                            HEALTH SECURITY
 
 
                         PRELIMINARY PLAN SUMMARY
 
 
      The Health Security plan guarantees comprehensive health benefits 
 for all American citizens and legal residents, regardless of health or 
 employment status.  Health coverage is seamless; it continues with no 
 lifetime limits and without interruption if Americans lose or change 
 jobs, move from one area of the country to another, become ill or 
 confront a family crisis.
 
      Every American citizen will receive a Health Security Card that 
 guarantees comprehensive benefits that can never be taken away.  
 Fundamental principles underlie health care reform: 
 
      *     The guarantee of comprehensive benefits for all Americans.  
 
      *     Effective steps to control rising health care costs for 
            consumers, business and our nation.  
 
      *     Improvements in the quality of health care.  
 
      *     Increased choice for consumers.  
 
      *     Reductions in paperwork and a simplified system. 
 
      *     Making everyone responsible for health care.
 
 
      Americans and their employers are asked to take responsibility 
 for their health coverage and, in return, they are guaranteed the 
 security that they will always be covered under a comprehensive 
 benefit.
 
      The Health Security plan creates incentives for health care 
 providers to compete on the basis of quality, service and price.  It 
 unleashes the power of the market and puts American consumers in the 
 driver's seat.  Consumers choose from whom and how they get their care.
 
      The plan empowers each state to set up one or more "health 
 alliances" that contract with health plans and bargain on behalf of 
 area consumers and employers.  Health plans must meet national 
 standards for coverage, quality, and service set by the National Health 
 Board. But each state tailors its approach to local needs and 
 conditions.
 
      The Health Security plan frees the health care system of much of 
 the paperwork and regulation, allowing doctors, nurses, hospitals and 
 other health providers to focus on providing high-quality care.  It 
 cracks down on  and abuse, reforms malpractice law and policy and 
 outlaws insurance practices that hurt small businesses and imposes the 
 first national standards for the protection of patient privacy and 
 confidentiality in medical information and records.
 
 
 CREATING SECURITY
 
 
      The Health Security plan guarantees every American and legal 
 resident health coverage that can never be taken away:
 
      *     The comprehensive benefits have no lifetime limits on 
            medical coverage and provides a full range of medically 
            necessary or appropriate services.
 
      *     No health plan may deny enrollment to any applicant 
            because of health, employment or financial status, nor may 
            it charge some patients more than others because of age, 
            medical condition or other factors related to risk. 
 
      *     All health plans must meet national quality standards and 
            provide reliable information to consumers so they can 
            choose their health plans and providers. 
 
      *     Americans have a broad choice of health plans and 
            providers.
 
      *     Elderly and disabled Americans receive outpatient 
            prescription drug benefits under Medicare for the first 
            time and expanded access to home and community-based long-
            term care services.  
 
      *     Self-employed workers are able to deduct the full cost of 
            their health coverage from their federal income taxes.
 
      *     Workers older than 55 who retire before they are eligible 
            for Medicare receive comprehensive coverage for the 
            guaranteed benefit but continue to pay only the employee 
            share of the premium.  
 
      *     New investments and loans help improve the availability and 
            quality of health care in rural communities and inner-city 
            neighborhoods.  
 
      *     School-based and community clinics expand access to care in 
            areas with inadequate health services.
 
      *     Financial incentives and expansion of the National Health 
            Services Corps attract health professionals to areas with 
            shortages of doctors and nurses.  
 
 
 CONTROLLING COSTS
 
      The Health Security plan cuts the projected growth in health care 
 costs by increasing competition in health care, reducing administrative 
 costs and imposing budget discipline.  Health plans compete to provide 
 affordable, quality care:
 
      *     Uniform, comprehensive health benefits and reliable 
            information about the price and performance of health plans 
            encourage informed choices. 
 
            Consumers may choose to pay less for lower-cost 
            health plans or more for higher-cost plans, creating 
            incentives for cost-conscious decisions.
 
      *     Payments to health plans are fixed, providing incentives to 
            spend resources wisely.  Payments are adjusted based on the 
            risk characteristics of each health plan's participants.
 
 
      If savings attained through competition and reductions in 
 administrative burden fail to contain costs, limits on the rate of 
 growth of insurance premiums provide an emergency brake --  or backstop 
 -- to ensure that premiums remain in line with inflation.
 
      Health reform also reduces the projected rate of growth in 
 federal and state spending for Medicare, Medicaid, and other government 
 programs.  Resources conserved from those steps are applied to other 
 aspects of the health care system, particularly the expansion of 
 Medicare benefits to include prescription drugs and for new long-term 
 care services.
 
      The Health Security plan cracks down on providers and 
 institutions that overcharge or engage in health care fraud.  It sets 
 tough new standards and imposes stiffer penalties that include:  
 
      *     New criminal penalties for health care  and for the payment 
      *     of bribes or gratuities to influence the delivery of health 
      *     services and coverage.
 
      *     New civil financial penalties against providers who submit 
      *     false claims.
 
      *     Tighter restrictions to eliminate referral "kickbacks" in 
      *     the private sector and new standards that prohibit 
      *     physicians from sending their patients to get services at 
      *     institutions in which they have financial interests.
 
