Health Insurance Reform and the 110th Congress

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

Introduc tion ..................................................................................................................................... 1
What Is Health Insurance Reform All About?..........................................................................1
Different Objectives............................................................................................................2
Prioritizing Among Stakeholders........................................................................................3
Scope of Reform.................................................................................................................3
General Approaches to Health Insurance Reform...........................................................................5
National Health Insurance Program..........................................................................................5
Expand Existing Public Programs for Certain Individuals.......................................................6
Expand Privately Sponsored Coverage.....................................................................................7
Expanding Employer-Based Coverage...............................................................................7
Improving Access to Health Insurance in the Individual Market.......................................9
Market Reforms................................................................................................................10
Encourage State-based Reforms..............................................................................................12
Simultaneously Expand Private and Public Coverage Options...............................................14
Health Insurance Reform Bills in the 110^th Congress...................................................................14
National Health Insurance Program........................................................................................15
H.R. 15..............................................................................................................................15
H.R. 676............................................................................................................................15
H.R. 1200..........................................................................................................................15
H.R. 1841..........................................................................................................................16
H.R. 2034/S. 1218.............................................................................................................16
H.R. 3000..........................................................................................................................16
Expand Privately Sponsored Coverage...................................................................................16
H.R. 227............................................................................................................................16
H.R. 241............................................................................................................................17
H.R. 914/S. 397.................................................................................................................17
H.R. 1802..........................................................................................................................17
H.R. 2132..........................................................................................................................17
H.R. 2302..........................................................................................................................18
H.R. 2626..........................................................................................................................18
H.R. 2737..........................................................................................................................18
H.R. 3515..........................................................................................................................18
H.R. 3516..........................................................................................................................19
H.R. 3975..........................................................................................................................19
H.R. 5348..........................................................................................................................19
H.R. 5784..........................................................................................................................19
H.R. 5923..........................................................................................................................19
H.R. 5955/S. 3072.............................................................................................................19
H.R. 6110..........................................................................................................................20
H.R. 6210..........................................................................................................................20
H.R. 6582..........................................................................................................................20
H.R. 6699..........................................................................................................................20
S. 99..................................................................................................................................21
S. 733................................................................................................................................21
S. 1019..............................................................................................................................21
S. 1783..............................................................................................................................21

S. 1875..............................................................................................................................22
S. 1886..............................................................................................................................22
S. 1899..............................................................................................................................22
S. 2795/H.R. 5918.............................................................................................................22
S. 2818..............................................................................................................................23
S. 2835..............................................................................................................................23
S. 2948..............................................................................................................................23
S. 3554..............................................................................................................................24
Grants to States.......................................................................................................................24
H.R. 506............................................................................................................................24
H.R. 3507/S. 2031.............................................................................................................24
S. 325................................................................................................................................24
Simultaneously Expand Private and Public Coverage Options...............................................25
H.R. 2351..........................................................................................................................25
H.R. 3163..........................................................................................................................25
H.R. 6280..........................................................................................................................25
H.R. 7129..........................................................................................................................25
S. 158................................................................................................................................26
Author Contact Information..........................................................................................................27
Acknowledgments ......................................................................................................................... 27

Congress last debated comprehensive health insurance reform in the 1990s. At that time, the
Health Security Act, a bill originating with President Clinton and then First Lady Hillary Clinton,
was considered alongside a number of bills introduced by Senators Chafee, Daschle and Dole,
and Representatives Gephardt and Bilirakis, among others. The Health Security Act (H.R. 3600 ^rd
103 Congress) would have required health insurance coverage for all U.S. citizens, reformed
existing public health insurance programs, and established caps on health care spending. At the
time, escalating health care and health insurance costs, declining numbers of individuals with
private coverage, and state experimentation and innovation spurred the federal debate. Reforming
the one-seventh of the U.S. economy devoted to health care would have been no small feat, ^nd^rd
however, and despite considerable efforts by the 102 and 103 Congresses, comprehensive
health insurance reform did not succeed. Support for the Health Security Act began to decline
well before its formal consideration was complete. Among the concerns raised were the non-
transparent process under which the plan was developed and the government involvement that ¹
would result from its implementation. Many of the bills considered after H.R. 3600 were rejected
for not extending coverage far enough among the uninsured.
Today, similar conditions may be setting the stage for reconsideration of major health insurance
reform. While in the midst of a recession, the costs of health insurance and health care services
are consuming a growing portion of workers’ compensation, and the percentage of individuals
with job-based coverage is declining. States are innovating and experimenting, providing useful
trials and errors to potentially inform the debate at the federal level.
This report presents basic background on health insurance that may be useful to legislators
considering health insurance reforms. It describes health insurance reform approaches and ^th
provides brief descriptions of health insurance reform bills introduced in the 110 Congress. The
potential impact of various reform approaches and bills is not analyzed in this report, however. As
a result, it does not provide evaluations of how well different bills, once enacted, would meet
their objectives. The relative impact on such objectives probably varies widely.
Health insurance reform is a broad term that could potentially span a large range of policy
options, all of which have their own inherent strengths and weaknesses. Some health insurance
reform bills address a discrete health insurance problem or issue, such as expanding public health
insurance coverage for uninsured children or reducing the number of costly state mandates on
private health insurance plans. At the opposite end of the spectrum, however, are proposals that
operate on a broader scale—changing the way people access public and/or private health
insurance, investing large amounts of government resources to assist individuals with the cost of
health care or health insurance, reducing costs and improving quality. The scope of proposed

¹^T^h^e^r^e^a^r^e^a^la^r^g^e^num^be^r^of^a^r^ticle^s^a^{nd b}^ook^s^e^x^a^m^ining^the^f^a^ilur^e^of^H^.^R^.³⁶⁰⁰^{, inc}^l^udi^ng^Sk^oc^p^o^{l, T}^{., “}^T^he^Rⁱ^s^e
^a^{nd Re}^souⁿ^dⁱ^ng^De^mⁱ^se^o^f^the^Clintoⁿ^Plaⁿ^,”^He^alt^h^Af^fairs^,^Sprⁱⁿ^g¹⁹⁹^{5; B}^l^eⁿ^do^{n, R}^{., B}^r^odie^,^M.,^B^e^ns^{on, J}^{., “}^W^ha^t
^H^a^ppe^ne^{d t}^o^A^m^e^r^ic^aⁿ^s^’^Supp^or^t^f^o^r^the^C^lin^to^{n H}^e^a^lth^Plaⁿ^?^”^He^alth^Aff^a^irs^{, S}^u^m^m^e^r^{1995; C}^l^y^m^e^r^{, A}^{., P}^e^a^r^{, R}^.^,
^a^{nd T}^one^r^,^R^{., “}^T^he^H^e^a^{lth C}^a^r^e^D^e^ba^te^{: W}^h^a^t^W^e^{nt W}^r^ong^?^”^Ne^{w Yo}^{rk Times}^{, A}^u^g^u^s^t²⁹^,¹⁹^94;^“^N^a^tiona^{l H}^e^a^lth
^P^r^o^g^ram^,^P^r^esi^d^en^t^’^{s G}^r^an^d^e^st^Go^al^,^{Is Decl}^ared^Deadⁱⁿ^C^oⁿ^g^ress,^”^{New Yo}^{rk Times}^,^S^e^p^t^em^b^e^r²⁷^,¹⁹⁹⁴^;^S^t^ar^r^P^.^,
^“^W^ha^{t H}^a^ppe^ne^{d to}^H^e^a^{lth C}^a^r^e^R^e^f^o^r^m^?”^Am^e^r^ic^{an Pr}^os^pe^c^t^{, v}^o^l^{. 6.}ⁿ^o^.^20,^D^e^c^e^m^b^e^r¹⁹⁹^5:2⁰^-³^1.

reforms is one factor that makes a simple yet comprehensive discussion of all of the important
options challenging. Other fundamental differences separating health insurance reform
approaches include different objectives of reforms and different priorities among important
stakeholders.
Health insurance reform bills introduced in the 110^th Congress have surprisingly different primary
objectives, which can include the following:
• Reducing the number of people without health insurance. Most health
insurance reforms seek to improve access to needed medical care. In the United
States, access to a great deal of expensive medical care is dependent on whether
an individual has health insurance.
• Reducing the reliance on health insurance for at least some portion of
needed medical care. A number of bills reflect the position that part of the
insurance problem in the United States is that people have too much of it—that
the presence of insurance has desensitized Americans to the cost of health care
services, allowing both the demand for and the prices of medical care, whether
necessary or unnecessary, to grow too quickly. These bills include provisions
intended to encourage cost-consciousness in individuals’ choices of health
insurance and health care and include a group of approaches sometimes referred ²
to as promoting “consumer directed” health care.
• Reducing the cost of health insurance. Some advocates of reform believe that
the rising cost of health insurance must be addressed before other problems can
be dealt with. Their reform approaches reflect the belief that more people will
purchase insurance once more affordable plans are available. Thus, they assert
reducing the number of uninsured is secondary to reducing the cost of the
insurance. Cost-reducing approaches span the continuum, from preempting the
application of costly state laws to establishing a single government payer for all
health insurance. Advocates of single payer approaches believe such a system
would improve administrative efficiencies, thereby reducing overall health
insurance costs.
A number of bills in the 110^th Congress feature other objectives related to improving the quality
of medical care or the quality of health insurance products. Proposals to improve health
outcomes, increase the availability of information about high-quality health care and providers,
and establish disease management systems are raising interest among private insurers,
government programs, and employers. These provisions alone, however, will not reduce the
number of people without any insurance, and their effect on medical costs is as yet ³
undetermined.

²^G^oodm^aⁿ^{, J}^.,^W^{hat I}^s^C^ons^um^e^r^-^D^ir^e^c^t^e^d^H^e^{alth C}^a^r^e^?^H^e^alt^h^Aff^a^ir^s^W^e^{b Ex}^c^l^us^iv^e^{, a}^t
^http:^//c^oⁿ^te^nt.^h^e^a^ltha^f^f^a^ir^s^.^or^g^/^c^g^i/c^onteⁿ^t/^f^u^ll/25/^6/^w^540.
³^Ma^ttk^e^,^S.,^Se^id,^M.,^Ma^{, S}^{., “}^E^vⁱ^de^nc^e^f^o^r^the^Ef^f^e^c^t^of^Dⁱ^se^a^s^e^Ma^na^g^e^m^e^{nt: I}^s^{$1 B}ⁱ^l^lio^{n a}^Y^e^a^r^a^G^ood
^In^vest^m^eⁿ^t^?”^Am^e^r^ic^{an J}^ourⁿ^a^{l o}^f^M^ana^ge^{d C}^a^r^e^,^vo^l^.¹³^,²⁰⁰⁷^.

What constitutes adequate health insurance is an important consideration that is beyond the scope
of this report. Nonetheless, sponsors of bills extending coverage are likely to grapple with
complex questions about the kind of coverage that should be extended. Sponsors of bills offering
generous government subsidies for health insurance may feel that it is their duty to set a minimum
standard for qualifying coverage as a way to ensure that taxpayers’ funds are being used
responsibly.
One of the challenges of undertaking comprehensive health insurance reform is that every U.S.
citizen is a stakeholder whose preferences and needs differ from those of others. Reform
approaches reflect different choices about the relative importance of needs among stakeholder
groups, including federal, state, and local governments, health care providers, medical
researchers, insurance carriers, employers, workers, and consumers.
Needs can vary considerably between stakeholder groups, and even within them. For example,
health care consumers may prefer low-cost health insurance obtained through lower profits to
health insurers while, according to standard economic theory, those health insurers will seek to
maximize profits. Within consumer groups, there are healthy people who may prefer limited
insurance coverage or none at all, while elderly or less healthy consumers may prefer more
comprehensive coverage. Sometimes meeting the needs of one group can exacerbate the
problems encountered by others. For example, requiring health care premiums to be community
rated—that is, based on the average costs of everyone in a large group—can reduce premiums for
individuals with expensive medical conditions. On the other hand, community-rated rates could
lead to higher premiums for the healthiest individuals.
Since the early 1990s, a number of incremental health insurance reforms have been enacted (see ^th
Text Box 1). Health insurance reform bills introduced in the 110 Congress reflect little
consensus about whether to continue incremental improvements building on our current
patchwork of coverage or to implement reforms with much broader scope.

