Reach of Subsidies Is Critical Issue for Health Plan

By ROBERT PEAR

WASHINGTON — The major health care bills moving through Congress would require nearly all Americans to have health insurance. But as lawmakers struggle to achieve the goal of universal coverage, a critical question is whether the plans will be affordable to those who are currently uninsured.

All the bills offer some kind of assistance to lower-income people who do not get health benefits through the workplace. The bills would provide premium subsidies to millions of people and would establish limits on consumers’ out-of-pocket costs. But lawmakers and consumer groups say insurance could still be out of reach for many families with modest incomes who receive small subsidies or none at all.

“We have to make sure that the health plans are affordable to average Americans, and to low-wage workers who are not eligible for Medicaid, because they would confront a penalty if they do not have health insurance,” said Senator Olympia J. Snowe of Maine, a Republican who is leading efforts to forge a bipartisan bill.

The question of how to make insurance affordable to all Americans is just one of the difficult issues facing Congress as it debates what is President Obama’s top domestic priority. The House speaker, Nancy Pelosi, despite resistance from conservative Democrats, vowed on Sunday that a health care overhaul would pass. “When I take this bill to the floor, it will win,” Ms. Pelosi said on CNN.

Under the legislation, insurers generally must accept all applicants and could not deny coverage because of a person’s medical history.

But Senator Ron Wyden, Democrat of Oregon, acknowledged that “there are some questions” about whether insurance would be affordable. “People who are making $50,000 or $60,000 a year and are spending $13,000 on health insurance may not get much of a subsidy,” said Mr. Wyden, a member of the Finance Committee. “Those people will ask, ‘How am I going to make this work for me and my family?’ “

When President Bill Clinton and Hillary Rodham Clinton tried to overhaul the health care system in 1993-94, they proposed an employer mandate requiring companies to pay about 80 percent of the cost of coverage for their workers. In response, many businesses rallied against the Clinton plan and helped defeat it.

Besides requiring employers to help finance coverage, Democrats this year would also require individuals to have insurance and would impose financial penalties on those who do not meet the requirement.

Under all the major bills, people could obtain exemptions from the requirement to carry insurance if they could show financial hardship. But such exemptions do not help achieve the purpose of the legislation, which is to get people insured. More than 45 million people do not have health coverage.

In a letter to Congress last week, advocates for patients — including AARP, the American Cancer Society and the American Heart Association — said the affordability of insurance was “of paramount importance.”

After analyzing the leading House and Senate bills, Stephen E. Finan, a health economist at the cancer society, said, “Subsidies do not appear to be adequate even for coverage in the lowest-cost plans.”

“Under the bill approved by the Senate health committee,” Mr. Finan said, “a family with annual income of $40,000 could obtain subsidies, but would still have to pay premiums of $1,760 a year and might have to pay as much as $2,320 in co-payments and deductibles, for a total of $4,080, or 10 percent of family income. And they might have to pay more if they use specialists outside the network of doctors in their health plan.”

Subsidies are a major factor in the cost of the legislation, and lawmakers are desperately hunting for ways to pay for it. The Congressional Budget Office says the government would spend $773 billion on subsidies from 2013 to 2019 under the House bill. Among people who receive assistance, it said, the average subsidy would be $4,600 in 2014, rising to $6,000 a person in 2019.

Under the House bill and a similar measure approved by the Senate health committee, premium subsidies would be available to families with incomes up to four times the poverty level, or $88,200 for a family of four. With income at that level, a family could be required to pay as much as 12.5 percent of its income in premiums under the Senate bill and 11 percent under the House measure.

Lower-income families would receive more help. A family of four with income of $34,000 might pay 1 percent to 3 percent of its income in premiums.

But lawmakers said that federal aid for low-income families could be pared back as Congress struggles to hold down the overall cost of the legislation.

Premiums, which increase with health care costs, are rising much faster than personal income. So federal subsidies must also increase to keep insurance affordable.

The Senate Finance Committee is considering proposals to limit eligibility for subsidies, a move favored by some fiscally conservative Democrats in the House Blue Dog Coalition. One proposal would bar subsidies for people with incomes over 300 percent of the poverty level ($66,150 for a family of four.)

Richard J. Kirsch, the national campaign manager of Health Care for America Now, a consumer group, expressed concern. “If Congress sets the limit at 300 percent of the poverty level,” Mr. Kirsch said, “millions of middle-income families would not be able to buy insurance because they could not afford the premiums on their own.”

The median income for married-couple families was about $73,000 in 2007, the last year for which Census Bureau figures are available.

Bruce Lesley, president of First Focus, a bipartisan advocacy group for children, said, “We are very concerned that as the legislation evolves, insurance will become less and less affordable than under the original proposals.”

Asked whether insurance would be affordable to everyone, Senator Snowe said: “That’s unknown. That will really be a test of this initiative in the final analysis.”

Still, Ronald F. Pollack, executive director of Families USA, a liberal-leaning consumer group, said the proposed subsidies would “make health insurance significantly more affordable than it is today.”

In addition, sponsors of the legislation said it would make insurance more affordable by slowing the growth of health costs in the long run.

The Senate health committee bill says “coverage is defined to be unaffordable if the premium paid by an individual is greater than 12.5 percent” of the person’s adjusted gross income.

In Massachusetts, which requires all adults to have health insurance, about 76,000 people qualified for hardship exemptions in 2007, the first year of an innovative state program to expand coverage. Nearly 430,000 are newly insured, the state says.

The major bills moving through Congress would set annual limits on out-of-pocket spending for co-payments, deductibles and similar charges. The limits would be $5,000 for an individual and $10,000 for a family under the House bill, and $5,800 and $11,600 under the Senate health committee bill.

Premiums are not counted against the limits. Nor are the extra charges that people often must pay when they go to doctors and hospitals outside an insurer’s network. People with insurance are often startled to find that they are responsible for thousands of dollars in such extra charges.