to
improve quality and access for all Americans. The Health Security
* Changes incentives in the insurance market so that health
plans compete on the basis of quality, service and cost --
not risk selection.
Reform requires health plans to accept all applicants, and
it forbids them from dropping anyone from coverage or
charging some consumers more than others on the basis of
age, gender, or health status or any personal
* Empowers consumers to make more cost-conscious decisions by
choosing among health plans on the basis of price and
Consumers reap the savings from enrolling in a health plan
that delivers the guaranteed benefits for a lower premium.
If they prefer a plan that costs more, they pay the
* Promotes the development of health plans that give
consumers better value for their money.
In the current system, doctors and hospitals get paid extra
for each service they perform. Under reform, health plans
become accountable for both quality and price. The
incentives change from "doing more" to giving consumers
* Improves information about quality of care.
The program calls for regular monitoring of access,
consumer satisfaction and the appropriateness and
effectiveness of care. Consumers receive annual
performance reports on health plans.
The Health Security plan also expands research related to
the effectiveness of medical treatments and courses of
care, fosters the development of practice guidelines and
provides other information to help doctors, nurses and
other professionals deliver more effective care.
* Creates standard reimbursement forms and requirements that
simplify the business side of health care.
With some 1,200 different payers of health costs,
hospitals, clinics and doctors contend with thousands of
forms, conflicting regulations and inspections by a variety
of federal, state, local and private agencies. The plan
creates standard reimbursement rules and inspection
procedures that streamline the system, reducing
administrative overhead for providers.
* Lowers administrative costs for small groups and
individuals as firms with fewer than 5,000 employees and
the self employed join alliances, consolidating
administration and purchasing tasks.
These groups currently pay as much as much as 30-40 percent
of premiums to support administrative overhead, compared to
5-7 percent for large firms.
ENFORCEABLE CAP: THE BACK-STOP FOR COST CONTAINMENT
While ample evidence demonstrates that competition and increased
efficiency control costs, the Health Security plan builds in a back-up
measure to control health care costs: an enforceable cap.
The cap is met through capping the growth in insurance premiums
paid by individuals and businesses to cover the guaranteed benefits.
The Health Security plan guarantees comprehensive benefits and limits
the rate of growth in premiums paid by employers and consumers for
these benefits. By the end of the decade, insurance premiums are held
to the rate of inflation.
Those limits are reasonable and achievable, given reforms that
enhance competition in the health insurance market, simplify the system
and reduce administrative costs, expand consumer choice and strengthen
the negotiating power of employers and consumers through health
The projected rage of growth in federal and state spending for
Medicaid is similarly limited, with coverage for Medicaid recipients
provided through regional alliances. Specific reforms hold Medicare to
comparable, but slightly higher, limits.
Health insurance premiums pay for coverage in the new system,
just as health insurance premiums pay for coverage today. The Health
Security plan limits how fast the cost of those premiums increase.
Alliance premium targets are based on the current level of health
care spending in each area. They, therefore, vary substantially from
alliance to alliance. The National Health Board appoints a commission
to explore methods to reduce these variations over time.
In each regional health alliance, health plans bid each year to
provide the guaranteed benefits, and alliances negotiate with them over
premium levels. Premiums vary from plan to plan.
If the average premium across all plans is less than the
alliance's premium target -- that is, if premiums, on average, are
increasing consistent with inflation -- then no enforcement is
If the average premium across all plans exceeds the alliance's
premium target, the premium, the cap prevents premiums from rising
beyond the target. In that case, plans whose proposed premium
increases exceed the allowed rate of growth are required to accept
lower premiums. The plan must adjust its payment rates to providers
or accept lower profits to make up the difference.
Large employers that form corporate alliances are expected to
comply with the same limits on premium increases as regional alliances.
If premiums in a corporate alliance exceed the allowed rate of growth
during two of any three years, the Department of Labor may require the
corporation to purchase coverage through regional alliances.