Text Box 1. Incremental Federal Health Insurance Reforms Since the Early 1990s
^Eligibil^{ity for Medicaid, init}^ial^{ly passed in 19}⁶⁵^{along with Medicare}^{, was delinked from cash welfare}^{programs, and}
^eligibi^{lity thresholds were raised f}^{or children, preg}^{nant wome}^{n, an}^{d certain aged. (See CRS Report RL330}^19,^Medicaid
^{Eligibility for A}^{dults and Chi}^ldren^{, by Jean H}^earne.)
^{The Health I}^nsu^rance^{Portability and Accounta}^{bility Act of 19}^{96 (}^{HIPAA) addressed a n}^umbe^{r of p}^{roblems in the}
^{offering and rating}^{of private}^heal^{th insu}^rance,^{particularly in t}^{he s}^{mall group and individual markets}^{for insura}^nce.
^{Ostensibly a}^{bout improving}^port^{ability of health insura}^{nce, its insu}^rance^{provisions reduced t}^{he len}^{gth of pr}^eexisting
^{condition exclusion periods for c}^{ertain individuals in the small group ma}^{rket, guara}^{nteed the}^{availability of plans for}
^{certain eligible people, and reduc}^{ed discrimination against individu}^{als within small groups ba}^{sed on}^{health conditions.}
^{(See CRS Report RL3163}^4,^{The Health Insurance Portabili}^{ty and Acc}^{ountability Act (HIPAA) of 1996: Ov}^{erview and Gui}^dance
^{on Frequently Asked Questions}^{, by}^{Hinda Chaikind et al.)}
^{The Balanced Budget Act of 1}⁹⁹⁷^{created the State C}^{hildren’s Hea}^{lth Ins}^uran^{ce Program (SCHIP), establishing grant}^s
^{for states to use}^{to provide healt}^{h insu}^rance^{to unin}^{sured low-income children. (See CRS Report RL304}^73,^State
^Childre^n’^{s Health Insurance Progra}^{m (SCHIP): A Brief Overview}^{, by Elicia J. Herz, Chris L. Peterson, an}^{d Evelyne P.}
^Baumruck^er.)
^{The Trade Act of 2}⁰⁰²^{created t}^{wo new program}^{s: grants}^{for stat}^{es to set u}^p^{or ex}^pand^high-risk^{pools for}
^{individuals who cannot find healt}^{h insu}^rance^{in the i}^{ndividual market, and health coverage}^{tax c}^{redits for certain}
^unem^{ployed individuals and people whose pe}^{nsions are g}^uara^nteed^{by th}^{e Pension Bene}^{fit Gua}^rante^{e Corporation.}
^{(See CRS Report RL3174}^5,^{Health Insurance: State High Risk Pools}^{, by Bernadette}^Ferna^{ndez, and CRS Report}
^RL326^20,^{Health Coverage Tax Cre}^{dit Authorized by t}^{he Trade Act of 2}⁰⁰²^{, by Bernadette Fer}^nandez.)
^Note:^D^{oes not include reforms}^{to Medicare or Medicaid unless t}^{hey ext}^{ended eligibility}^.
A number of incremental reforms enacted over the past 15 years have improved the availability of
health insurance for some populations. However, they have been built on a system where some
continue to have no access to any insurance and others to only unaffordable options, where the
number of uninsured has continued to rise, and where such changes may have exacerbated the
loss of privately sponsored coverage. For example, a body of research has concluded that
expanding Medicaid and the State Children’s Health Insurance Program (SCHIP) has generated
some crowd-out of private coverage; on the other hand, children are the only subpopulation in ⁴
which uninsurance rates have fallen over the past decade.
Questions about the scope of reforms extend to the cost of the reform plans. At one end of the
federal financing spectrum are bills that feature subsidies for individuals to use toward the cost of
health insurance. Such bills presume that a financial commitment from the federal government is
essential to achieve universal or near universal coverage, whether coverage is provided through
government programs or private plans. A fair amount of research supports the notion that ⁵
significant subsidies would be needed to induce many of the uninsured to purchase coverage.

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^s^e^e^G^r^ube^{r, J}^{., S}ⁱ^m^{on, K}^.,^Cr^o^w^d^-^o^u^t^T^eⁿ^Y^e^a^{rs L}^a^t^e^{r: H}^a^{ve R}^ecen^t^P^u^blⁱ^c^In^s^u^raⁿ^{ce E}^x^paⁿ^sⁱ^oⁿ^s^Cr^o^w^d^e^d^o^u^t^P^rⁱ^v^a^t^e
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⁽^c^onti^nue^d.^..)

On the other end of the spectrum are a number of market reform approaches that reflect the
position that government laws and regulations have raised the cost of insurance, reduced the
number of options available to people, and created disincentives to purchasing low-cost
insurance. For example, state benefit mandates are blamed for increasing costs and reducing
choices. Bills at this end of the spectrum aim to make the market for insurance work better,
proposing to achieve higher coverage rates without subsidies because people will find health
insurance products are more affordable by meeting, but not exceeding, their insurance needs.

Health insurance reform bills introduced in the 110^th Congress can be classified as expanding ⁶
coverage using one of the following approaches:
• Largely replace existing coverage with a national health insurance program (or a
national health service).
• Expand existing public programs for certain individuals.
• Expand privately sponsored coverage—including proposals to
• expand employer-based health insurance,
• expand the individual market for health insurance, and
• improve the private market for health insurance.
• Encourage state-based reforms.
• Simultaneously expand private and public coverage options.
A number of proposals introduced in the 110^th and earlier Congresses were directed at the creation
of a national health insurance program. While the legislation can take a variety of forms, the
general thrust of such proposals is to make basic health insurance available to all Americans so
that access to health care would not be contingent on individuals’ ability to pay or their
employment status. These bills all share at least three common features: replacement of most or
all of the existing sources of coverage, universal entitlement to health care or health insurance,
and government-provided health coverage.
National health insurance legislation in the 110^th Congress generally took one of two approaches: ⁷
social insurance or national health service. Under the social insurance approach, all individuals

^(...c^on^tin^ue^d)
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^Hea^lth^Iⁿ^su^ran^ce^{for Al}^{l: Pri}ⁿ^cⁱ^p^l^e^s^{for Re}^form^{, C}^o^m^m^onw^ea^{lth F}^und^{, O}^c^to^be^r²⁰⁰⁷^;^Iⁿ^su^ring^Ame^r^ica^’^{s Hea}^lth^:
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²⁰⁰^{4 htt}^p^://w^w^w^.io^m^.e^du/CMS/³⁸⁰⁹^/⁴⁶⁶^0/¹⁶⁶⁷⁵^.a^s^p^x^.
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^“^g^ov^e^rⁿ^m^eⁿ^t-^s^pons^or^e^d^pr^og^r^a^m^s^w^{ith a}^{ll of}^the^f^o^llowⁱ^ng^c^h^a^r^a^c^t^e^r^is^tic^s^:^a^.^T^h^e^pr^og^r^a^m^,^inc^l^udi^ng^be^ne^f^its^a^nd
⁽^c^onti^nue^d.^..)

would obtain their health insurance through a government-administered and financed system.
Medicare is an example of a social insurance program for elderly and disabled individuals.
Private insurers can retain a role in such a system, essentially acting as contractors. In contrast,
the national health service approach, modeled after systems like Britain’s National Health
Service, includes universal coverage, as well as reforms of some or all of the factors of health
care production—such as public ownership of hospitals, or public employment of physicians.
Private insurers may or may not have a role is such a system.
Because of the magnitude of the changes in such approaches, they would be subject to criticism,
particularly about the level of governmental intrusion they would potentially introduce. The
counterargument could be that the continuation of more incremental changes cannot be relied on
to achieve universal or near universal insurance coverage.
The majority of bills in the 110^th Congress to expand public health insurance programs would
have done so only for certain targeted groups of individuals. For example, some bills would have
allowed younger non-disabled adults (for example, those between ages 55 and 64) to enroll in
Medicare. Other bills would have eliminated the two-year Medicare waiting period for people
who are disabled. Yet other bills would have extended SCHIP and Medicaid, with an objective of
covering nearly all children. None of these partial coverage bills are summarized at the end of this
report. Instead, the list of introduced legislation is focused on only those bills that are not limited
to particular demographic groups.
Although the bills characterized in this section are not listed at the end of this report because of ⁸
their narrow scope, that is not to suggest their impact would be insignificant. If one measures the
success of past health insurance reforms by the number of previously uninsured individuals who
obtained health coverage, then the expansion of public programs (Medicare, Medicaid, and
SCHIP) must be considered great successes. For example, in the years after the creation of
SCHIP, the percentage of children who were uninsured fell by more than one-third; this is in ⁹
contrast to a 12% increase among non-aged adults over the same period.
A number of bills offered in the 110^th Congress would have built on those programs to extend
coverage to more uninsured individuals. Public program expansions have advantages over other
types of reforms in that the programs are already operational and their administrative costs may

^(...c^on^tin^ue^d)
^fⁱ^na^nc^ing^m^e^thod,^is^pr^e^s^c^r^ibe^d^b^y^s^t^a^t^ute^.^{b. T}^h^e^pr^og^r^a^m^pr^ov^ide^s^f^o^r^e^x^plic^it^a^c^c^ounta^b^il^ity^of^be^ne^f^{it pa}^y^m^eⁿ^ts^a^nd
^inc^o^m^e^{, us}^ua^lly^{in the}^f^o^r^m^of^a^t^r^us^{t f}^und^{. c}^.^T^h^e^pr^og^r^a^m^is^fⁱ^na^nc^e^d^by^c^ontrⁱ^bu^tio^ns⁽^e^.g^{., ta}^x^e^s^o^r^pr^e^m^iu^m^s⁾^f^r^o^m
^or^oⁿ^be^ha^lf^of^pa^r^tic^ipaⁿ^ts^{, w}^h^ic^{h in}^s^o^m^e^pr^og^r^a^m^s^a^r^e^s^upple^m^ente^d^by^g^o^v^e^rⁿ^m^e^{nt inc}^o^m^e^f^r^o^m^othe^r^s^o^ur^c^e^s^.
^Iⁿ^v^e^s^t^m^e^{nt inc}^o^m^e^{on pr}^og^r^a^m^ass^e^ts^m^a^y^a^l^s^o^be^us^e^d^{to f}ⁱ^na^nc^e^t^h^e^pr^og^r^a^m^.^{d. T}^h^e^pr^og^r^a^m^is^un^iv^e^r^s^a^ll^y⁽^o^r
^a^l^m^o^s^t^univ^e^r^s^a^l^l^y⁾^c^o^m^puls^o^r^y^f^o^r^a^de^fⁱ^ne^d^po^pula^tⁱ^on,^or^the^c^o^ntrⁱ^b^u^ti^on^is^s^e^{t a}^t^s^u^c^h^a^s^ubsⁱ^d^iz^e^d^le^v^e^{l tha}^t^the
^v^a^st^m^a^jorit^y^of^the^pop^ula^tⁱ^{on e}^lⁱ^g^ible^to^pa^rtic^ipa^t^e^a^c^t^ua^lly^pa^rtic^ipa^t^e^.^”^From^A^c^tua^r^ia^{l Sta}^nda^{rd o}^f^P^r^a^c^tic^e^{No. 3}²^,
^Soc^ia^{l I}ⁿ^s^u^r^anc^e^{, A}^c^tua^r^ia^{l Sta}ⁿ^d^a^r^d^s^B^o^a^r^{d, D}^o^c^.^N^o^{. 0}⁶²^,^ht^tp:/^/^w^w^w^.^a^c^t^ua^rⁱ^a^l^s^t^a^nda^r^d^s^boa^r^d^.or^g^/pdf^/a^s^ops^/
^a^s^op0³²^_06^2.^pdf^.
⁸^Som^e^of^the^s^e^lim^ite^{d sc}^ope^bills^c^oul^{d p}^o^te^nt^ia^lly^e^x^t^e^{nd c}^o^v^e^ra^ge^{to m}^o^re^uni^nsure^dⁱⁿ^divⁱ^dua^{ls t}^h^aⁿ^som^e^of^the
^b^{ills t}^h^{at are listed}^at^th^{e en}^d^o^f^th^{is rep}^o^r^t.^Becau^{se th}^{is rep}^o^{rt f}^o^cu^{ses o}ⁿ^ap^p^r^o^ach^{es an}^dⁿ^o^{t im}^p^{act, it}^d^o^e^{s n}^o^t
^a^ddr^e^s^s^thos^e^dif^f^e^r^e^nc^e^s^{in c}^o^v^e^r^a^g^e^.
⁹^B^a^s^e^{d on}^the^pe^r^c^eⁿ^ta^g^e^of^indivⁱ^dua^ls^uni^ns^ur^e^d^f^o^r^the^f^u^{ll y}^e^a^r^,^{in 1}⁹⁹⁶^aⁿ^d²⁰^06,^f^r^om^the^Me^dic^a^l^Ex^pe^ndit^u^r^e
^P^a^ne^l^Surv^e^y^(MEP^S)^{, a}^d^mⁱ^niste^r^e^d^by^the^A^g^eⁿ^c^y^f^o^{r He}^a^lthc^a^r^e^Re^se^a^r^c^h^a^{nd Qua}^lity⁽^A^HRQ).

