THE WHITE HOUSE
Office of the Press Secretary
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:
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 benefit.
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 conditions.
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 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:
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 care services.
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:
The Health Security plan guarantees consumers a choice of health plans and enhances the patient-doctor relationship.
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.
The Health Security plan reduces the burden of paperwork and administration, streamlines regulatory, billing and reporting requirements and helps reduce confusion.
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 condition.
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-time.
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 and quality.
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 community-based care.
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 arrangements:
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 patient's plan. * 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.
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 want.
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 package.
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:
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 weightedaverage 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 average premium.
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 plan:
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 characteristic. * Empowers consumers to make more cost-conscious decisions by choosing among health plans on the basis of price and quality. 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 difference. * 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 better value.
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 alliances.
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 triggered.
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
States: Implement health care reform within federal framework
Alliances: Serve as purchasing agent for employers and consumers
The new framework for health security includes these components:
FEDERAL RESPONSIBILITIES AND NATIONAL HEALTH BOARD
The National Health Board consists of seven members appointed by the President with the advice and consent of th e Senate. The National Health Board assumes certain responsibilities for administering the new health care system, while existing federal agencies assume others. The Board:
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 individual.
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:
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:
Where inadequate services exist, alliances may organize health providers or use financial incentives to encourage health plans to expand.
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 health plans.
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 participants.
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 services.
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 plans.
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 community rate.
A new chapter in ERISA establishes fiduciary and enforcement requirements for employers and other sponsoring health benefit plans in corporate alliances.
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:
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 nonfinancial 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:
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 essential providers.
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:
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 insurance.
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 of payroll. * 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 sector.
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 hours worked.
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.
Working individuals and families may have their share of the premium deducted from their paychecks or write a check to the local health alliance.
Consumers pay premiums based on the type of policy they need to purchase:
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 sliding-scale basis.
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.