STRUCTURE OF THE NEW SYSTEM
A new national framework organizes the market for health
coverage; the federal government, states and alliances divide
responsibilities as follows:
Federal Government: Sets the basic framework for the system
* Defines guaranteed benefits package
* Determines caps on growth in insurance premiums
* Reforms insurance system
* Establishes quality standards
States: Implement health care reform within federal framework
* Establish alliance(s)
* Certify health plans
* Monitor quality and availability of care
* Implement insurance reform
Alliances: Serve as purchasing agent for employers and
* Solicit competitive bids from health plans
* Distribute consumer information materials
* Collect premiums and pay health plans
The new framework for health security includes these components:
* An independent National Health Board acts as the board of
directors for the health care system, setting national
standards and overseeing implementation of reform.
* States establish alliances and qualify health plans.
Tailoring the system to local needs, states may create a
single-payer system by establishing only one alliance and
negotiating directly with providers.
* Regional and corporate alliances bring together consumers
and employers, acting as their advocates in negotiations
with competing health plans over service and price.
* Competing health plans deliver health services covered in
the guaranteed comprehensive benefit. Each alliance offers
a menu of plans, including a traditional fee-for-service
arrangement, preferred provider organizations and health
FEDERAL RESPONSIBILITIES AND NATIONAL HEALTH BOARD
The National Health Board consists of seven members appointed by
the President with the advice and consent of the Senate. The National
Health Board assumes certain responsibilities for administering the new
health care system, while existing federal agencies assume others. The
* Sets national standards for state plans and ensures access
to health care for all Americans.
* Interprets and updates the comprehensive benefits and
recommends to the President and Congress changes in the
health care system.
* Establishes a new performance-based quality management
program and develops valid measures of health outcomes to
be used in annual performance reports for health plans.
* Develops and implements standards for a national health
information system, using a public-private network to
support quality improvement and collects enrollment data
and comparative information about cost.
* Implements the safety net of the national health budget.
States ensure that all eligible individuals enroll in a regional
or corporate alliance and have access to a health plan that delivers
the guaranteed comprehensive benefit. Each state must implement plans
approved by the National Health Board by January 1, 1997.
States may begin to implement the new system as early as January
1, 1995. Implementation involves adopting federal standards and
establish health alliances.
Within the broad federal guidelines, states exercise flexibility
in the design and governance of regional health alliances. States have
the option to implement a single-payer system.
States certify health plans, much as they license health
providers and insurance companies today. They determine mechanisms for
evaluating the quality of health plans, their financial stability and
capacity to deliver the guaranteed benefits, as well as compliance with
prohibitions against discrimination based on race, ethnicity, gender,
income and health status.
Only certified plans may offer health coverage through alliances.
In the case of areas where no health plan forms, the state must assure
that at least one health plan is available to cover every eligible
Each state creates one or more regional alliances that organize a
menu of health plans, negotiate premiums and enroll individuals in
plans. Within broad federal parameters, states exercise flexibility in
the design and governance of regional alliances.
The vast majority of people continue to choose their health care
coverage through their employers, who provide information on area
health plans available through the alliance. The following groups
obtain health coverage through regional alliances:
* Employees in firms with fewer than 5000 employees
* Employees of federal, state and local governments
* Individuals who are self-employed
* Part-time workers
* Retirees not yet eligible for Medicare
* Individuals who are not employed.
Health alliances consolidate the purchasing power of individuals,
small- and medium-size businesses to secure the best health coverage
for the lowest price. Alliances organize and streamline the fragmented
insurance system, replacing health insurance brokers, agents and
underwriters with consumer-run organizations focused on providing
access, service, quality and affordable care.
Alliances drive the competitive forces that make the new system
work for consumers and employers. Their mission is to:
* Bargain with health plans on behalf of consumers, business
and purchasers of health care services.
* Negotiate premiums and coverage and ensure the delivery of
high-quality care while controlling costs.
* Assure that all residents in the area enroll in health
plans that provide the guaranteed comprehensive benefits.
