The New York Times has the nitty-gritty details of the deal reached between the White House and labor unions:
Under the bill passed last month by the Senate, the federal government would have imposed a 40 percent tax on the value of employer-sponsored health coverage exceeding $8,500 a year for an individual and $23,000 for a family. The tax would have taken effect in 2013. White House officials, Democratic Congressional leaders and labor unions said Thursday that they had agreed to an increase in those thresholds to $8,900 for an individual and $24,000 for a family. Moreover, they said, starting in 2015, the cost of separate coverage for dental and vision care would be excluded from the calculations.
In addition, they said, health plans covering state and local government employees and collectively bargained health plans would be exempt from the tax until 2018. This transition period addresses the concerns of schoolteachers and other public employees who have denounced the tax.
For people in certain high-risk occupations, including police officers and construction workers, thresholds would be higher: as high as $27,000 for a family.In addition, Mr. Trumka, who led a team of labor leaders negotiating with the White House, said the thresholds would be increased for "age and gender," to reflect the higher premiums often charged for health plans with large numbers of women, older workers and retirees.
He said the changes would reduce the amount of revenue from the tax by about 40 percent, to $90 billion over 10 years. The tax in the Senate bill would have generated $149 billion over 10 years.
Ezra Klein points out that the threshold for a plan would be lifted in accordance to the inflation rate:
In the Senate bill, the tax begins on family plans costing $23,000 a year, and that sum grows at the rate of inflation in the Consumer Price Index plus one percentage point (so if inflation that year was 3.3 percent, the threshold would grow by 4.3 percent).
In the excise tax deal announced today, the threshold becomes $24,000, and the growth rate is exactly the same.
Health care costs in the past two years have been lower than usualbecause of the recession:
Amid one of the worst economic recessions in recent history, U.S. health spending grew 4.4 percent in 2008, its slowest rate in nearly 50 years. However, overall health spending, which reached $2.3 trillion in 2008 — $7,681 per person — still increased faster than the overall economy, federal analysts reported yesterday in the January issue of the journal Health Affairs. Health spending constituted 16.2 percent of the Gross Domestic Product (GDP), increasing from 15.9 percent the year before.
The annual report on health spending is from the Centers for Medicare & Medicaid Services (CMS). The 2008 growth rate CMS reported is the lowest rate of growth in health spending since the federal government started tracking the trend. "Health care spending is usually somewhat insulated from the immediate impact of a downturn in the economy. But this recession has exerted considerable influence on the health care sector," says CMS statistician Micah Hartman, who co-authored the report with fellow economists Anne Martin, Olivia Nuccio and Aaron Catlin. The authors discussed their report at a January 4 Washington D.C. briefing.
And the full briefing paper, which is interesting to read, mentions the recession as a factor in the slow growth of private insurance premiums:
Private health insurance premiums and benefits both grew in 2008 at their slowest rate since 1967: 3.1 percent and 3.9 percent, respectively. These trends were heavily influenced by the recession, as enrollment in private health insurance declined from 196.4 million in 2007 to 195.4 million in 2008 and private insurance spending growth slowed for both physician and clinical services and retail prescription drugs. The decline in enrollment was due in part to lost jobs, particularly in the manufacturing and finance sector late in 2008.41 Slower spending growth for employer-sponsored premiums and individually purchased private health insurance, and declining property and casualty insurance spending (which sometimes insures for medical expenses) all contributed to the 2008 slowdown.42,43
The net cost of private health insurance—the difference between premiums and benefits—declined to $92.0 billion in 2008, a decrease of $2.6 billion from 2007. As a result, the net cost of this insurance continued its recent decline as a share of total premiums from 13.7 percent in 2003 to 11.7 percent in 2008.
It brings up a very interesting question that I'd like to ask ---what happens if private insurance premiums outpace inflation, say if the rate of inflation is at 3.3 percent, and private insurance premiums go up to 4% or to 7%? It'll be interesting to see how this economy, if it ever becomes a productive economy that results in real wage growth for Americans, would affect the increase of private insurance premiums. We do know that private insurance premiums were anywhere from 6% to 8% a year, with some years at 13%, before the economic downturn which seemed to have stabilized it at 5% in the past two years, and now at 3.1% this year if the report I'm reading is correct.
And now for other health news....
The President is still leaning towards the national health insurance exchange according to Politico, and when asked about the anti-trust exemption for private insurers, President Obama brought up the issue of 60 votes in the Senate.
California Rep. Lynn Woolsey, who once threatened to vote against the bill if it didn’t contain a public option, pressed the president on how the legislation would hold insurance companies accountable without a national government competitor.The president "implied a national exchange without saying it," a Democratic leadership aide said. Obama also pointed to the bill’s requirement that insurance companies use more premium money for health care than for profits and to the bill’s strong insurance reforms.
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And the president reiterated his support for repealing the anti-trust exemption for insurance companies but didn't promise anything. "I’m entirely supportive of that, but I want 60 votes in the Senate. I’m trying to get it done. I’ll leave it at that," he said, according to the aide.
Here's the round-up from the Wall Street Journal on the pay-fors in the final health bill that negotiators in Congress are wrangling with:
In addition to softening the tax on high-end plans, Democrats plan to increase subsidies for lower earners to buy health insurance. To pay for such changes, Democrats are considering levying an additional $10 billion in fees on medical-device makers, for a total of $30 billion over 10 years. But it wasn't a done deal as the House was showing resistance.
Congressional negotiators have also told drug makers they were considering decreasing reimbursements under government health programs or increasing fees by an additional $10 billion over a decade, beyond the $80 billion in concessions the industry agreed to last year, according to people familiar with the negotiations. And lawmakers are looking to push fees on nursing homes past the $14.6 billion over a decade that is in the Senate version.
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Issues that have yet to be resolved, aides said, included how to structure the new exchanges where Americans would buy coverage, how much to increase the Medicare payroll tax and how to handle restrictions on abortion coverage.