4th UPDATE: Senate Health Proposal Has $6 Billion Fee For Insurers

A health-care proposal by Senate Finance Committee Chairman Max Baucus would impose a $6 billion annual fee on health insurers, according to a summary of the proposal.

Baucus, D-Mont., discussed his proposal Tuesday with a bipartisan group of six members of the Senate Finance Committee who have been seeking a compromise on health-care legislation for months. The fee on insurers is just one of several provisions that would help defray the costs of expanded health coverage in a summary of Baucus' plan that was circulated Tuesday.

The $6 billion fee on insurers "would be allocated by market share" and would begin in 2010, according to the summary. Insurers would also be affected by an excise tax on high-cost health-insurance plans, which would put a 35% tax on premiums for plans above $8,000 for singles and $21,000 for family plans provided by employers.

The tax would not apply to the entire premiums of the high-cost plan, but "the amount of premium in excess of the threshold," according to the summary.

The proposal represents a major step forward for Baucus, who has slogged through long, closed-door meetings on health-care legislation while the Senate Health, Education, Labor and Pensions Committee approved its own bill and a trio of House committees also approved bills. Unlike the other committees' bills, Baucus' "framework for consideration" does not include a public health-insurance option, but would instead allow the creation of state health-insurance cooperatives.

After the meeting Tuesday with the "Group of Six," Baucus said the insurance proposal is "very important," and he cited a recent analysis by a financial firm that he said showed that fee "would be very hard to pass on to consumers."

Baucus told reporters that he wants to see comments on his proposal from the other members of the group by Wednesday morning.

He said he is working to reach agreement within the group by the time President Barack Obama addresses Congress in a joint session Wednesday night, but indicated that the negotiations would continue even if they did not reach agreement.

"I'm just hopeful that when the president gives his statement tomorrow night, that that's going to help move the ball forward, and very expeditiously," Baucus said. "The rubber is starting to hit the road here."

Sen. Olympia Snowe, R-Maine, who is a key figure in the negotiations because she is viewed as a possible partner with Democrats on a compromise bill, said an agreement by Wednesday is an "overly ambitious goal," however.

Snowe stopped short of endorsing Baucus' proposal, telling reporters that she had concerns about several issues. She specifically expressed concern about growing financial burdens on states as a result of the plan's proposed Medicare expansion, and she also said she would seek language related to medical malpractice lawsuits.

Snowe has pushed a "trigger" option for a public health-insurance option that would allow such plans to be established if insurers did not offer affordable insurance in local geographic areas. But Snowe indicated that the trigger provision would not be part of any agreement reached by the Finance Committee group.

"We have not had the trigger mechanism on the table in our discussions," Snowe said. "I think that'll come at a later point in our discussions."

Robert Zirkelbach, a spokesman for the America's Health Insurance Plans, or AHIP, trade group, said in a statement that the insurance fee proposals "will only make it harder for families and small business to afford coverage." Members of AHIP include Aetna Inc. (AET), Humana Inc. (HUM), Cigna Corp. (CI) and UnitedHealth Group Inc. (UNH).

"The American people want reform that eases the burden of rising medical costs and puts our health-care system on a sustainable and fiscally responsible path - not new taxes on health insurance," Zirkelbach said.

Other "pay-for" provisions in the plan include a $2.3 billion annual fee on pharmaceutical companies, a $4 billion annual fee on medical device makers and a $750 million annual fee on clinical laboratory companies - all of which would begin in 2010.

A proposal from Baucus has been eagerly anticipated on Capitol Hill, since a bipartisan compromise in the Senate Finance Committee could help pave the way for passage of a bill in the Senate.

But key Republicans in Baucus' bipartisan negotiating group, including Sens. Charles Grassley, R-Iowa, and Mike Enzi, R-Wyo., have appeared less optimistic in recent weeks about the prospects for a deal.

Baucus' proposal also requires all Americans to purchase health insurance, with penalties for failure to comply ranging from $750-$950 per uninsured individual.

But it provides refundable tax credits for individuals and families with income up to 300% of the poverty level to cover a portion of insurance premium costs.

Unlike legislation moving through the House of Representatives, the Baucus proposal would not require employers to offer health-insurance coverage. But large employers - those with more than 50 full-time employees - would pay a fee for each employee who received tax credit subsidies to buy health insurance. That fee would be capped at $400 times the total number of employees in the firm.

- By Patrick Yoest, Dow Jones Newswires; 202-862-3554; [e-mail]

(Martin Vaughan contributed to this report)