Democrats Try to Balance Cost and Coverage in Health Plan

WASHINGTON — As Democrats prepare to take up health care legislation on the floor of the Senate and the House, they are facing tough choices about two competing priorities. They want people to pay affordable prices for health insurance policies, but they want those policies to offer comprehensive health benefits.

These goals collide in the bills moving through Congress. The different versions of the legislation would all require insurance companies to provide coverage more generous than many policies sold in the individual market today. That is good for consumers, Democrats say.

But Republicans say the new requirements would mean added costs for some consumers and for the government, which would help pay premiums for millions of low- and middle-income people.

That tension between keeping costs low and improving coverage is just one of many challenges facing Congress and the Obama administration as they head toward the final stages of the effort to pass health care legislation.

Under the legislation, the government would not only require insurers to accept all applicants. It would also define the acceptable levels of coverage.

Senator Jeff Bingaman, Democrat of New Mexico, said the federal government had to specify coverage levels because the benefits under many existing insurance policies were inadequate.

“We have more than 46 million people who are uninsured,” Mr. Bingaman said. “We also have a substantial number who are underinsured. Although they have coverage, it is so bad or so inadequate that if they really get sick, they find they cannot afford the health care they need.”

But the No. 2 Republican in the Senate, Jon Kyl of Arizona, said it was “an act of hubris” for Congress to prescribe the permissible coverage.

“For the life of me,” Mr. Kyl said, “I don’t see why Washington has to dictate what kind of insurance you get to buy. Why not let the consumer decide?”

The Senate Finance Committee had been scheduled to meet Tuesday to finish work on a sweeping health care bill that it put together over the last two weeks. But it postponed the session while it waits for a cost estimate from the Congressional Budget Office.

Under the committee’s bill, there would be four levels of benefits — bronze, silver, gold and platinum — and all insurers would be required to offer, at a minimum, coverage in the silver and gold categories.

Most employer-sponsored health plans already meet the proposed federal standards. But insurers and actuaries say that one-third to one-half of policies bought by individuals and families fall short. About 17 million people buy insurance on their own, in this individual market.

Senator Kent Conrad, Democrat of North Dakota, who helped write the Finance Committee bill, acknowledged that the federal standards were “high in relation to what is selling in the marketplace in some parts of the country.”

The Senate health committee and three House committees have approved bills that would set even higher standards, meaning that insurers would pick up more of the costs.

In comparing the overall benefit levels of different health plans, federal officials often use a yardstick known as actuarial value. This statistic measures the share of health care spending for a given population that is covered by a plan. Consumers pay the remainder, in deductibles, co-payments and other charges.

The four levels of coverage allowed by the Finance Committee have actuarial values ranging from 65 percent for the bronze plan to 90 percent for the platinum plan.

The Senate health committee prescribes three levels of coverage, with actuarial values from 76 percent to 93 percent.

The House bill also calls for three levels of coverage — basic, enhanced and premium — with values from 70 percent to 95 percent.

By contrast, the Congressional Budget Office says, the actuarial value of policies bought in the individual insurance market now averages 55 percent to 60 percent.

For insurance plans provided by employers, it said, the average value is 80 percent to 85 percent. And according to the Congressional Research Service, the value is slightly higher, 87 percent, for the standard Blue Cross and Blue Shield plan available to federal employees, including members of Congress.

Senator Michael B. Enzi, Republican of Wyoming, said Congress was being “too prescriptive.”

“We are about to tell the nation, every person in the nation, what the minimum insurance is that they can have,” Mr. Enzi said. “And then we will institute a penalty if they don’t buy the minimum insurance we say they ought to have. If they want less, we say no.”

While higher-value plans may provide greater protection for many people, they may also cost more.

“In many states, the average actuarial value is way below the 65 percent proposed in this legislation,” said Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee. “So if health care reform passes and our constituents go to buy new coverage, many will end up seeing higher prices than they would have under current law.”

But Senator Debbie Stabenow, Democrat of Michigan, said the whole point was to improve the protection of consumers.

“The more we lower the actuarial value, the more the individual or the family will have to shoulder the costs of their plan,” Ms. Stabenow said. If a plan has a value of 60 percent, she said, policyholders as a group would be expected to pay 40 percent of their medical expenses.

Senator Olympia J. Snowe, Republican of Maine, said she shared that concern. Under the bronze plan, she said, “you could be consumed by cost-sharing unless you were very healthy.”

The major bills would set annual caps on out-of-pocket spending, but the limits could be as high as $5,950 for individuals and $11,900 for families.

Roland D. McDevitt, director of health research at Watson Wyatt Worldwide, a benefits consulting concern, said it was a huge challenge to make insurance “affordable for families and affordable for the government” at the same time. Under the major legislative proposals, Mr. McDevitt said, insurance is likely to be more expensive for many young healthy people, but less expensive for a 60-year-old with diabetes and a heart condition.

The chairman of the Finance Committee, Senator Max Baucus, Democrat of Montana, said he was trying to “strike a balance between affordability and proper coverage.”

If the government does not set minimum coverage levels, he said, insurers will continue to offer low-value policies that leave consumers exposed to exorbitant costs and the risk of bankruptcy.

Such policies amount to “pseudo coverage,” Mr. Baucus said.