The Senate Finance Committee’s health care reform bill and the House legislation require insurance issuers to meet certain basic benefit standards, but grandfather all existing insurance plans for a period of 5 years (the House bill only applies this restriction to current employment-based health plans) . If insurers do not comply with the new federal requirements after the 5-year grace period, they would no longer be able to offer health care coverage.

The merged Senate bill takes a different approach. Section 1251 eliminates the 5-year period and allows enrollees to remain in their insurance plans for as long as the coverage remains available:

By 2017, most Americans will have the option of purchasing comprehensive insurance coverage within the Exchange and would theoretically abandon plans that offer sub-prime benefits and high-deductibles. Insurers that want to minimize their administrative overhead and standardize their plans, may also modify all existing policies to meet the new federal guidelines.

Under the Senate bill, individuals under 30 years of age or those who are exempt from the individual mandate, could still chose to enroll in a catastrophic plan that covers essential health benefits.

The Congressional Budget Office analysis of the recently released Senate health bill has concluded that compared to the Senate Finance Committee’s bill, the merged legislation makes a stronger contribution towards deficit reduction even though it includes (among other things): 1) more affordability credits for middle class families and a public option, 2) a strong individual requirement to purchase coverage, 3) and a lower threshold for the excise tax on so-called Cadillac health plans. An increase in the payroll tax for individuals/families earning $200,000/$250,000 makes up for the loss in revenue from the excise tax, while the later implementation date (the bill moves the start dates for the individual mandate, exchanges, and employer penalties from July 1, 2013 to January 1, 2014) helps increase the deficit savings in the merged legislation.

Despite these changes, the merged bill still lowers health care spending over the long term. The legislation establishes an Independent Medicare Advisory Board (IMAB)– which is required to “recommend changes to the Medicare program to limit the rate of growth in that program’s spending” — and places a 40% excise tax on insurers that offer expensive policies. While the budget office did not analyze the affect of the legislation on national health expenditures, the CBO is predicting that spending per Medicare beneficiary would decrease, as compared to the growth rate of the past two decades (from 8% growth rate to 6% growth rate). As a result, the federal government would be spending less on health care in the decades following the initial 10-year window, despite the expansion in coverage.

Below is an examination of how the merged Senate bill evolved from the Senate Finance Committee’s proposal:

Here is how the merged Senate bill compares to the legislation passed in the House. The merged Senate legislation has lower affordability standards, covers less people, invests less in prevention, does not require all large employers to provide health insurance, and includes a weaker public option. But the bill goes further in controlling health care spending and reducing the deficit: