Today, Sen. Ron Wyden (D-Ore.) announced a new health care reform proposal he will be introducing in the 110th Congress. Titled the Healthy Americans Act, Wyden's bill will incorporate a key piece of NSBA's health care proposal: individual responsibility.

The goal behind Wyden's reform package is to get every American covered with health insurance through a combination of individual responsibility, federal assistance and employer involvement. The Healthy Americans Act will require all individuals to purchase a federally-defined health insurance package, which is based on the current Federal Employees Health Benefit Package standard Blue Cross Blue Shield plan.

Private insurers will be allowed to offer these plans through the creation of a state Health Help Agency (HHA). Each state will be responsible for creating its own HHA which will then serve as a clearing house for private insurers to offer plans. The HHA also will facilitate the payment mechanisms for insurers, as well as provide individuals with quality and cost information.

Wyden's bill aims to preserve the oversight and enforcement functions of the state to a certain degree. However, the proposal will preempt state rating rules in favor of an adjusted community rating system that only will allow for price variation based on geography, family size and smoking status of the individual. Private insurers would operate under a "guarantee issue" and couldn't refuse coverage to any individual.

Employer's Financial Obligation
In Wyden's proposal, the employer's role will face significant changes from the current system. Every employer will be required to pay an annual fee, essentially a "premium tax" to help fund the system. This tax will transition in over three years in order to get all businesses -- large and small, those offering insurance and those not -- paying standardized fees to help subsidize the system.

Employers who currently provide health insurance will be required to transfer the amount they pay in insurance premiums directly to increased wages for the employee within the first two years after the date of enactment. In the third year of the transition, these employers will be assessed a premium tax -- "shared responsibility payments" -- to help fund the overall system. The premium tax will be a per-employee percentage of the national average premium cost for the federally-defined package.

The premium tax for small employers -- those with less than 50 employees -- will be between two and 10 percent of the national average premium cost per employee. Large employers will be assessed a tax between 17 and 25 percent of the national average premium cost per employee. The legislation does a transition period for companies between 50 and 200 employees. The rate employers will be charged within their respective ranges is based on their revenue per-employee: those with a lower revenue per-employee would pay a lower rate, and vice-versa.

Employers not currently offering health insurance will face a three-year transition with incremental increases to get them paying the full standardized premium tax in the third year.

Tax Treatment of Health Insurance
A broad vision of Wyden's plan is a health system where employers no longer offer health insurance as a piece of their compensation package. Under the current system, employers can provide health insurance benefits pre-tax to their employees. In Wyden's proposal, employers may have the ability to provide additional services above and beyond the federally-defined package, but the tax treatment of such additional services remains unclear.

A key piece of Wyden's proposal is the requirement for employers to withhold from employees' income the cost of their individual health insurance plan. That withholding will be remitted to the IRS which will send the money to the HHA. The HHAs will then funnel payments to the private insurers based on number of individuals insured.

The tax treatment of the individual plans will provide some level of deductibility for individuals. The amount withheld by the employer for the cost of the individual's health insurance plan will not be included in the individual's gross income, allowing for pre-tax payment of the employee's plan.

However, because the withholding on the part of the employer is considered wages, employers will face increased payroll taxes. In Wyden's proposal, employers will only be allowed to deduct the cost of the premium tax, COBRA payments, qualified long-term insurance plans, and qualified prevention and wellness programs.

Individuals will be given a standard deduction for the cost of their health insurance premium based on income. The deduction will be phased in for individuals at or above 185 percent of the federal poverty level (FPL). The deduction then will begin to be phased-out starting with individuals whose annual income exceeds $125,000, and will be fully phased-out for individuals with annual incomes above $250,000.

Low Income Subsidies
Because the Wyden proposal calls for individual responsibility, a subsidy for low-income individuals is included. Premiums for individuals and families at 100 percent FPL would be fully subsidized. Individuals and families above 100 percent FPL will be eligible for a subsidy that will phase out at 400 percent FPL.

Wyden’s proposal also includes federal reforms for state-based Medicaid and State Children's Health Insurance Programs (SCHIP). The bill would increase school based health centers and ensure all children below 300 percent FPL have access to health insurance.

Medicaid will be largely privatized under this system, as individuals now will go through the HHA for the purchase of individual health insurance. The low-income subsidy will pay for the large number of individuals currently receiving Medicaid, but will only apply to those services outlined in the federally-defined package. Medicaid will continue to provide services not offered by the plans as well as long term care.

NSBA applauds Wyden on taking such a broad, thoughtful approach to health care reform. While there are areas where NSBA differs with Wyden's proposal on the delivery and payment of his proposal, the great efforts that have gone into his proposal have not gone unnoticed. NSBA looks forward to working with Wyden and his staff in moving the debate forward.

A working paper titled Cost and Coverage Estimates for the
Healthy Americans Act is available here.