Key Differences in Senate, House Health Bills

Democrats in the U.S. Congress are preparing to merge the two health care bills passed in 2009 by the Senate and House of Representatives into a single bill.

This compromise bill would have to be passed by both chambers of Congress before being sent to President Barack Obama to sign into law. Health care reform is Obama's top legislative priority, and the Democrats are aiming to overcome unified Republican opposition.

Here is a detailed summary of the major differences between the House and Senate versions that Democrats must resolve.

Insurance Market Reform

Both bills would bring insurance market reforms barring insurers from excluding people for pre-existing conditions and preventing them from arbitrarily dropping policy holders.

Both bills would create insurance exchanges in which small businesses and individuals without employer-sponsored health benefits can shop for coverage. The Senate bill would create state-based exchanges. The House bill would create a national exchange but would allow states to operate state-based exchanges if they meet minimum requirements.

The House bill would allow insurers to charge older people up to twice the amount they charge younger policy holders. The Senate bill would allow insurers to charge older people up to three times what they charge younger people.

The Senate bill would allow young people to stay on their parents' insurance plans until the age of 26. The House bill would allow such coverage until age 27.

Both bills would place limits on how much insurers can spend on administrative costs and profits. The Senate bill would require insurers to spend at least 85 cents of every premium dollar on medical care in small group markets and 80 cents in large group markets. The House bill would require insurers to spend at least 85 percent of premiums on care.

Public Option

The House bill would create a new government health insurance plan to compete with private insurers. This “public option'' would have to meet the same coverage requirements as private insurers. The Senate bill has no public option.

The Senate bill would direct the U.S. Office of Personnel Management, which oversees health policies for 8 million federal workers and their families, to contract with private insurance companies to offer policies on the exchanges.

Both bills also would create nonprofit cooperatives to provide medical coverage to members.

Financing

Another big difference between the two bills is how they are financed. The House bill would impose a 5.4 percent surtax on individuals earning more than $500,000 a year and couples making more than $1 million. It also would raise money by imposing a 2.5 percent excise tax on medical devices.

The Senate bill includes a 40 percent excise tax on high-cost health insurance plans. It also would raise payroll taxes for Medicare, the government health insurance plan for the elderly and disabled, to 2.35 percent from the current 1.45 percent for individuals earning $200,000 or more annually and for couples earning $250,000 or more. The Senate bill includes special fees on insurers, drug companies and medical device makers and would impose a 10-percent tax on indoor tanning.

Abortion

Abortion could be another contentious issue. Both bills would bar the use of federal funds to pay for an abortion.

The House bill contains tougher language that would require anyone seeking coverage for elective abortions to buy separate insurance riders.

The Senate bill would let states opt out of including plans with abortion coverage on the exchanges and would require anyone with abortion coverage to write two separate premium checks -- one for the abortion coverage and one for the rest.

Medicaid Coverage

The Senate bill would make Medicaid, the government health insurance program for the poor, available to everyone with incomes up to 133 percent of the poverty level. The House would expand the Medicaid program to everyone with incomes up to 150 percent of the poverty level. The poverty level in 2009 for an individual was $10,830 and for a family of four $22,050. Many states have eligibility requirements below that level.

Coverage Mandates

Both bills would require most individuals to obtain health insurance and would impose penalties on those who do not. The House bill would impose a 2.5-percent penalty tax on income up to the average cost of an insurance policy. The Senate would phase in a $750-per-person annual penalty up to $2,250 per family or a penalty of 2 percent of taxable income, whichever is greater. The full penalty would take effect in 2016.

Employer Mandates

The House bill would require employers with payrolls above $750,000 to provide health insurance to workers. Those who do not provide insurance would face a penalty of 8 percent of payroll. Employers with a payroll between $500,000 and $750,000 would pay fines on a sliding scale of 2 percent, 4 percent and 6 percent of payroll.

The Senate bill has no such employer mandate. But large firms with more than 50 workers would have to pay a fine of $750 annually per worker if any of their employees obtain federally subsidized coverage on the exchange.

Workers with employer-sponsored plans with costs deemed unaffordable — exceeding 9.8 percent of salary — may drop that coverage and purchase federally subsidized insurance on the exchange. In those cases, the employer would pay a fine up to $3,000 per worker receiving the insurance subsidy.

In some cases the Senate bill would require employers with health plans to provide cash vouchers to lower-income workers to obtain insurance on the exchange.