Finance Chairman Baucus proposes health care reform bill with revenue offsets

Senate Finance Committee Chairman Max Baucus (D-MT) released on September 16, 2009, his "chairman's mark" for health care reform legislation. Chairman Baucus also announced that the Finance Committee will meet on September 22 to begin consideration of his bill and that he expects the Committee to complete its work by the end of that week. The Baucus proposal, which is reported to cost $856 billion over 10 years, features a number of health insurance reforms and measures to increase coverage of the uninsured. The plan does not include a federal public health insurance option, but instead proposes the establishment of a system of nonprofit health care cooperatives.

The Senate is expected to consider a combined version of the health care reform bill as may be approved by the Finance Committee and the bill previously approved by the Senate Health, Education, Labor and Pensions Committee. The House is expected to consider a version of the health care reform bills approved in July by the House Ways and Means Committee, the House Education and Labor Committee, and the House Energy and Commerce Committee.

Revenue Offsets
Chairman Baucus has proposed several revenue offsets as part of his health care reform bill, "America's Healthy Future Act," including:

Fees to be paid by health care industry participants - Of immediate implication for Pharmaceutical and Medical Device companies, the Baucus bill proposes to raise revenue by assessing fees on segments of the health care industry. The annual fees would be apportioned among specified industry participants based on each participant's relative market share of covered domestic sales for the preceding year. The non-deductible fees would be effective for calendar year 2010 and thereafter, with respect to domestic covered sales in calendar year 2009 and thereafter.

  • A $2.3 billion annual fee would be apportioned among pharmaceutical manufacturers and importers.
  • A $4 billion annual fee would be apportioned among medical device manufacturers and importers.
  • A $6 billion annual fee would be apportioned among U.S. health insurance providers. Note: This fee would not apply to an employer that self-insures
  • A $750 million annual fee would be apportioned among clinical laboratories

The bill also would provide new requirements for tax-exempt hospitals, and would repeal the current business income exclusion for federal subsidy payments made for retiree prescription drug expenses.

Excise tax on insurance providers offering high-value insurance coverage - A 35-percent excise tax would be imposed on insurers if the value of employer-sponsored health insurance exceeds an inflation-indexed amount. For 2013, the threshold would be $21,000 for family coverage and $8,000 for individual coverage. The excise tax would apply to amounts above the threshold. In the case of a self-insured group health care plan, the excise tax would be paid by the plan administrator, or by the employer if the employer acts as the administrator. The excise tax would be nondeductible for federal tax purposes. The proposed tax would be effective for tax years beginning in 2013.

Tax on non-qualified distributions from health savings plans - The current tax on distributions from a health savings account that is not used for qualified medical expenses would be increased to 20 percent, effective for disbursements made in taxable years starting after 2009.

Business information reporting - Current business information reporting requirements would be expanded by eliminating the exception for payments to corporations. Under the proposal, businesses would be required to file an information report for payments to corporations that have an annual aggregate value of $600 or more. The proposal would be effective for payments made in tax years beginning after 2011.

Employer health insurance reporting - An employer would have to disclose the value of health benefits on an employee's annual Form W-2, effective in the first tax year after 2009.

Links to the full text and a summary of the chairman's mark of the bill: