Under all of the bills now before Congress, new insurance market regulation requiring individual and small business health plans cover everyone and charge the same premium regardless of health status will do a great deal to increase affordability, especially for people with major health concerns.

The bills differ, however, on the levels of coverage and assistance offered. The latest version of the House bill, like the HELP bill, would expand Medicaid eligibility up to 150 percent of the federal poverty level. By comparison, the Finance bill expands coverage under Medicaid up to 133 percent of the federal poverty level.

Similarly, cost-sharing credits in the House plan for those who purchase coverage though the insurance exchange are more generous and extend farther up the income ladder then such credits in the Senate Finance bill. Cost-sharing is minimal under Medicaid for those under 150 percent of poverty under the House bill; for those between 133 percent and 150 percent of federal poverty level about 97 percent of medical costs would be covered. Subsidies for people living between 300 and 350 percent of poverty would increase the actuarial value of the basic plan to 72 percent.

By comparison, under the Senate Finance bill, cost-sharing subsidies for those between 100 and 150 percent of poverty would increase actuarial value of the lowest-tier plan to 90 percent, and, for those with incomes between 150 and 200 percent of poverty, to 80 percent.

Another provision key to ensuring affordability is having employers contribute to coverage–as they now do for 162 million people. Our analysis shows that an average family with employers contributing to coverage could expect to pay $6,700 a year in premiums and out-of-pocket costs, while a family without employer contributions could expect to pay $10,000 more–or a total of $16,700.

Under the House bill, employers are required to provide at least 72.5 percent of premium contributions for individuals and 65 percent for families, or pay 8 percent of their payroll. Under the HELP bill, employers are required to provide at least 60 percent of the premium contribution or pay $750/year per uncovered full-time worker. Employers are not required to pay anything toward premiums under the Senate Finance bill, though firms with more than 50 full-time employees must pay a flat fee equal to the national average tax credit for each employee who receives tax credit through an exchange.

While these issues will be difficult to resolve, reaching consensus on what constitutes affordability and committing the necessary funds to achieve it are crucial in securing access to essential care for all and protection from the financial hardship that illness can now bring.

Affordability for healthcare insurance is a function of three elements: premium cost, cost sharing, and scope of covered services. Ideally, no one should be required to pay more than 10% of their incomes for total health costs, but the ceiling of $900b on the net cost of a health bill makes this an impossible standard to meet.

While the House bill would greatly lower the cost for many people in the individual and small group markets, it would still impose costs above 10% for moderate and middle income individuals and families -- roughly those between 300 and 500% of poverty. Furthermore, escalating health costs could easily worsen the affordability picture over time if cost containment measures are not effective in bending the cost curve.

I believe affordability for moderate income Americans will be an ongoing issue post enactment. Very high cost sharing will be a real and ongoing challenge for those who need health insurance protections the most -- those will multiple chronic conditions. And with age rating permitted at 2:1, the affordability challenge will be greatest for older adults. The lack of adequate financing in the bill over time will be more obvious as we try to address these concerns.

So while the legislation makes real strides toward more affordable health coverage, the issue is not going away. We will need to be bolder and more creative if we are to truly achieve affordable health coverage for all.

Reformers have much more to do when it comes to making health care more affordable for Americans. Three points stand-out in my mind:



1. Writing in Time magazine (10/26), Kate Pickert points out that during the ongoing open enrollment season millions of Americans with employer based health coverage are going to find themselves paying more for less. Pickert points out that the percentage of workers with significant deductibles has more than doubled in the last three years while surveys indicate that 40% of workers will pay higher premiums next year in addition to facing increasingly higher out-of-pocket expenses. She also points out that "of companies that offered health benefits in 2009, 86% offered only one plan." Shouldn't reformers find a way to make health coverage more affordable to this hard-hit group of workers? Won't these Americans ask why health reform isn't working for them?



2. Doug Elmendorf, head of the Congressional Budget Office, told the Senate Finance Committee that under the legislation passed by that Committee less that 10% of the population will be eligible to go to the new health insurance exchanges, even seven years after the bill becomes law. The CBO estimated last week that about six million people will be in the House public option which CBO says will likely "attract a less healthy pool of enrollees." Both findings are based on the fact that the exchanges for the most part will only be available to the unemployed and the currently uninsured -- a population expected to be more expensive to insure as many in this group have up until now been unable to afford check-ups, preventive care, or chronic care maintenance. How will creating exchanges with a risk pool that no commercial insurer in America would accept hold the private insurance industry accountable? Isn't this what private insurers want? Shouldn't reformers be trying to open up the exchange to a larger risk pool with a healthier mix of subscribers?