be lower, relative to the costs of benefits, than for typical private coverage.¹⁰ If the target
population of a reform proposal is predominantly those who cannot afford private coverage, or if
the proposal includes sliding scale subsidies, utilizing existing programs that already conduct
income determinations and administer subsidies may be efficient.
Proposals to expand public coverage while maintaining the existing private market for insurance
face an obstacle in “crowd out.” There is evidence that in the presence of expanding public
coverage, private coverage will be lower than it would have been. However, analyses have
concluded that when public programs cover the lowest income people, for whom few affordable
private sources of coverage exist, crowd-out is low. But when public programs extend into higher ¹¹
income levels, crowd-out rises.
Private health insurance sponsored by employers covers more than 60% of the U.S. population.¹²
As a result, a major portion of health insurance in this country is funded privately by workers and
their employers. Some of the bills focus on expanding employer-based or “group” coverage
generally, and others address the particular needs of small employers or the problems present in ¹³
the individual market for insurance. Still other approaches focus on freeing private markets for
insurance from the laws, regulations, and incentives that raise costs and reduce flexibility, with ¹⁴
the hope that such changes would improve the availability and affordability of health coverage.
Because more than 80% of uninsured individuals under age 65 are employed or are family ¹⁵
members of a person with ties to employment, efforts to expand or strengthen the employer-
based, or group, market for insurance can potentially be effective in reducing the number of
uninsured. Work-focused approaches, of course, have limited impact on people who have no or
tenuous ties to the workforce.
Many bills in the 110^th Congress proposed to subsidize workers’ or employers’ share of premiums
(either directly or through tax credits, exclusions or deductions; see Text Box 2), mandate that
some or all employers offer coverage, or improve pooling in the small employer market for

¹⁰^R^e^por^te^d^a^d^mⁱ^nis^t^r^a^tiv^e^c^o^s^t^s^f^o^r^Me^dic^a^r^e^a^nd^Me^dic^aⁱ^{d a}^r^e^g^e^ne^r^a^lly^be^t^w^ee^{n 3%}^to^4%^of^be^ne^f^its^{, w}^h^ile^pr^iv^a^t^e
^plaⁿ^s^r^a^ng^e^f^r^om^be^t^w^e^eⁿ^5%^to^50%^of^pr^e^m^ium^.^Aⁿ^a^l^y^s^ts^a^r^g^u^e^,^how^e^v^e^r^{, a}^{bout w}^h^e^t^he^r^the^a^d^mⁱ^nis^t^r^a^tiv^e^pu^blic
^p^r^o^g^ram^d^a^t^a^{are co}^m^p^l^e^t^e^an^d^com^p^arab^l^e^.^S^{ee M}^a^t^t^h^ew^s,^M^.^,^M^e^dic^a^r^e^’^s^Hⁱ^dde^{n A}^d^mⁱ^nis^t^r^a^tiv^e^C^o^s^t^s^:^A
^Comparis^{on of}^M^e^dic^a^re^an^d^the^Priv^ate^Se^c^t^{or (}^B^ase^dⁱⁿ^P^a^{rt o}ⁿ^{a Te}^c^hⁿⁱ^c^a^{l P}^ape^r^by^M^a^rk^Lit^o^{w of M}^illim^an,^Inc^.⁾^,
^C^ounc^il^oⁿ^A^f^f^o^r^d^a^b^le^H^e^a^{lth I}ⁿ^s^u^r^a^nc^e^,^J^a^nua^r^y²⁰⁰^6.
¹¹^Pub^lic^pr^ogr^am^c^r^ow^d-^o^u^t^of^prⁱ^v^ate^c^o^v^e^r^age^:^W^hat^ar^e^t^h^e^is^s^u^e^s^?^T^h^e^R^obe^r^t^W^o^{od J}^o^hⁿ^s^oⁿ^Fo^unda^tⁱ^oⁿ^,
^Re^se^a^r^c^h^S^y^nthe^{sis Re}^{port No}^{. 5}^,^htt^p^://w^ww^.r^w^j^f^.^org^/^pr^/^s^yⁿ^the^s^is/re^ports_aⁿ^d^_^b^rie^f^s/pdf^/no5^_re^s^e^a^r^c^h^re^port.^pdf^.
¹²^{CRS Rep}^o^r^{t 9}⁶^-8⁹¹^,^H^e^alt^h^Iⁿ^s^u^r^anc^e^C^o^v^e^r^age^:^C^har^ac^te^rⁱ^s^tic^s^{of t}^h^e^Iⁿ^s^u^r^e^d^a^{nd U}ⁿ^ins^u^r^e^{d P}^o^p^u^lati^onsⁱⁿ²⁰⁰⁷^,
^b^y^Ch^{ris L}^.^P^e^tersoⁿ^an^d^A^p^{ril G}^r^ad^y^.
¹³^For^a^ba^c^k^g^r^ound^on^the^w^a^y^s^{in w}^h^ic^{h pe}^ople^obtaⁱⁿ^he^a^{lth i}ⁿ^s^u^r^a^nc^e^a^{nd t}^h^e^m^a^r^k^e^t^s^f^o^r^ins^u^r^a^nc^e^,^s^e^e^C^R^S
^R^e^por^{t R}^L³²²³^7,^Hea^l^t^h^Iⁿ^su^{rance: A}^P^rⁱ^m^er^,^b^y^Bern^ad^et^t^e^F^e^rn^an^d^ez.
¹⁴^T^h^e^{list of}^{bills a}^t^the^eⁿ^{d of}^th^is^re^{port a}^ssocⁱ^a^t^e^d^w^{ith t}^h^{is se}^c^tioⁿ^do^no^{t i}ⁿ^c^l^ude^lim^ite^{d sc}^ope^re^f^o^rm^{s tha}^t^{, f}^o^r
^exa^m^p^l^e,^p^r^o^hⁱ^bⁱ^t^p^r^e-exi^s^tⁱⁿ^{g co}ⁿ^dⁱ^tⁱ^oⁿ^excl^u^sⁱ^oⁿ^s^f^o^{r ch}ⁱ^l^d^r^{en o}^r^rest^ri^ct^p^rⁱ^v^at^{e p}^l^an^{s’ ab}ⁱ^lⁱ^t^y^t^o^u^s^{e l}ⁱ^f^etⁱ^m^{e l}ⁱ^mⁱ^t^s^.
¹⁵^Se^e^Fig^u^r^e¹^{in C}^R^{S R}^e^por^{t 9}⁶^-⁸^91,^H^e^alth^Iⁿ^s^u^r^anc^e^C^o^v^e^r^a^g^e^:^C^har^ac^te^rⁱ^s^tic^s^of^the^Iⁿ^s^u^r^e^d^an^{d U}ⁿⁱⁿ^s^u^r^e^d
^P^o^pu^l^a^ti^on^{s i}ⁿ²⁰⁰⁷^,^by^Chris^L^.^P^e^te^rs^oⁿ^aⁿ^{d A}^p^{ril G}^r^a^d^y^.

insurance.¹⁶ A number of bills were intended to address the disadvantages that small employers
face in providing health insurance as a benefit relative to large employers. (A number of these
approaches are discussed more thoroughly in the “Market Reforms” section below.) Large
employer groups are able to spread risk more broadly among their employees and enjoy
economies of scale that keep per person administrative costs low. When a large employer self-¹⁷
insures, its health benefits are not subject to state insurance laws and regulation (because it is
not defined as “insurance”). This, along with the broad risk spreading and low per person
administrative costs, can confer a considerable cost advantage over similar benefit plans in the
small group or individual markets for insurance.
Text Box 2. Subsidies for Private Health Insurance
^{To achieve universal or}^near^univ^{ersal private h}^{ealth insu}^rance^cov^{erage, financial assistance with}^th^{e cost of health}
^insuran^{ce is likely to be necessa}^r^{y. Various studies examining indiv}^{iduals’ demand for health insu}^ran^{ce find that}
^{subsidies need to cover a}^{significant portion of a}^premium^before^{a low- or modest-}^{income person}^{may be willing to}
^purc^{hase it. Eve}^{n bills that r}^equir^{e individuals to purchase}^coverag^{e tend to include assistance}^with^{costs, because}
^{health insu}^rance^pr^{emiums for}^{a f}^{amily at twice the federal poverty}^{level can easily account for}^more^than²⁵^{% of the}
^{family’s income.}
^{Three alternative way}^{s to su}^{bsidize health coverage a}^{re p}^{roposed in bills offered in the}¹¹⁰^th^Congr^{ess. Some bills}
^{would create direct su}^{bsidies for health insu}^rance^{that wo}^{uld be a}^{dministered by the}^{state or fede}^r^{al government’s}
^{designated health agen}^{cy. Individuals would apply to the ap}^prop^{riate office and, once determined eligible, would be}
^{provided either with a pa}^yment^{or vouche}^{r to use}^{toward their ins}^uranc^{e costs, or payme}^{nts would}^{be made directly}
^{to the insu}^rance^{carrier. The se}^c^{ond approac}^{h is to utilize the Int}^{ernal Reven}^{ue Service (IRS) and}^{build subsidies into}
^{the existing a}ⁿⁿ^{ual federal tax}^fili^{ngs. Under t}^{he second a}^pproac^{h, tax filers would attest to their c}^{overage during t}^he
^{past year; a}^{nd if their income}^{is determined to be}^{below the eligibility threshold, they would receive}^{tax credits in t}^he
^{amount of th}^{e su}^{bsidy for w}^hich^{they are eligible. A final group of}^{bills would provide tax credits or subsidies directly}
^{to employers to encourag}^{e more}^generous^{employer cont}^ribution^{s to workers’ plans.}
^{All approaches raise administrativ}^{e challenges. The large variation in pr}^{emium costs}^{for different}^pla^{ns, combined with}
^{varying income levels of those eligible for subsidies, complicates r}^{outinized systems for su}^{bsidizing coverage. Many}
^{low-income indiv}^{iduals or familie}^{s without tax liability do not file a}^{nnual ta}^{x ret}^ur^{ns; getting t}^{hem in}^{to the system is}
^{difficult. And employer sub}^{sidies may or may}^{not ultimately help w}^orkers.
^{For bill writers, other complicati}^{ons arise in evaluating s}^u^b^sidies,^whethe^{r delivered directly or thr}^{ough the}^tax
^{system. One goal in setting}^su^{bsidy amounts is often}^{to achieve m}^aximum^{health ins}^uranc^{e p}^urc^has^{es with fewest}
^{public f}^{unds. It is difficult to kno}^{w the corre}^{ct su}^{bsidy level to maximize the nu}^mbe^{r of u}^ninsu^{red individuals or}
^{families who wil}^{l become willing t}^o^{buy coverage, t}^{he ma}^{ximum a}^{mount of income t}^{hat a low-income individual or}
^{family should be ex}^{pected to con}^{tribute toward coverage, or t}^he^proper^pha^{se-out sch}^{edule for in}^{dividuals or famil}^ies
^{with increasing income. Finally, subsidies could exacer}^{bate b}^udget^{ary pro}^{blems by e}^ncou^{raging cro}^{wd-out of existing}
^{employer or individual payments}^{for coverage.}
^{There are oth}^{er ways to s}^u^b^sidiz^{e insura}^{nce via less direct rout}^{es. One of t}^{hose, re-insura}^{nce, ap}^pe^{ared in a n}^umbe^r
^{of health ins}^uranc^{e reform}^{bills in the 1}¹⁰^th^Congres^{s. These bills p}^{ropose to transfe}^{r some of t}^{he “}^excess”^{risk for}
^{covering certain g}^{roups to eithe}^r^{a pool funded by}^contrib^{utions f}^{rom all insurers or f}^{rom the gove}^rnme^nt.