Where inadequate services exist, alliances may organize health
providers or use financial incentives to encourage health plans to
Alliances operate as non-profit corporations, independent state
agencies or agencies of the executive branch of the state. The board
of each alliance includes an even number of consumer and employer
representatives but may not include health providers and others who
profit from the industry. Each alliance also forms an advisory board
composed of health care professionals and providers who practice in its
Alliances hold an annual open enrollment period during which they
offer consumers a menu of health plans, including at least one
traditional fee-for-service plan.
Alliances negotiate rates for premiums with each health plan and
collect premium contributions. Alliances pay health plans a fixed
premium for each individual or family that enrolls, adjusting the total
payments to plans to reflect the health status of that plan's
Firms employing more than 5000 workers, Taft-Hartley plans and
rural cooperatives are eligible to organize corporate alliances,
although they may also choose to purchase coverage through regional
alliances. Corporate alliances resemble the operation of large
employers' benefit departments, arranging premiums and the delivery of
Corporate alliances provide health benefits to their employees
either through a self-funded employee benefit plan or through contracts
with health plans. They operate under the same rules as regional
alliances except that the population served is limited to company
employees and their dependents. Each corporate alliance contracts with
at least one fee-for-service plan and offers at least two other health
The U.S. Department of Labor monitors the operation of corporate
alliances, fulfilling the same role that it assumes under the Employee
Retirement Income Security Act of 1974 (ERISA).
Organizations eligible to form corporate alliances may exercise a
one-time option to have individual establishments with fewer than 100
employees join regional alliances at community rates. Large
corporations also periodically have the option to join regional
alliances at a risk-adjusted rate, which gradually declines to the
A new chapter in ERISA establishes fiduciary and enforcement
requirements for employers and other sponsoring health benefit plans in
Competing health plans provide medical services guaranteed in the
comprehensive benefits, delivering them through fee-for-service
networks, preferred provider organizations and health maintenance
organizations. Health plans may not:
* Deny enrollment to any person based on individual
characteristics, health status or anticipated need for
* Terminate, restrict or limit coverage for the comprehensive
benefit package for any reason.
* Cancel coverage for any eligible individual until that
individual is enrolled in another health plan.
Health plans offer coverage at the same rates for all
participants, regardless of age, health or other personal
characteristics. Alliances adjust payments to health plans to account
for the level of risk among individuals enrolled in each plan.
IMPROVING HEALTH SERVICES
The Health Security plan seeks to remove financial and non-
financial barriers that limit care for Americans who live in urban
centers, rural communities and those who suffer from certain illnesses.
Because a disproportionate number of residents of rural communities and
urban centers lack health coverage today, universal coverage will bring
major new health resources into those communities.
The plan improves access specifically for Americans who live in
rural areas through initiatives to:
* Develop communications links between rural health
professionals and academic health centers.
* Create incentives to expand community-based networks of
health providers and plans, such as long-term contracts for
health plans in rural areas and federal loan guarantees for
* Attract health professionals to rural areas through the
expansion of the National Health Service Corps, tax
incentives to encourage practice in rural areas, and
changes that increase compensation for primary care
physicians who serve Medicare beneficiaries.
* Expand the rural public health system, including support
for transportation, outreach, case management, translation,
health education, nutrition, social support, child care and
home visiting services.
The Health Security plan makes federal grants and loans available
in underserved urban communities for capital investment. The
government further supports the efforts of traditional health care
providers, such as community-based clinics, to adapt to the new system
through designation as essential community providers.
Essential community providers receive special protection: For
five years, health plans are required to reimburse these providers for
services. At the end of that period, health plans must either
demonstrate their capacity to provide access for all participants --
including residents of undeserved areas -- or continue contracting with
Federal block grants that support community health centers,
family planning clinics, health care for homeless families and maternal
and child health programs continue. New initiatives include funding
for school-based clinics.
States begin implementation of the new system as early as January
1, 1995 Most states come into the system in 1996; the rest are
required to begin implementation by 1997.
At the time of state implementation, federal discounts for small,
low-wage employers and low-income individuals and families become
available. States that expedite implementation receive financial
incentives including special start-up funds, and early access to
federal funding for discounts.
