Senate Democrats backpedal on health insurance mandate

In the closing hours of debate over health reform this week, Democrats on the Senate Finance Committee tacked away from what had been a lynchpin of their reform drive: universal coverage.

The push to cover all Americans in Democratic draft legislation on Capitol Hill rests on three legs: more affordable premiums, subsidies for low-income families, and penalties for individuals who do not purchase insurance.

But in recent weeks, focus groups and internal polls have signaled mounting public fears that even with reform, people will not be able to afford health insurance. Those who can’t or won’t meet new federal mandates face a year in jail, penalties up to $1,900 per family, and garnishment of wages.

In response, Democrats on Thursday reined in some of those penalties and mandates – but not on Republican amendments.

Idaho Sen. Michael Crapo’s proposal to exempt families earning less than $250,000 a year from the bill’s direct tax provisions, including the penalty for individuals who do not purchase health insurance, failed on a near party-line vote. All Democrats, with the exception of Sen. Blanche Lincoln of Arkansas, opposed the bill, 12-11.

Republican Sen. John Ensign’s amendment to exempt families earning less than $250,000 from a fee for not purchasing health insurance also failed, 12-11.

But when Sen. Charles Schumer (D) of New York proposed softening penalties for uninsured Americans, all Democrats and all but one Republican embraced it. The amendment passed, 21-1.

Senator Schumer’s proposal exempts individuals from penalties if they cannot find a plan with a premium less than 8 percent of their adjusted gross income. The finance committee draft had set the threshold for the affordability waiver at 10 percent. Schumer’s amendment also eliminates criminal penalties on uninsured people not eligible for a waiver the first year the new law takes effect. In Year 2, 50 percent of the penalty could be imposed in Year 2, and a full criminal penalty only in the third year.

The effect of a lower mandate and penalties would be that some 2 million fewer uninsured Americans will be covered by the reform, according to Congressional Budget Office (CBO) estimates. Schumer said he would be willing to work with Sen. John Ensign (R) of Nevada on working out protections from civil penalties, including garnishing of wages by the Internal Revenue Service.

Asked why Democrats opposed GOP amendments for increasing the number of uninsured but endorsed Schumer’s though it would do the same, Schumer said: “Just be glad we’ve found something on which we have bipartisan agreement.”

At the heart of the national debate over healthcare reform is a tipping point: If a critical mass of uninsured, healthy Americans don't join the ranks of the insured, then popular reforms such as ending discrimination based on preexisting conditions become too expensive.

“History has demonstrated that insurance reforms without getting everybody covered drives up healthcare costs for individuals and families,” said America’s Health Insurance Plans (AHIP), the lead insurance industry group, in a statement on Friday.

“Unless everybody participates in the system the market reforms aren’t sustainable,” said AHIP spokesman Robert Zirkelbach.

Other groups backing universal coverage say it’s too early to make judgments on the final plan. “We’ve got perhaps another 100 days before this process ends, hopefully successfully, and they’ll be a lot of tacking,” says Ralph Neas, chief executive officer of the National Coalition on Health Care.

The Finance committee is expected to vote on their version of the bill next week. It will be scored by the CBO and merged with the Senate Health, Education, Labor and Pensions panel’s version of the bill before coming to the Senate floor for a vote, expected later this month.

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