¹⁶^Rⁱ^s^k^poo^ls^a^r^e^la^r^g^e^g^r^oups^ofⁱⁿ^divⁱ^dua^ls^w^hos^e^m^e^dic^a^l^c^o^s^t^s^a^r^{e c}^o^m^b^ine^d^to^c^a^l^c^u^la^te^pr^e^m^ium^s^.^P^o^oling^rⁱ^s^k^s
^tog^e^the^r^a^llow^s^the^c^o^s^t^s^of^the^le^s^s^he^a^lthy^{to be}^s^u^bs^idiz^e^d^by^the^he^a^lthy^.^Iⁿ^g^e^ne^r^a^{l, the}^la^r^g^e^r^the^rⁱ^s^k^pool^{, t}^h^e
^m^o^{re p}^r^edⁱ^c^t^a^b^l^{e an}^d^st^abl^e^t^h^e^p^r^e^mⁱ^u^{ms can}^b^e^.^(F^ro^m^“Overvi^e^w:^In^su^ran^{ce M}^a^rket^{s 10}¹^”^p^r^esen^t^a^tⁱ^oⁿ^b^y^Co^ri
^U^c^c^e^{llo, A}^m^e^r^ic^aⁿ^A^c^a^d^em^y^o^f^A^c^tua^r^ie^s^a^t^the^N^a^tiona^{l A}^s^s^o^cⁱ^ation^f^o^r^Socⁱ^a^l^Iⁿ^s^u^r^a^nc^e²⁰⁰⁸^A^nnua^{l Me}^e^tⁱⁿ^g^.⁾
¹⁷^Ma^ny^la^r^g^e^em^plo^y^e^r^s^s^e^l^f^-ⁱ^ns^ur^e^theⁱ^r^ow^{n he}^a^l^t^h^c^o^v^e^r^a^g^e^ins^t^e^a^{d of}^p^u^r^c^ha^sⁱ^ng^ins^u^r^a^nc^e^thr^oug^{h a}^tr^a^d^it^io^na^l
ⁱⁿ^su^ran^{ce carri}^er.^T^h^o^s^{e em}^p^l^o^y^e^r^{s ret}^aⁱⁿ^t^h^{e ri}^{sk t}^h^at^co^st^{s o}^f^m^e^dⁱ^cal^b^eⁿ^e^fⁱ^t^s^f^o^{r t}^h^ei^{r em}^p^l^o^y^{ees e}^x^ceed^t^h^e
^c^o^lle^c^t^e^d^pr^e^m^ium^s^ins^t^e^a^d^of^pa^ss^ing^tha^t^rⁱ^s^k^a^l^oⁿ^g^{to t}^h^eⁱⁿ^s^u^r^aⁿ^c^e^c^o^m^p^aⁿ^y⁽^a^lthoug^{h m}^aⁿ^y^of^them^pur^c^h^a^s^e^a
^sto^p^-^l^o^{ss po}^licy^th^{at reim}^b^u^r^{ses t}^h^em^f^o^{r lo}^{sses ab}^o^v^{e a sp}^ecifⁱ^ed^level.⁾

Most health insurance in the United States is obtained through employment. This is due to a
number of factors—workers perceive employers as paying for most of the cost of group health ¹⁸
insurance, and payments for group plans have tax-advantaged status. Further, the cost of group
plans are calculated for an entire group, whereas people in the individual, or non-group, market
are often “underwritten” based on their own health status—that is, the price of the insurance
policy is based on an individual’s own set of health conditions. While health underwriting could
result in low-cost plans for healthy individuals seeking coverage, those with medical conditions
could be at a significant price disadvantage relative to the price they might be charged if their
premiums were averaged across an employment based group. Insurers selling plans in many
states can even refuse to sell to individuals with health conditions, or sell policies that exclude ¹⁹
coverage for particular conditions and sometimes for entire body systems.
Some bills offered in the 110^th Congress were intended to address these issues, in the hopes of
making the individual market work better for more people. Potential advantages of improving the
individual market for insurance include
• increasing individuals’ choices (coverage options would not be limited to those
chosen by their employer), and
• increasing the portability of health insurance (portable health insurance does not
have to be discontinued when one leaves a job).
Tools utilized by individual market bills include
• giving individually purchased insurance the same tax-advantaged status as
employer-sponsored coverage, and
• providing subsidies for the purchase of coverage in the individual market.
Some bills would eliminate the tax benefits for employer-based health insurance premiums and
replace them with new tax benefits for coverage in the individual market. (See Text Box 3 for
summaries of tax policies related to health insurance.) These provisions were intended, over time,
to provide incentives for people to move from employer-based coverage to coverage in the
individual market. However, because of the market limitations discussed above, such as health
underwriting, lack of guaranteed availability of plans, and the absence of employer contributions,
these proposals by themselves may improve options for some, but not others. For example,
employer contributions fund a large portion of the nation’s health insurance bills. Without
replacing those funds, some people may find individual insurance less affordable than their ²⁰
employer-sponsored plan, at least in the short run. In addition, risk pooling in the individual

¹⁸^U^nde^r^c^u^r^r^e^{nt la}^w^,^pe^ople^buyⁱⁿ^g^he^a^{lth ins}^u^r^a^nc^e^thr^oug^h^theⁱ^r^e^m^plo^y^e^r^s^a^{nd s}^e^lf^-^e^m^p^loy^e^{d indi}^vⁱ^dua^ls^a^r^e^a^b^le^to
^e^x^c^l^ude^pr^e^m^iu^m^s^f^o^r^he^a^{lth i}ⁿ^s^u^r^a^nc^e^f^r^o^m^ta^xa^ble^inc^o^m^e^{. O}^t^he^r^s^m^a^y^de^duc^{t m}^e^dic^a^l^c^o^s^t^s^{but o}ⁿ^ly^if^they^itemⁱ^ze
^de^duc^ti^ons⁽^w^hic^h^m^o^s^t^ta^x^p^a^y^e^r^{s do}^no^t)^aⁿ^{d o}ⁿ^ly^{to the}^e^x^te^{nt t}^h^a^t^pr^e^m^ium^s^a^{nd ot}^he^r^uⁿ^r^e^im^bur^s^e^{d m}^e^dic^a^l
^exp^eⁿ^s^{es ex}^ceed⁷^.⁵^%^o^f^ad^j^u^st^{ed gro}^{ss i}ⁿ^co^m^e^.
¹⁹^P^o^ll^itz^{, K}^.,^Soriaⁿ^{, R.}^aⁿ^d^T^hom^a^s^{, K}^.,^Ho^w^Accessib^l^{e is In}^divid^u^a^l^Hea^l^t^h^Iⁿ^su^ran^{ce fo}^{r Peop}^{le i}ⁿ^L^e^ss-T^h^an^-
^P^e^rf^ect^Hea^l^t^h^?^R^e^p^o^r^t^f^o^r^t^h^e^K^a^is^e^r^Fa^mⁱ^l^y^Founda^tio^{n, J}^une²⁰⁰¹^{, h}^ttp:^//w^w^w^.kf^f^.or^g^/ins^u^r^a^nc^e^/^u^p^loa^d^/^H^ow^-
^A^c^cessi^b^l^e-i^s^-In^dⁱ^vi^d^u^a^l^-^Heal^t^h^-Iⁿ^s^u^r^an^ce-f^o^r-Coⁿ^s^u^m^er-iⁿ^-^L^e^ss-^T^h^an^-P^erf^ect^-Heal^t^h^-Rep^o^r^t^.^pd^f^.
²⁰^O^v^e^r^tim^e^,^em^ploy^e^r^s^w^{ould l}ⁱ^k^e^ly^c^onv^e^r^{t a}^t^le^a^s^{t s}^o^m^e^por^tion^o^f^pr^em^iu^m^c^ontrⁱ^b^u^ti^ons^t^o^w^a^g^e^{s. N}^one^t^h^e^l^e^s^s^,
^t^h^{ere w}^o^u^l^d^p^r^ob^ab^l^y^b^e^so^m^e^“l^e^a^ka^ge,^”^an^dⁱⁿ^t^h^{e i}^m^m^e^dⁱ^at^{e t}^e^r^m^,ⁿ^o^t^al^l^em^p^l^o^y^er^{s h}^a^{ve p}^o^lⁱ^cⁱ^e^{s i}ⁿ^pl^{ace t}^o^rai^s^e
^w^a^{ges i}^mmedⁱ^at^el^y^.