Organizations eligible to establish corporate alliances must
begin providing the guaranteed benefit package by January 1, 1997.
To reduce the potential for disruption during transition, interim
insurance reform imposes new rules including:
* Prohibitions against dropping consumers from coverage.
* Prohibitions against profiteering.
* Prohibitions against reducing coverage.
* Creation of a national risk pool to assure access to
coverage during the transition.
* Assurance of portability of coverage
FINANCING HEALTH COVERAGE IN THE PRIVATE MARKET
The Health Security plan caps employer contributions for
insurance premiums as a percent of payroll. The cost of providing
health coverage declines for most firms that currently provide
* The plan eliminates the $25 billion that employers
pay each year to cover the cost for uninsured patients.
* In the current system, many employers pay the entire
premium for family policies, while the employer of a
worker's spouse makes no contribution. Under reform, both
employers share the cost for families in which two spouses
* In the current system, health insurance premiums for
many employers total more than 10 percent of payroll. Under
reform, premiums paid by employers purchasing through
regional alliances are capped at 7.9 percent of payroll.
Businesses that employ fewer than 50 workers receive
additional discounts on their insurance premiums, reducing
their contributions to between 3.5 percent and 7.9 percent
* Under reform, employers in regional alliances pay
community rates that do not vary according to the age,
gender or health status of their workers.
Employer obligations for insurance premiums are calculated
based on the average premium among health plans in their
area. As competition among health plans -- backed up by
national caps on premium increases -- brings the rate of
growth in health costs under control, the projected rate of
growth in health costs declines throughout the business
* Employers pay 80 percent of the average premium in the
alliance toward the cost of the policy chosen by the
employee, which depends on the employee's family status.
For employees with a spouse, the employer contribution is
reduced to reflect the contributions on behalf of dual wage
earners in the alliance region.
* For part-time workers, employers pay a pro-rata share of
the 80 percent employer contribution based on the number of
Working Individuals and Families: Individuals and families in
which at least one person works pay a maximum of 20 percent of the
premium to enroll in the average-cost health plan in their area.
* Those who choose a lower-cost plan pay less than the 20
* Those who choose a more expensive plan pay more, as they do
* Employers who currently pay 100 percent of the premium for
their employees may continue to do so.
Working individuals and families may have their share of the
premium deducted from their paychecks or write a check to the local
Consumers pay premiums based on the type of policy they need to
* Two parent family with children.
* Single parent family.
* Single individual.
Individuals and families with incomes below 150 percent of the
federal poverty level -- $21,525 for a family of four -- are eligible
for discounts on the employee's share of the premium.
Part-Time Workers: Part-time workers are responsible for the 20
percent employee share of the premium, and workers with incomes below
150 percent of the poverty level receive discounts.
The number of hours an employee works determines how much of the
employer share of the premium is paid by the employer and how much by
the worker. For example, an employer would pay 40 percent of the
premium for someone who works half-time. The worker is responsible for
the remaining 40 percent of the premium, with discounts provided on a
A part-time worker with more than one job receives contributions
from more than one employer toward the employer's share of the premium.
Unemployed Individuals: Unemployed individuals and families are
responsible for the 20 percent employee share of the premium and
receive a discount if their incomes are below 150 percent of the
poverty level. They also are responsible for what would be the
employer's share of the premium but receive discounts on a sliding-
scale basis to help cover the cost.
Self-employed Individuals: The self-employed worker pays the 20
percent employee share of the premium and receives a discount if his or
her income is below 150 percent of the poverty level. Self-employed
workers also are responsible for the 80 percent employer share and
receive the same discounts as small employers. They may deduct from
their taxes 100 percent of their health care premiums.
Employer contributions toward the premium and toward cost sharing
related to the nationally guaranteed comprehensive benefit -- as well
as for additional benefits phased in by the year 2001 -- are fully tax
deductible and not counted as taxable income for employees.
Tax preferences continue for benefits in excess of the nationally
guaranteed benefit package offered as of January 1, 1993, for ten years
after enactment of health reform.