3. At a time when affordability is so crucial what will happen to subsidies? Julie Appleby in Kaiser Health News 10/29 reports discouraging news: Subsidies are likely to drop, starting in the second year after the bill is passed. Why? Appleby asserts that because subsidies are based on a percentage of the premium paid for the first year--if premiums rise faster than inflation in the second year, millions of hard working middle class folks will have to pay the extra costs out of pocket.



In my mind, subsidies will never be enough to address these issues. Rather the path to affordability for all Americans is injecting real choice and competition into the health care marketplace. Health reform must lay out a path to open the exchanges over time so that not just employers, but more and more Americans will be empowered to choose the health insurance plan that works best for them and their family. The only way to change insurer behavior is to put their entire customer base on the line. Force them to compete on the basis of cost, quality and coverage. I don't see how injecting competition into only 10 percent of the insurance market -- while guaranteeing that private insurers will keep the other 90 percent of their customers -- accomplishes that. Of course opening up the exchanges means taking on what I like to call the "status quo caucus," the many powerful interest groups who claim to want change while hiring lobbyists to protect what works for them. I believe that reform should address the needs of working families, which means empowering them to choose the health care that works best for them.

In Washington, much of the discussion about affordability focuses on the gross costs of health insurance reform to the federal government: Specifically, should the gross federal costs be limited to $800 billion over ten years, $900 billion, $1 trillion, or some other figure. (The net costs will actually be zero or less since the gross costs will be fully paid for through the elimination of health system waste and new revenues.)

Around the country, however, America's families cannot fathom the difference between $800 billion, $1 trillion, or some similar figure. Instead, the value of health insurance reform for America's families, and families' real measure of affordability, will be determined by their own "pocketbook test": Will health reform result in sufficient savings so health coverage and care fit within family budgets.

The affordability test will be extremely important for middle-class as well as moderate- and low-income people and families. It makes sense, therefore, that sliding-scale subsidies be extended to people and families with incomes of at least 400 percent of the federal poverty level. At 400 percent of the federal poverty level -- $88,200 in annual income for a family of four -- health insurance premiums are difficult to afford: Average premiums for family coverage today exceed $13,000, which, even without the inclusion of deductibles and co-payments, constitute a significant portion of families' incomes.

For low-income families and the near-poor, however, the provision of adequate help is even more important. It is these groups that constitiute the bulk of the uninsured today. For them, an apparent nominal premium requirement -- even of two or three percent of income -- is quite likely to make insurance premiums unaffordable.

For this reason, the new House bill, which extends Medicaid eligibility to 150 percent of the federal poverty level (slightly above $33,000 in annual income for a family of four), makes abundant sense. Medicaid's out-of-pocket protections for premiums, deductibles, and co-payments are uniquely tailored to make coverage and care affordable for those who need help the most.

When the final legislation is crafted in the Senate-House Conference Committee, the conferees would be wise to retain this laudable expansion of the Medicaid program.

Lately the health reform debate has been "all public option all the time". The ideologically oriented debate about the public option has diverted attention from the meat and potatoes consumer issues in health reform.

There is no doubt that policies offered to people in the exchanges will be better than what they could get in the broken non-group insurance market. But, depending on how details of the legislation are resolved, questions are likely to be raised about whether policies will be affordable for people who now will be required to have them as a matter of law. There are two key numbers to watch in assessing affordability: the subsidies provided to help people pay there premiums, and the scope of the underlying coverage itself and the size of the deductibles and out-of-pocket costs people will have to pay. In policy terms affordability is measured in terms of a percentage of family income. However, in the real world whether or not a policy is affordable to a family facing a penalty if they don't buy it depends on what else is going on with their family budget. Are they struggling to put kids through college? Do they have a lot of credit card debt? Are they having trouble paying the rent or the mortgage?

Policymakers face a very real dilemma here: they want to keep the overall price tag of the legislation down but they also want policies to be affordable, both to assure access to insurance and to prevent a political backlash to the law. As the process moves to single bills in the Senate and the House and then a final bill in conference the issue of affordability is likely to come more sharply into focus. While benefits for lower income people are stronger, deductibles for middle class people earning between $66,000 and $88,000 in some of the bills are quite high even compared with high deductible plans in the marketplace. It’s possible that there will be pressure to improve the benefits for the middle class before the final deal is done.