market in many states is limited, and individual underwriting common. This could mean that once
employers drop coverage, healthy people could easily find replacement policies in the individual
market, but those less healthy and arguably most in need of health insurance become a new and
possibly needier group of uninsured. Finally, the administrative costs in an environment with few
economies of scale are high. For these reasons, most bills proposing individual market solutions
tend to be combined with other reforms addressing some of these issues.
Text Box 3. Tax Benefits to Individuals for Health Insurance
^{Many of t}^he^{health refor}^{m bills introduced in the}¹¹⁰^th^Cong^ress^{would have utilized the U.S. tax system to help m}^eet
^{the objectives of the}^{bills. Below}^{are brief desc}^{riptions of the}^som^{e of the ta}^{x be}^{nefits p}^{roposed in}^{health insu}^rance
^{reform bills. For more information about ta}^x^benefits^{for health i}ⁿ^s^uranc^{e, see CRS Report RL33}⁵⁰⁵^,^{Tax Benefits for}
^{Health Insurance an}^{d Expenses: Ov}^{erview of Cur}^{rent Law a}^{nd Legislation}^{, by Bob Lyke a}^{nd Julie M. Whitt}^aker.
^{Tax subsidies for the pu}^rc^has^{e of health insura}^nc^{e. A n}^u^m^b^{er of bills proposed tax}^{credits for the}^pu^rchase^of
^{health insu}^{rance. Some would pr}^{ovide for larger credits for lower-income people, with amounts t}^h^{at gradually}
^{become smaller as income rises.}^{Most of these}^{bills would provide}^{for ref}^{undable a}^{nd/or advancea}^{ble credits.}
^{Advanceable credits may}^improv^{e the timeliness of those}^paymeⁿ^{ts to assist individuals with paym}^{ent for}^premiums
^{when t}^{hey ar}^{e due.}
^{Expanded dedu}^{ction f}^or^{health insuran}^{ce payment}^{s. Several bills would a}^{llow a deducti}^{on in the}^{calculation of}
^{adjusted gross income (an “abov}^{e-the-line” deduction) for health i}^nsura^nce^premiu^{ms, sometimes f}^{or a standard}
^{amount. The deduction would be}^{available whether t}^{he ta}^xpaye^{r itemizes or claims the standard de}^{duction and would}
^{be available to all taxpayers, whet}^{her or}^{not insura}^{nce is em}^ployer^{-sponsored or individually purcha}^{sed. This}
^approac^{h would establish compa}^r^{able tax treat}^ment^betwee^{n p}^urc^{hasers of e}^{mployer-based a}^{nd individually}
^purc^{hased ins}^ura^nce.
^Ending^or^cap^{ping the cu}^rren^{t tax e}^{xclusion fo}^{r health insuran}^{ce premium}^{s. Under}^cur^r^{ent law, any}
^{amount paid for em}^ployment-bas^{ed health insu}^rance^may^{be ex}^clu^{ded from individuals’ income. Ca}^{pping t}^{he e}^xclusion
^{would make premium}^payme^{nts i}ⁿ^exce^{ss of th}^{e cap ta}^{xable. The}^pur^{pose of su}^{ch a}^{policy would be to encourage}
^{more cost consciousnes}^{s among}^purc^haser^{s of health}^insu^{rance. I}ⁿ^additi^{on, tax reven}^ues^{raised from cappi}^{ng the}
^{exclusion could be significant}^and^{could provide a funding}^source^f^{or other health}^insu^{rance e}^xpa^nsi^{ons or su}^bsidies.
^{Proposals to end the ex}^{clusion u}^{sually would replace it with the o}^{ptions above.}
^{Tax-advantaged savings a}^c^c^o^unts.^{Recent legislation has expa}^{nded the availability of tax-advantaged savings}
^{accounts t}^{hat ca}^{n be}^{used to pa}^y^{for necessa}^{ry h}^{ealth care}^{not pai}^{d by the i}^nsura^{nce. Sometimes th}^{ese account}^{s are}
^{combined with high ded}^{uctible h}^{ealth plans. Proposals to expa}^nd^{these accou}^{nts ar}^{e often inte}^nde^{d to improve cost}
^{conscious use of}^{health se}^{rvices a}^{nd to encourage}^savings.
A number of bills offered during the 110^th Congress included other market improvements
intended to make private health insurance more accessible and affordable. These approaches were
intended to
• reduce state regulation of health insurance plans, with an objective of increasing
affordability;
• broaden risk pools so that premiums for health insurance products are averaged
over a larger group of individuals; and
• encourage “consumer driven” health plans and health choices.
In general, such approaches would retain the current sources of coverage.

States are primarily responsible for regulating the business of insurance. Over the years, states
have developed a significant body of law dealing with all aspects of health insurance. State laws
and regulations include patient protections, instructions on how insurance carriers may develop
the rates charged for their products, and procedures for approval of those rates. They address how
entities in the business of selling health insurance fund their enterprises and prepare against the
risk of insolvency. Insurance carriers are subject to fair marketing practice laws, requirements
related to the filing of grievances against the plans, and appeals processes of plan decisions.
States also have benefit requirements that ensure that certain medical services must be available ²¹
for a product to be sold and marketed as health insurance.
Proposals to reduce state regulation would move insurance markets closer to an unrestrained free
market and would invariably reduce costs for some purchasers of health insurance. (However,
they may increase costs for others.) They would also address insurers’ complaints about the
challenges of selling products across state lines when laws in some states are significantly
different from others. Many of the state laws were developed, however, to protect consumers
from certain business practices; bills that would preempt those state laws raise concerns about
those business practices reemerging.
Pooling proposals often focus specifically on small employers. Small employers have a harder
time providing insurance to their employees for a number of reasons. Small groups are not able to
spread their highest health risks broadly. As a result, premiums for small firms, particularly those
with older or less healthy workers (or workers’ dependents), are relatively high for similar
benefits than for larger employers. Proposals encouraging small employers to join into health
purchasing groups (sometimes called health insurance purchasing cooperatives or regional
purchasing cooperatives) are meant to pool together those small groups, raising the number of
individuals over which premiums are calculated. Bills encouraging professional and trade ^th^th
associations to offer coverage were considered in the 109 and 110 Congresses and were
ostensibly about such pooling. In addition, those bills would have provided regulatory relief for
insurers selling products through associations. Most of those bills, however, did not require
premiums to be calculated across the entire group, and so would not have increased the size of the
risk pools.
Increasing the size of risk pools is one objective of bills that would establish programs similar to
the Federal Employees Health Benefits Program (FEHBP). In general, those bills would identify
an existing federal agency or create a new one to negotiate with a limited number of health plans.
At least one plan would be available in all areas of the country, and enrollment would be offered
either to all small employers or to both small employers and individuals. The coverage would be
modeled on the plans offered through the FEHBP. In general, the bills would require that
premiums for plans offered through the program would be averaged across all of the enrollees for ²²
each plan—the largest possible risk pool. In addition, those bills usually include significant
subsidies for low-income employees or individuals and sometimes for employers as well.
Spreading risk broadly, however, is not a panacea. Community-rating (setting the level of
premiums based on the average expenses of all subscribers in an area could result in increased

²¹^{See also}^{CRS Rep}^o^{rt RS}²²⁴⁷⁶^,^S^t^an^dar^dⁱ^zⁱⁿ^g^St^ate^H^e^alt^h^Iⁿ^s^u^r^a^nc^e^Re^gul^ati^oⁿ^,^b^y^Bern^ad^et^t^e^F^e^rn^an^d^{ez and}^Jean
^Hearn^e^.
²²^For^a^dis^c^us^sⁱ^oⁿ^of^tha^t^de^ba^te^s^e^e^C^R^S^R^e^por^t^R^L³¹⁹^63,^As^s^o^cⁱ^a^t^ion^Sp^ons^or^e^d^H^e^alt^h^Pl^ans^:^Le^gi^s^l^atio^{n i}ⁿ^t^h^e
¹⁰⁹^th^C^o^ngr^e^s^s^,^b^y^Jean^Hearn^e^.

prices for young healthy people with low health risk and lower prices for those who are older or
have health problems. If the goal of such approaches is to increase insurance coverage among
those who need it most, this trade-off may be acceptable. If, however, the healthier and younger
groups find their rates excessive, they may drop coverage altogether (where enrollment is
voluntary), making the pool increasingly costly and undermining the objective of spreading risk.
Only one state has “pure community rating,” where no individual-market premiums can vary by
any individual factor, even age. More than 15 other states have taken other steps, such as rate
banding or adjusted/modified community rating (generally using at least age as a rating factor), ²³
that effectively pool some risk. Federal policies in this area might take into account the unique
state markets that have developed in response to state laws to ensure that federal policies do not ²⁴
undermine improvements that states have already made.
“Consumer driven” reforms are those that seek to encourage more choices for individuals in
terms of the cost and coverage, and to raise cost consciousness, encouraging a preference for low-
cost plans and better decision making about health care use. Ultimately, these reforms are
intended to reduce overall premium growth. For example, proposals to create tax preferences for
high deductible health plans combined with health savings accounts are intended to encourage
price reductions in coverage through several mechanisms: high deductible health insurance plans
offer limited coverage relative to what may be covered by more typical comprehensive products,
and health savings accounts encourage people to think more before seeking care for which money
must be drawn from their savings account.
As in the early 1990s, state experimentation with health insurance reform is generating interest
and discussion at the federal level. A number of states are experimenting with comprehensive
insurance reforms toward a primary objective of achieving universal or near universal coverage
(see Text Box 4). Some of these reforms may serve as a blueprint for federal changes, providing
demonstrations that can better inform a federal debate. Many legislators, however, would rather
have states continue to undertake reforms to address coverage gaps for their citizens. As a result,
a number of bills have been introduced to provide grant funds for states to continue and expand
health insurance reforms on their own.

²³^“^I^ndivⁱ^d^u^a^l^Ma^r^k^e^t^R^a^te^R^e^s^t^rⁱ^c^tions^,²⁰⁰⁷^,”^K^a^is^e^r^Fa^mⁱ^l^y^Found^a^tion’^s^s^t^a^t^e^h^e^a^lthf^a^c^t^s^.^or^g^,
^h^t^t^p^:^/^/^www^.^s^t^a^t^e^h^eal^t^h^f^a^ct^s.^o^r^g/^c^o^m^p^aret^ab^l^e^.^j^sp^?iⁿ^d⁼³⁵⁴^&^cat⁼⁷^.
²⁴^H^e^rring^{, B.,}^P^a^uly^M.,^The^Effe^c^t^of^State^C^o^m^m^u^nity^R^a^tin^{g Re}^g^u^l^a^tio^ns^Oⁿ^Pr^e^m^ium^s^a^{nd C}^o^v^e^r^ageⁱⁿ^the
^I^ndivⁱ^du^{al H}^e^alt^h^Iⁿ^s^u^r^a^nc^e^M^a^r^k^e^t^{, N}^B^ER^W^o^r^k^ing^P^a^pe^r^Se^rⁱ^e^s¹²⁵⁰⁴^{, h}^ttp:^//w^w^w^.nbe^r^.^or^g^/^pa^pe^r^s^/w¹²⁵⁰⁴^.^P^a^uly^,
^{M., H}^e^rring^{, B}^.,^P^oolⁱⁿ^{g H}^e^alt^h^Iⁿ^s^u^r^a^nc^e^Ris^k^s^,^A^E^I^P^r^ess,¹⁹⁹⁹^.

