Proposed Health Plans Could Cost Less

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WASHINGTON (TheStreet) — President Barack Obama asked Congress not to "walk away" from health care reform during his State of the Union speech on Wednesday. As legislators grapple with how to pay for a program that could cost as much as $1 trillion over 10 years, Americans are wondering how much they might have to pay for government-sponsored coverage.

While the cost for consumers will be unclear until the House and Senate bills are combined, a review of the bills gives some hints as to where it would hit the average American's wallet.

What would premiums cost?

The Congressional Budget Office estimates that insurance under the proposed "bronze" plans, the lowest level of coverage, would cost as much as $5,000 for single policies and as much as $12,500 for family policies by 2016. The average premiums among all types of plans in 2016 would be $5,800 for single policies and about $15,200 for family policies.

That's less than the current premiums for employer-sponsored health insurance. The average annual premium for these family plans has more than doubled from $5,791 in 1999 to $13,375 in 2009, according to the Kaiser Family Foundation, a health care think tank. Individual plans rose from $2,471 to $4,824 during the same time period.

On average, covered workers contributed 17% of the total premium for single coverage and 27% for family coverage in 2009, a rate that has remained relatively stable for the past several years, according to the foundation

Under the House plan, families that earn up to 400% of the federal poverty level would qualify for subsidies. Individuals who earn $20,000 to $35,000 a year would pay between $947 and $3,500 after subsidies.

The Senate plan would also subsidize coverage for people with income levels between 100% and 400% of the federal poverty level, which was $18,310 for a family of three in 2009. Medicaid would be expanded to all individuals with incomes up to 133% of the federal poverty level.

What if you don't buy coverage?

The Senate bill would phase in a non-coverage penalty beginning in 2012. The fee would start at $95 (or 0.5% of the person's income if that amount is larger) and rise to as much as 2% of income, or $2,250 per family and $750 for individuals, by 2016.

The House bill would tax 2.5% of an individual's income, capped at the cost of an average premium.

How would employers be affected?

Companies with more than 50 employees that don't offer health insurance would be forced to pay $750 per worker under the Senate plan. At smaller firms, if even one person receives coverage, the charge is enacted.

If the premiums offered by an employer are higher than 9.8% of an employee's income, and that employee obtains coverage through the government program, a $3,000 penalty will be assessed.

The House bill would require employers to subsidize at least 72.5% of the premiums for individual coverage and 65% of the premium for family plans. Companies that don't comply could face a payroll tax of as much as 8%. Companies with annual payrolls of less than $500,000 would face no assessment. Those with payrolls of $500,000 to $584,999 would pay 2% of payroll; $585,000 to 669,999 would pay 4%; and $670,000 to $749,999 would pay a 6% assessment.

Would there be a tax increase?

The House bill would hit individuals with adjusted gross incomes exceeding $500,000 (and households earning more than $1 million) with a 5.4% income tax.

The Senate bill doesn't include such a levy, but there is a tax on what are being called "Cadillac plans." Insurers and plan administrators who offer plans valued at $8,500 for individuals or $23,000 for families would be charged a 40% tax that would likely be passed on to consumers. Some industries, such as mining and construction, would be exempt.

The Senate bill also proposes increasing the Medicare payroll tax from 1.45% to 2.35% for individuals earning more than $200,000. Employers would continue to pay their current tax of 1.45%.

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