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Budget Deal Cuts Healthcare Voucher Plan from Reform Bill

Source: NY Times, Suite, Business Insurance

Posted on 13 Apr 2011

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During private negotiations last Friday, in which Republicans and Democrats were attempting to come to a consensus on the budget, the health care voucher plan supported by Senator Ron Wyden (D-ORE) was cut.

Senator Wyden had succeeded in passing the health care plan months before this private negotiation, despite extensive lobbying against it. As reported by the New York Times, Wyden claims that he was "flabbergasted, just flabbergasted," that this plan was cut.

“After weeks of closed-door negotiations to keep the federal government open, Free Choice Vouchers were placed on the chopping block even though there is no budget savings from cutting them this year,” Sen. Wyden wrote in an article published in the Huffington Post after he learned that budget negotiators agreed to repeal the voucher provision.

How The Health Care Voucher Plan Would Work

The health care voucher plan would have allowed about 300,000 American workers to choose their own insurance coverage through their current employer, rather than allowing the employer to do so.

Under the provision, employees would have to meet two conditions to be entitled to the employer-funded vouchers: their family income could not exceed 400% of the federal poverty level, and the premium contributions their employers require them to make must be between 8% and 9.8% of their income.

If those conditions are met, those employees would be entitled to receive a voucher from their employers, and the value of the voucher would not be tied to the plan in which the employee was actually enrolled.

Instead, the voucher's value would be equal to what the employer would pay if the employee were enrolled in whichever of its plans offered the “largest” premium contribution by the employer. Then, the employee could use the voucher to purchase health insurance coverage from a state health insurance exchange. The exchanges are authorized under the reform law and are supposed to be set up by 2014.

If the cost of a policy purchased by an employee through the exchange is less than the value of the voucher, the employee could pocket the difference in cash, which would be considered income and taxed.

Who Axed the Program?

When asked who asked the program, Mr. Wyden said, "I wish I knew. “Everyone at the table says that someone else brought it up. They all say, ‘It wasn’t me.’ ”

Democrats and administration officials insisted Tuesday in interviews that Republican leaders had moved to get rid of the Wyden plan. They acknowledge privately that were not in a position to fight it that aggressively, given that it was opposed by business and labor, and that agreeing to kill the plan was seen as a way of staving off other possible cuts in health care financing.

“There’s no question that eliminating this provision wouldn’t have been our first choice,” said an Obama administration official who spoke on the condition of anonymity in discussing private negotiations. “But these were tough, tough negotiations, and obviously no one got everything they wanted.”

Michael Steel, a spokesman for Speaker John A. Boehner, said “the program was eliminated because it costs jobs — and jobs are the American people’s top priority.”

High Cost for Employers

The provision, to go into effect in 2014, would have a huge and costly impact on employers with large numbers of low-paid workers—such as retailers—who are required to pay a high percentage of the premium.

And, depending on how the legislative language is interpreted in subsequent regulations, it also could prove costly to employers that offer employees a choice of health care plans ranging from relatively low-cost to very expensive plans.

Experts say the provision is almost certain to result in adverse selection, inflating employer costs.