Text Box 4. State Health Insurance Reforms
^{A num}^{ber of s}^{tates are e}^nacting^{health insu}^rance^reforms^{of histo}^{ric proportions, utilizing such tools as individual}
^{mandates, employer “pa}^{y or play}^{” req}^{uirements, a}^{nd rewriting ma}^{rket regulations.}
^Massach^{usetts, for e}^xam^{ple, has implemented t}^{he following reforms: individual mandates that req}^u^{ire citizens with}
^{sufficient income to obtain}^health^insura^{nce, income-related sub}^{sidies, employer “pay or play”}^req^{uirements (w}^herein
^{employers that do not}^{provide h}^{ealth insura}^nce^{pay an}^assessmeⁿ^t^{towards sub}^{sidies for the u}^nins^{ured), Medicaid}
^expa^{nsions, insura}^{nce ma}^{rket ref}^{orms, and statewide minimum b}^e^{nefit standards}^{for private in}^sura^{nce. Massac}^huse^tts
^{financed th}^{e reform}^{s th}^{rough a}ⁿ^umbe^{r of source}^{s, with over half}^{of those fu}^{nds coming f}^{rom Medicaid. The}
^{continuation of the}^{federal Medic}^{aid funding has}^bee^{n a conce}^{rn, b}^{ut its rene}^{wal has a}^ppare^{ntly bee}^{n exte}^{nded. (See,}
^{for exam}^{ple, “Mass. gets $}^10.6^{b f}^{or healthcare in}^sura^nce,”^Bost^{on Globe}^{, Oct. 1, 200}^8.)
^{Vermont’s reforms included over}^{35 initiatives designed to contain}^{cost, increase access, a}^{nd impro}^{ve quality of health}
^{care. The state esta}^{blished Catamount Health, a}^{health ins}^ura^nce^{product (sold by Blue Cross Blu}^{e Shield and by}
^{MVP) for people who ha}^{ve bee}ⁿ^unins^{ured over a}^{year or w}^{ho ha}^{ve had a q}^{ualifying event. The}^sta^{te also provides}
^premium^su^{bsidies for individuals}^{with qualifying incomes.}
^{A num}^{ber of oth}^{er states}^{are dev}^{eloping health coverage}^{proposals. Other state}^{s, including Washin}^{gton, Hawaii,}
^{Tennessee, and}^{Oregon, hav}^{e en}^{acted major reforms in t}^{he pa}^{st, many of w}^{hich ha}^{ve bee}ⁿ^{pulled back or re}^pealed
^{for lack of fu}^{nding in the i}^nterveⁿ^{ing years. Maine’s DirigoChoice program offers s}^u^b^{sidized health insura}^{nce to}^Maine
^busines^{ses with less t}^han⁵⁰^empl^{oyees, the self-employed, and other individuals. Revenues for th}^{e p}^{rogram have}
^{fallen short of ex}^{pectations, so a}^{new law was pa}^{ssed to raise reve}^nues^{from a ta}^{x on b}^{eer, wine an}^{d soda, plus other}
^{provisions. In Novem}^ber²⁰^{08, M}^{aine voters overtu}^{rned t}^{he law; t}^{he legislature will have to decide how to continue}
^{to fund th}^{e p}^rogram.
Some maintain that state-led reform can better reflect local needs, particularly in smaller or more
homogenous states. Access to health insurance and health care can be very localized, reflecting
the close relationship between private health insurance and local health care providers, labor
markets and economic conditions.
State based reforms, however, face several significant obstacles. The Employee Retirement
Income Security Act of 1974 (ERISA) impedes states from passing certain laws that affect ²⁵
employer benefits, such as health insurance. For example, ERISA has generally pre-empted ²⁶
states’ ability to require employers to offer or pay for health insurance. Further, states’ track
record includes a number of failed initiatives—often related to inability to fund the rising costs of ²⁷
the reforms. States’ ability to pay for reforms can be subject to the peaks and valleys of the
states’ tax collections. During challenging economic times, a need for state assistance of all kinds,
including health insurance, rises often at the same time that states’ tax base erodes, reducing ²⁸
states’ ability to fund such needs. Finally, to ensure equity across states, federal reforms may be
necessary.

²⁵^A^lthoug^{h e}^x^a^c^tly^how^m^u^c^h^of^{an im}^pe^dim^e^{nt ER}^I^S^A^c^r^ea^te^s^is^{in f}^l^ux^a^s^le^g^a^{l c}^h^a^lle^ng^es^a^r^e^c^ons^ide^r^e^d^{. F}^o^r^m^o^r^e
^oⁿ^E^R^I^S^A^an^d^t^h^e^l^e^gal^l^aⁿ^d^s^cap^e,^{see Bu}^t^l^e^r,^P^.^,^ERI^{SA Imp}^lic^ati^{ons f}^o^{r St}^ate^He^alt^h^C^a^re^Ac^c^e^{ss Initia}^tiv^e^s^{: Impac}^t
^{of t}^h^e^M^a^r^y^lan^d^“F^air^Sh^ar^e^Ac^{t” C}^our^t^D^e^cⁱ^sⁱ^on^,^p^r^ep^{ared f}^o^{r Acad}^e^m^y^H^eal^t^h^an^d^t^h^{e Nat}ⁱ^oⁿ^a^l^Acad^e^m^y^f^o^{r S}^t^at^e
^H^e^a^lth^P^o^lic^y^,^N^o^v^e^m^b^e^r²⁰⁰^{6 a}ⁿ^d^E^m^p^l^o^{yee R}^e^tⁱ^r^emen^t^In^co^{me Secu}^ri^t^y^A^c^t⁽^E^R^I^S^A^{) an}^d^S^t^a^t^{e Hea}^l^t^h^R^e^f^o^rm,^Aⁿ
^Allia^nc^e^{for He}^alt^h^Re^f^o^{rm To}^olkⁱ^t^{, A}^u^g^u^s^t²⁰⁰⁷^.
²⁶^C^R^S^R^e^por^{t R}^L³⁴⁶³⁷^,^Le^g^a^{l I}^s^s^u^e^s^Re^lati^ng^to^Sta^t^e^H^e^alth^C^a^r^e^Re^gul^ati^on:^ERI^SA^Pr^e^e^m^ptioⁿ^a^{nd F}^a^ir^Sh^ar^e
^Laws^,^by^J^{on O}^.^Sh^im^a^buk^ur^{o a}ⁿ^{d J}^e^nnif^e^r^Sta^m^aⁿ^.
²⁷^Kl^eiⁿ^,^E^.^,^{“Over S}^t^at^e:^W^h^y^t^h^{e L}^a^b^o^r^at^o^rⁱ^e^{s o}^f^De^m^o^crac^y^C^aⁿ^’^t^A^c^hⁱ^ev^{e Un}ⁱ^v^ersal^Heal^t^h^Care,^”^t^h^e^Wa^shⁱⁿ^gt^oⁿ
^M^onthly^,^J^u^ly^/^A^ug^us^{t 20}^07,^p.²⁶^.
²⁸^In^su^c^h^tⁱ^m^es,^st^at^{es an}^d^t^h^ei^{r advo}^cat^{es are q}^uⁱ^{ck t}^o^no^t^e^t^h^at^al^l^b^u^t^oⁿ^e^st^at^{e (}^V^erm^oⁿ^t^{) m}^u^st^an^nu^al^l^y^b^a^l^aⁿ^{ce t}^h^ei^r
^budg^e^t^s^.

A large number of introduced bills include provisions incorporating combinations of the
approaches discussed above. Proponents of such proposals tend to rely on existing sources of
private insurance in combination with expanding public programs to extend coverage among the
uninsured. They reflect a view that no single approach (except for what some maintain is
politically unlikely national health insurance) with its inherent strengths and weaknesses will be
sufficient to get to all Americans insured. Bills advocating multiple approaches often include
market improvements to extend the availability of plans and subsidies to help low-income ^th
populations pay for their health coverage. Some of these bills were new to the 110 Congress,
while others had been reintroduced from earlier Congresses. The newest of the bills advocating
multi-system reforms tended to include provisions to improve quality of care, better manage
chronic diseases, and encourage healthier living.
While there may be a small number of introduced bills in this category, it is a favored approach
among many in the policy community. Proposals offered by America’s Health Insurance Plans
(AHIP, [www.americanhealthsolution.org]) and The Health Coverage Coalition for the Uninsured
(http://www.coalitionfortheuninsured.org/amuninsured/amuninsured.html), which includes groups
such as AARP, Blue Cross Blue Shield Association, and the American Hospital Association,
among many others, advocate such multidimensional approaches.

Brief summaries of the major provisions of health insurance reform bills introduced in the 110^th
Congress are provided below. The bills are loosely classified into the following reform
approaches, similar to the discussion above
• Largely replace existing coverage with a national health insurance program (or a
national health service).
• Expand privately sponsored coverage.
• Provide grants to states to encourage state-based reforms.
• Simultaneously expand private and public coverage options.
As discussed previously, there were many bills in the 110^th Congress to expand public health
insurance programs for certain targeted groups of individuals—for example, to allow non-
disabled individuals between ages 55 and 64 to enroll in Medicare. None of these narrow scope
bills are summarized in the list that follows. Similarly, bills affecting private health insurance that
only targeted certain individuals or narrow issues—for example, to prohibit pre-existing condition
exclusions for children or to restrict private plans’ ability to use lifetime limits—are also excluded
from the list that follows.

The National Health Insurance Act was introduced in January 2007 by Representative John
Dingell. The bill would require that medical services, hospital services, and other personal health
services be made available to all eligible individuals, including U.S. wage earners and their
dependents who are not eligible for Medicare. States and local administrative committees or
officers would administer the health benefits. It would establish a National Health Insurance
Board in the Department of Health and Human Services and a National Advisory Medical Policy
Council. The Board would be required to (1) determine the amount of funds required for the
provision of the benefits and (2) determine allotment amounts to states for services. The bill
would establish a National Health Care Trust Fund, into which proceeds from a value added tax
of 5% on each sale of property, performance of services, and importation of property for
commercial purposes, with exceptions, would be deposited for the purpose of funding the
provisions of the Act.
The United States National Health Insurance Act, introduced by Representative John Conyers in
January 2007, would establish the United States National Health Insurance (USNHI) Program to
provide all individuals residing in the United States and territories with all medically necessary
health care at no cost. Care would be provided by public or not for profit institutional providers,
HMOs, and participating physicians. It would prohibit health insurers from selling coverage
duplicative of USNHI benefits; however, they could sell coverage for services not considered to
be medically necessary. The bill would establish a USNHI Trust Fund to finance the program
with amounts deposited (1) from existing sources of government revenues for health care, (2) by
increasing personal income taxes on the top 5% income earners, (3) by instituting a progressive
tax on payroll and self-employment income, and (4) by instituting a small tax on stock and bond
transactions. The bill would establish a National Board of Universal Quality and Access to
provide advice on quality, access, and affordability.
The American Health Security Act of 2007 was introduced by Representative Jim McDermott in
February 2007. The bill would require each participating state to establish an American Health
Security Program to provide every U.S. citizen, national, or lawful resident alien with health care
services. It would eliminate Medicare, Medicaid, SCHIP, the Federal Employees Health Benefits
Program, and the Civilian Health and Medical Program of the Uniformed Services. It would
require each state to prohibit the sale of health insurance in that state that duplicates benefits
provided under the program. It would establish a benefits standards board to (1) develop policies,
procedures, guidelines, and requirements to carry out the Act; (2) establish reporting standards;
(3) create several advisory councils; and (4) establish a budget for covered health care services.
Finally, it would create the American Health Security Trust Fund and appropriate to the Fund
specified tax liabilities and current health program receipts.

The AmeriCare Health Care Act of 2007 was introduced by Representative Pete Stark in March
2007. The bill would establish a new health insurance program called AmeriCare and establish an
individual entitlement to its benefits for all U.S. residents. It specifies the benefit packages to be
offered as well as allowable cost sharing. Benefits under AmeriCare would be (1) the same as the
benefits provided under Medicare Parts A and B or (2) equivalent to the coverage in any of the
four largest health plans offered under the Federal Employees Health Benefits Program.
Financing for the program would come from individual premiums, employer contributions, state
maintenance of effort payments, and general revenue funds.
The Medicare for All Act was introduced by Representative John Dingell in the House of
Representatives and Senator Ted Kennedy in the Senate in April 2007. The bill would amend the
Social Security Act to establish a new health insurance program, Medicare for All. The program
would offer a choice of plans to eligible individuals, provided such individuals are not eligible for
Medicare. Persons eligible for this program would include all citizens and persons with lawful
status. The act specifies that the benefit packages to be offered would be (1) a comprehensive set
of benefits that include (but would not be limited to) the full range of benefits under Medicare
fee-for-service or (2) equivalent to the coverage in any of the four largest health plans offered
under the FEHBP. The act also specifies the cost-sharing to be imposed under this new program,
including reduced cost-sharing for low-income persons. The program would be financed through
new taxes on workers and employers, and would be administered by the federal government.
The Josephine Butler United States Health Service Act was introduced by Representative Barbara
Lee in July 2007. The bill would establish the United States Health Service (USHS), through
which all individuals while within the United States would be eligible to receive health care and
supplemental services. All health care services would be provided at federal health care facilities.
Such facilities would be established by the USHS in such number and location as to ensure that
every resident receives equitable access to needed health care resources funded by the federal
government. Benefits provided would include health promotion; prevention; diagnosis and
treatment of illness and injury; rehabilitation and therapy; drugs and therapeutics, and ambulance
and other transportation; child care; homemaking and home health; and counseling and social
service assistance. All current law health provisions would be repealed. A health service tax
would be imposed on each individual, estate, trust, and corporation. All other health-related tax
deductions and exclusions would be ended. The Health Service Trust Fund is created into which
current Medicare trust fund amounts would be transferred along with health service tax receipts.
The Health Care Tax Deduction Act of 2007 was introduced by Representative Cliff Stearns in
January 2007. The bill would establish a standard tax deduction from gross income for health

insurance premiums and unreimbursed prescription drug expenses paid for the benefit of the
taxpayer, the taxpayer’s spouse, and dependents.
The Small Business Health Fairness Act of 2007, introduced by Representative Sam Johnson in
January 2007, would provide for the establishment and governance of association health plans
(AHPs)—group health plans whose sponsors are trade, industry, professional, chambers of
commerce, or similar business associations, and which meet certain certification requirements.
AHP plans would be exempt from certain state regulations. The bill would establish an
Association Health Plan Fund to make payments to maintain coverage for plans that become
insolvent and would establish a Solvency Standards Working Group. The bill would preempt any
state law that precludes a health insurance issuer from (1) offering health insurance coverage in
connection with a certified AHP or (2) offering health insurance coverage of the same policy type
to other employers operating in the state that are eligible for coverage under such AHPs, whether
or not such other employers are participating employers in such a plan. (Similar AHP provisions
are included in H.R. 324, a minimum wage bill, and H.R. 1012 which provides for tax changes
for small businesses.)
Tax Equity and Affordability Act of 2007 was introduced by Senator Mel Martinez in the Senate
in January 2007 and in the House by Representative Paul Ryan in February 2007. The bill would
amend the Internal Revenue Code (IRC) to (1) allow individual taxpayers a refundable tax credit
for health insurance costs paid for the benefit of the taxpayer, the taxpayer’s spouse, and
dependents; (2) require business taxpayers who receive payments for certain employee health
insurance coverage to file informational returns; (3) direct the Secretary of the Treasury to make
advance payments of health insurance tax credit amounts to health insurance providers; and (4)
limit the tax exclusion for employer-provided health care coverage.
The Keeping Small Businesses Healthy Act of 2007, introduced by Representative Darlene
Hooley, would amend the IRC to allow certain small business employers with 100 or fewer
employees a refundable tax credit for up to 60% of the health insurance costs paid for their
employees. The tax credit would be calculated on a sliding scale. The smallest businesses would
receive credits that cover a greater percentage of cost.
The Small Business Health Plans Act of 2007 was introduced by Representative Thomas Allen in
May 2007. The bill would direct the Secretaries of Health and Human Services (HHS) and Labor
to provide for a national health pooling arrangement for eligible small employers modeled after
FEHBP, through which they could offer health insurance coverage to employees and their
dependents. The bill outlines program elements and coverage requirements. The bill would
require the HHS Secretary to (1) establish a program of premium assistance for small employers
that provides a sliding scale of assistance based on the number of employees, the average wage,
and the employer profit margin; (2) provide for reinsurance coverage for an individual’s claims

that exceed a specified amount for a year; and (3) provide grants to states for the establishment,
initial administration, and operation of pooling arrangements.
The Health Insurance Affordability Act of 2007, introduced by Representative Steve King in May
2007, would amend the IRC to allow a deduction from gross income for premiums paid for a high
deductible health plan. The deduction would not be allowed for those premiums that are excluded
from income under the existing exclusion for employer sponsored health insurance premiums.
The Comprehensive Health Coverage And Reform Enhancement Act of 2007, introduced by
Representative Tom Price in June 2007, would amend the IRC to allow an advanceable tax credit
and a deduction for qualified health insurance. It would impose a tax penalty on employers who
do not make premium contributions to individually sponsored health plans in lieu of the
employer’s group health coverage. The bill would change federal employees’ contribution
requirement so that the government contribution amount would not change based on the chosen
health benefits plan. The bill would treat health care professionals negotiating with health plans
as collective bargaining units for purposes of antitrust laws. The bill would regulate health care
lawsuits and dispute resolution, and would deem hospitals, emergency departments, physicians,
and physicians groups that provide emergency care to be employees of the Public Health Service
for purposes of any civil action that may arise due to items and services furnished. It would also
simplify applicable state health insurance laws and would allow medical care providers to
immediately deduct the cost of health care information technology and permit a business tax
credit for certain telecommunication charges. It would allow certain physicians a bad debt tax
deduction for their costs in providing uncompensated care to emergency room patients. It would
also require the Secretary to establish a Technical Advisory Group to review issues related to
HIPAA.
The Health Care Relief Act of 2007, introduced by Representative Leonard Boswell in June 2007,
would amend the IRC to allow (1) a refundable tax credit of up to $1,000 for the health insurance
coverage costs of a previously uninsured taxpayer, the taxpayer’s spouse, and dependents; and (2)
certain small employers a business tax credit for amounts paid under a new health plan for
employee health insurance coverage.
The Health Insurance Tax Relief Act of 2007 was introduced by Representative John McHugh in
September 2007. The bill would amend the IRC to (1) allow individual taxpayers a refundable
and advanceable tax credit for payments for qualifying health insurance and (2) require business
taxpayers who receive payments for certain employee health insurance coverage to file
informational returns.

The Affordable Health Care for Americans Act of 2007 was also introduced by Representative
John McHugh in September 2007. The bill would amend the IRC to allow a tax deduction from
gross income for the health insurance costs of an individual taxpayer, the taxpayer’s spouse, and
dependents (available whether or not a taxpayer itemizes deductions).
The Health Insurance Affordability Act of 2007, introduced by Representative Steve Chabot in
October 2007, would amend the IRC to allow individual taxpayers a tax deduction for health
insurance costs.
The American Health Benefits Program Act of 2008, introduced by Representative Langevin in
February 2008, would establish the American Health Benefits Program based on FEHBP. A
limited number of health insurance plans, modeled after those offered to federal employees,
would be made available to all individuals who are not eligible for qualifying employer-
sponsored insurance. The government would pay about 72% of the cost of the plans, and sliding
scale subsidies would be available to those with low-income for remaining cost-sharing amounts.
The bill would make other tax policy changes and would institute an individual mandate to obtain
coverage.
The Affordable Health Care Expansion Act of 2008 was introduced by Representative Kay
Granger in April 2008. The bill would amend the IRC to provide individual taxpayers with a
refundable and advanceable tax credit for health insurance costs paid for the benefit of the
taxpayer, the taxpayer’s spouse, and dependents and would require business taxpayers who
receive payments for certain employee health insurance coverage to file informational returns.
The Patients’ Health Care Reform Act was introduced in April 2008 by Representative John
Shadegg. The bill would amend the Internal Revenue Code of 1986 to allow individuals a
refundable and advanceable credit for health insurance costs, to allow employees who elect not to
participate in employer subsidized health plans an exclusion from gross income for employer
payments in lieu of such participation, and for other purposes.
The Making Health Care More Affordable Act of 2008 was introduced in May 2008 by
Representative Timothy Walberg and Senator Roger Wicker. The bill would provide a tax credit
for the purchase of coverage. It also permits the establishment of AHPs that would be exempt
from certain state insurance regulations but subject to new ERISA provisions. The bill also
includes provisions allowing a health insurer to designate a primary state; the insurance laws
applicable to the individual market for insurance in that primary state would apply to individual

policies sold by that insurer in that state as well as in other states, which the laws of those other
states preempted. It would also increase the tax deduction for contributions to HSAs and would
allow a new tax deduction for high deductible health plan premiums.
The Roadmap for America’s Future Act of 2008 was introduced by Representative Paul Ryan in
May 2008. The bill would eliminate the current exclusion from individuals’ income of employers’
contribution to health insurance, replacing it with a refundable tax credit for qualified coverage. It
would allow a health insurer to designate a primary state; the insurance laws applicable to the
individual market for insurance in that primary state would apply to individual policies sold by
that insurer in that state as well as in other states, which the laws of those other states preempted.
It would establish regulatory relief from state insurance regulation for plans offered through trade
and professional associations. The bill also revises Medicaid to require states to elect either a
block grant for acute care services or implement a refundable tax credit for the Medicaid
population for such services; under Medicaid it also phases out disproportionate share hospital
(DSH) payments and establishes a block grant to states for long-term care services. The bill
would abolish SCHIP and amend Medicare to make an income-related reduction in the Part D
prescription-drug premium subsidy.
The Small Business Health Options Program Act of 2008, or the SHOP Act, was introduced by
Representative Ron Kind in June 2008. The bill would require the HHS Secretary to establish a
nationwide health insurance purchasing pool for small businesses and the self-employed that
would offer a choice of private health plans. It also provides a tax credit for small employers.
The Small Business Cooperative for Healthcare Options to Improve Coverage for Employees
(CHOICE) Act of 2008, or the Small Business CHOICE Act of 2008, was introduced by
Representative Nydia Velazquez in July 2008. The bill would provide for the establishment and
governance of Small Business Health Insurance Cooperatives, which are insurance companies
chartered in a qualified state by small businesses to provide reinsurance for enrolled individuals
whose paid claims exceed a certain amount (between $10,000 and $250,000). The bill directs the
Secretary of the Treasury to establish an independent commission to promote the development of
such cooperatives, make recommendations to the Secretary regarding minimum capital
requirements, and conduct oversight of such cooperatives. The bill would exempt such
cooperatives from certain state laws and regulations. It would also establish the small business
CHOICE tax credit for small employers for costs related to providing qualified employer-
subsidized health coverage for employees and their families, disallowing the credit unless the
employer offers a qualified wellness program.
The Health Security for All Americans Act of 2008 was introduced by Tom Latham in July 2008.
The bill would provide for federally regulated health insurance for associations of small
employers and for alternative market pooling organizations primarily for individuals. It also

requires the Secretary to promulgate regulations establishing health insurance rating rules for the
small-group market. The bill also would provide a tax deduction for the qualified health insurance
costs of individuals.
The Small Business Health Care Tax Credit Act was introduced by Senator John Kerry in January
2007. The bill would provide a partially refundable tax credit to small businesses (less than 50
employees) based on a percentage of the employer’s cost of providing qualified health benefits to
employees and dependents. The tax credit would be calculated on a sliding scale basis, with the
smallest businesses receiving credits that would cover a greater percentage of costs.
Promoting Health Care Purchasing Cooperatives Act was introduced by Senator Russell Feingold
in March 2007. It would authorize the Secretary of HHS, acting through the Director of the
Agency for Healthcare Research and Quality (AHRQ), to award grants for the development of
health care purchasing cooperatives of two or more self-insured employers. It would set
requirements for cooperatives, including that they (1) be nonprofit, wholly owned, and
democratically governed by its member-employers; (2) exist solely to serve the membership base;
(3) assist members in pooling their health care insurance purchasing power; (4) provide data to
improve the ability of the members to make data-based decisions regarding their health plans; and
(5) conduct activities to enhance quality improvement in the health care community. The bill
would also require the Secretary to carry out an identical grant program for eligible groups of two
or more employers that have 99 employees or less and purchase health insurance for their
employees.
The Universal Health Care Choice and Access Act, introduced by Senator Tom Coburn in March
2007, would amend the IRC to (1) allow participants in high deductible health plans an increased
tax deduction for contributions to a health savings account and (2) allow individual taxpayers a
refundable tax credit for health insurance premiums paid. It would require states to establish and
operate a qualified high-risk pool or a state-designated alternative that ensures access to private
health insurance for medically uninsurable individuals. The bill also includes provisions allowing
a health insurer to designate a primary state; the insurance laws applicable to the individual
market for insurance in that primary state would apply to individual policies sold by that insurer
in that state as well as in other states, which the laws of those other states preempted. The bill
would also provide for health promotion and disease prevention activities, including requiring the
HHS Secretary to convene an interagency coordinating committee to develop a national strategic
plan for preventive care.
The Ten Steps to Transform Health Care in America Act was introduced by Senator Michael Enzi
in July 2007. The bill would require all adults with dependent children to obtain qualified health
insurance coverage for those children and would establish an advanceable and refundable health
insurance tax credit for the purchase of health insurance. It would merge the small group and

individual markets for insurance and includes provisions intended to simplify insurance standards
for health plans, to improve quality of health care and to facilitate the adoption of health
information technology. The bill would provide for grants for demonstration projects encouraging
residential or community based settings of integrated skilled nursing care and for states to
develop alternatives to tort litigation for resolving disputes over injuries caused by health care
providers.
The Healthy Tax Reform Act was introduced in July 2007 by Senator Jim DeMint. The bill would
establish an advanceable and refundable health insurance tax credit for the purchase of qualified
health insurance, limit the availability of certain tax preferences for individuals eligible for the
health insurance tax credit, and repeal the alternative minimum tax. In order to be eligible for the
credit, a taxpayer must be purchasing coverage in a state that has been deemed by the Secretary of
HHS to be making efforts to provide its citizens with greater access to affordable private health
insurance, including by establishing a state health insurance exchange as well as a high-risk pool,
a reinsurance mechanism, or some other approach for dealing with those with high risks. The bill
sets requirements for state health insurance exchanges and would amend Medicaid to allow for
the offering of health opportunity accounts in all states.
The Every American Insured Health Act was introduced by Senator Richard Burr in July 2007.
The bill would provide every American with a refundable, advanceable flat tax credit of $2,160
per individual and $5,400 per family. It would encourage the establishment of statewide insurance
pools to reduce costs and help high-risk individuals access affordable coverage and would expand
the availability of health opportunity accounts under the Medicaid program.
The Universal Health Coverage Act of 2007, introduced by Senator Ben Cardin in July 2007,
would require all Americans to enroll in a qualified health care plan. The bill would require the
Secretary of HHS, in consultation with the National Association of Insurance Commissioners, to
develop at least three types of low-cost health insurance plans for each State and the District of
Columbia to make available, on a guaranteed-issue basis, to all individuals with incomes below
400% of the federal poverty line. Those who fail to enroll for any coverage for a continuous
period greater than 60 days would be required to pay a tax equal to the average monthly premium
amount for qualified coverage as defined by the state in which they reside. Funds collected by
this tax would then be used to automatically enroll them in a state-approved plan.
The Small Business Health Options Program Act of 2008 (SHOP Act) was introduced by
Senators Durbin, Coleman, Snowe, and Lincoln in the Senate and by Representative Barrow in
the House of Representatives in April 2008. The purpose of the bill is to expand health insurance
access and reduce costs through the establishment of a national health insurance purchasing
group, the implementation of nationwide adjusted community rating standards, and financial
assistance through tax credits for small employers that choose to sponsor health insurance plans

in states that enact (or already have in place) adjusted community rating. The national health
insurance purchasing group—called the SHOP program—would guarantee access to health
insurance for all small employers and self-employed individuals. In addition, plans sold through
the SHOP program would be priced based on adjusted community rating principles, wherein
workers’ individual or collective health status cannot be used to set the price for a small
employer’s group. The bill’s adjusted community rating provisions are envisioned as reducing
variation in premiums (in states that do not already require community or adjusted community
rating) so that instead of individuals paying premiums based on their individual health risks, the
costs of those at greatest risk of needing costly medical care are spread among all of a plan’s
purchasers. Other employer cost reductions would be achieved by providing tax credits to small
employers who share in the cost of the premiums for their employees.
The Small Business Health Plans Act of 2008 was introduced by Senators Enzi, Ben Nelson, and
Gregg in April 2008. The bill’s main provisions would establish regulatory relief from state
insurance regulation for plans offered through trade and professional associations and establish a
framework of incentives to encourage states to adopt a single, federally described set of insurance
laws and regulations. The bill envisions that reducing state regulation of certain health insurance
plans and reducing the variation in regulation of all other plans would result in lower-cost
offerings and more choices for sponsors of health insurance in the small group market. Those
regulatory reforms would move states that have already established community rating or adjusted
community rating principles toward greater individual underwriting. Under such practices,
younger, healthier, or low-risk individuals may find their health insurance costs declining relative
to older or higher-risk individuals, who will have to bear a greater share of their own projected
expected health costs.
A bill to amend the IRC to allow the purchase of health insurance with pre-tax dollars, and for
other purposes, was introduced by Senator Jim DeMint in April 2008. The bill would amend the
IRC to allow (1) taxpayers who do not itemize their deductions to deduct from gross income the
costs of health insurance and long-term care insurance, and (2) payments from health savings
accounts for individual-market high-deductible health plan premiums.
The Small Business Empowerment Act was introduced by Senator Sherrod Brown in April 2008.
It would establish a national health insurance purchasing pool modeled on FEHBP through which
self-employed and uninsured workers in small firms could purchase coverage. The program
would be administered by a private entity under a contract with HHS. Plans sold through the pool
would be rated based only on a purchaser’s age. The bill would also authorize a pilot project and
an assessment of the pilot under which carriers offer a model health benefits plan, the
specifications of which would be developed by a National Health Coverage Commission. The bill
would also authorize the Secretary to establish a reinsurance program for carriers offering health
benefits through the pool and a public education campaign.

The Affordable Coverage for Small Employers Act of 2008 was introduced by Senator Gordon
Smith in September 2008. The bill would create a National Health Coverage Policy Board that
would divide the country into regions over which separate boards would be established to oversee
private health insurance exchanges and the rules under which they would operate (e.g.,
establishing standard benefit packages, rating rules). Sliding-scale tax credits would be provided
to lower-income employees of small businesses and to other individuals purchasing coverage
through an exchange. Tax credits would also be provided to small businesses for their
contributions toward the cost of coverage.
The Health Partnership Through Creative Federalism Act, introduced by Rep Tammy Baldwin in
January 2007, would require the Secretary of HHS to do the following: establish a State Health
Coverage Innovation Commission to oversee and review proposals submitted by states (or other
government entities) to expand and improve health care and health programs; submit to Congress
a list of state applications that the Commission recommends for approval; report to the public
concerning progress made by states; and make recommendations. Plans may include other goals,
such as improvements in quality, efficiency, cost-effectiveness, and the appropriate use of
information technology. The Secretary would provide grants to those states with approved
applications. The bill requires the commission and Secretary to fund a balanced diversity of
approaches and link allocations to goals and performance measures. It authorizes an appropriation
of such sums as are necessary.
The States’ Right To Innovate in Health Care Act of 2007 was introduced by Representative John
Tierney in the House of Representatives and Senator Bernard Sanders in the Senate in September

2007. The bill would authorize planning and demonstration grants for states to develop cost-

effective delivery systems of universal, comprehensive health care with simplified administration.
It would direct the Secretary of HHS to establish a commission to review applications. State plans
would be required to provide for coverage of all state residents with health benefits that are at
least actuarially equivalent to the standard Blue Cross/Blue Shield preferred provider option
service benefit plan under FEHBP.
The Health Partnership Act was introduced by Sen. Jeff Bingaman in January 2007. The bill
would make grants available to states to carry out health care expansion and improvement
programs. It would establish a State Health Innovation Commission, which would do the
following: provide states with reform options; establish minimum performance measures and
goals with respect to coverage, quality, and cost of such programs; review state applications; and
submit to Congress a list of state applications that the commission recommends for approval. The
bill sets forth rules for congressional consideration of such proposals and establishes that priority
would be given to those programs that the commission determines have the greatest opportunity

to succeed in expanding health insurance coverage. It authorizes an appropriation of such funds
as necessary.
The Health Coverage, Affordability, Responsibility, and Equity Act of 2007 was introduced by
Representative Marcy Kaptur in May 2007. The bill would encourage the use of demonstration
waivers by states to implement policies that make comprehensive, affordable health coverage
available for all state residents. Coverage would emphasize the use of preventive services, care
coordination, and health information technology. If states choose to undertake such waivers, they
would be eligible to receive the grants funds and federal tax expenditures that would otherwise be
available under other provisions of this bill. If states do not undertake such waivers, then the bill
would extend Medicaid to allow for the coverage of all individuals with incomes below 100% of
the poverty line and amend SCHIP to provide additional funds for states that extend coverage to
all targeted low-income children. The bill would also provide for an advanceable, refundable tax
credit for the cost of qualified health insurance, establish an FEHBP-like purchasing pool for
individuals and small groups to obtain coverage, create standards for state-based reinsurance
programs, and make grants available to states toward the costs of such programs.
The Healthy Americans Act was introduced by Representative Brian Baird in September 2007. Its
provisions are almost identical to those of S. 334 (described below) except instead of replacing
the existing tax exclusion for payments for employer-provided health insurance with a standard
deduction for premiums for all taxpayers, it would replace the exclusion with a refundable tax
credit.
America’s Affordable Health Care Act of 2008 was introduced by Representative Jeff Fortenberry
in June 2008. The bill would permit the HHS Secretary to create three health insurance coverage
policies that could be available in the individual market in any state and would be subject to
specified federal requirements and without regard to state benefit requirements. In addition, the
bill would provide funding for the creation and expansion of state high-risk pools.
The Several Approaches to Reduce the Uninsured Act of 2008 was introduced by Representative
Robert Andrews in September 2008. The bill would amend ERISA to permit states to regulate the
health plans of employers with 100 or more workers that might otherwise be exempt from state
laws and regulations if the state enacted a comprehensive health program that also required
residents to be insured with adequate coverage. It also amends ERISA to permit states to enact
requirements that employers contribute certain amounts toward the health insurance they offer.
The legislation permits states and small employers to have buy-in arrangements so that they can
both make contributions to the insurance they may obtain for individuals. It creates a federal
commission to review applications from states to do comprehensive health care reform, with

recommendations for funding provided to the Congress for its expedited consideration to provide
funding through 2013, subject to federal budget neutrality.
The Access to Affordable Health Care Act was introduced by Senator Susan Collins in January
2007. The bill would amend the IRC to provide (1) tax credits to small businesses for qualified
employee health insurance expenses, (2) tax credits for individuals and families for qualified
health insurance, (3) deductions for long-term care insurance premiums, and (4) tax credits for
individuals with long-term care needs. It would require the Secretary of Labor to award grants to
states to assist in planning, developing, and operating qualified small employer purchasing groups
for health insurance. It would direct the Small Business Administration to award grants to states,
local governments, and nonprofit organizations to provide health insurance information to small
employers and require the Secretary to award demonstration grants for states on the effectiveness
of innovative ways to increase access to health insurance. The bill would amend the SCHIP
program to provide additional allotments to eliminate funding shortfalls and to allow states to
extend coverage to qualified children, parents, and pregnant women. It would provide for
improved outreach and enrollment in government programs for eligible children and homeless
individuals and families and express the sense of the Senate that appropriations for consolidated
health centers and the National Health Service Corps should be doubled over the next five fiscal
years. The bill would require the Secretary of HHS to (1) award grants to states for the promotion
of healthy lifestyles and for the establishment and operation of worksite wellness programs for
small employers and their employees, (2) expand comprehensive school health education
programs, and (3) establish demonstration projects related to providing low-cost, high-quality
health care and attracting educators and clinical practitioners to underserved areas.
S. 334
The Healthy Americans Act was introduced by Senator Ron Wyden in January 2007. The major
provisions of the bill would mandate that all individuals (with some exceptions) have health
coverage. Individuals would have the opportunity to enroll in one of the private health plans
(“Healthy Americans Private Insurance Plans”) administered by regional insurance entities
(“State Health Help Agencies”). HAPI plans would be comprehensive and include prevention and
disease management programs. Full subsidies would be made available for individuals and
families with income below poverty, and partial subsidies for other low income individuals. The
program would be financed by individual and employer payments, reductions in Medicare and
Medicaid spending, and other general Treasury funds. The existing tax exclusion for payments for
employer-provided health insurance would end and a standard deduction would be established for
premiums for all taxpayers.

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