      *     Strong accountability standards that make provider  and 
      *     other misconduct automatic grounds for exclusion from all 
      *     health plans.
 
 
 EXPANDING CHOICE
 
      The Health Security plan guarantees consumers a choice of health 
 plans and enhances the patient-doctor relationship.
 
      *     Alliances offer an array of competing health plans from 
            which individuals and families choose their health 
            coverage, expanding the range of choice for many Americans.
 
      *     Alliances must offer a traditional fee-for-service 
            option in which every patient can see any physician he or 
            she chooses.
 
      *     Consumers -- rather than their employers -- choose their 
            health plan from among a menu of plans offered by 
            alliances.
 
      *     Doctors and other health care providers also have a choice 
            of health plans and delivery systems in which they may 
            choose to practice medicine.
 
      *     Separate programs increase federal support for long-
            term care and improve the quality and reliability of 
            private long-term care insurance.
 
 
 ENHANCING QUALITY
 
      The Health Security plan improves the quality of health care.  It 
 creates standards and guidelines for health professionals, reorienting 
 quality assurance programs to measuring outcomes rather than 
 regulation, increases the national commitment to medical research and 
 promotes primary and preventive care.
 
      *     Health plans are held accountable for delivering 
            appropriate, quality care.
 
      *     Regular surveys of consumer satisfaction are used to 
            measure health plans.
 
      *     Regular publication of useful and easily understood 
            information about quality and cost allows consumers to make 
            informed choices among health plans.
 
      *     A special funding mechanism strengthens the role of 
            academic health centers in research, training and 
            specialized care.
 
      *     Increased investment in research advances medical 
            knowledge.
 
      *     Changes in Medicare rate schedules and the allocation of 
            federal funds supporting graduate medical education provide 
            new incentives for physicians to choose primary care as the 
            focus of their training.
 
      *     Expanded funds for education and new federal action helps 
            remove artificial barriers to practice that hinder nurses 
            and other professionals.
 
      *     Investments in public health and medical research improve 
            health protection for all Americans.
 
 
 REDUCING BUREAUCRACY
 
      The Health Security plan reduces the burden of paperwork and 
 administration, streamlines regulatory, billing and reporting 
 requirements and helps reduce confusion. 
 
      *     A comprehensive benefits package that covers every American 
            and legal resident reduces confusion for health care 
            providers and consumers.
 
      *     Administrative costs caused by multiple insurance policies 
            with different benefits and risk selection disappear.
 
      *     Standard forms for insurance claims and billing procedures 
            simplify paperwork and reduce administrative costs.
 
      *     Administrative costs for small companies decline as those 
            firms purchase care through regional health alliances that 
            benefit from economies of scale.
 
      *     The plan simplifies federal regulatory requirements for 
            Medicare, Medicaid and programs that govern clinical 
            laboratories. 
 
      *     The plan requires that health care services covered by 
            workers' compensation and automobile insurance be delivered 
            through an individual's health plan reducing duplication 
            and waste.
 
      *     Malpractice reform reduces incentives for the practice of 
            "defensive medicine," including unnecessary tests and 
            procedures.
 
 
                           THE HEALTH SECURITY PLAN
 
 
 COVERAGE
 
      All American citizens and legal residents are guaranteed a 
 nationally defined, comprehensive package of benefits and enroll in a 
 health plan.  Coverage continues without interruption regardless of a 
 change of employer, employment status, marital status or medical 
 condition.
 
      Coverage goes into effect -- state by state -- beginning in 1995 
 and is fully implemented by 1997.
 
      The vast majority of Americans continue to receive their health 
 coverage at work, as they do today.  All workers have a choice of 
 health plans, each of which must be certified as meeting quality 
 standards.  Unlike today, however, all employers contribute to the 
 purchase of health coverage for their employees, both full and part-
 time.
 
      Employed individuals receive information about enrollment and 
 health plans either at work or directly from the alliance.  Small 
 business owners and their families, employees of small business, the 
 self-employed and the unemployed sign up for the health plan of their 
 choice through the regional alliance office in their area.
 
      Firms or Taft-Hartley Plans with more than 5000 employees may 
 fulfill their obligation to provide coverage for their employees by 
 establishing a corporate alliance or joining the regional alliances.  
 Corporate alliances must meet federal standards for benefits, choice 
 and quality.
 
      Medicare beneficiaries continue to receive all current benefits 
 and, in 1996, receive a new benefit covering outpatient prescription 
 drugs.  New long-term care programs also expand access to home and 
 community-based care.
 
      Those people who receive health care through the Department of 
 Defense, the Department of Veterans Affairs and the Indian Health 
 Service may continue to do so.
 
      Medicaid beneficiaries receive coverage through the regional 
 health alliance, choosing among the health plans it offers.   
 
 
 BENEFITS
 
      The health benefits guaranteed to all Americans contain no 
 lifetime limits on coverage, and provide a comprehensive package of 
 medical services delivered in hospitals, clinics, professional offices 
 and other sites.  One uniform, comprehensive benefit package replaces 
 hundreds of different insurance products in the market today.   
 
      When medically necessary or appropriate, covered services include 
 hospital care, emergency services, preventive care, mental health and 
 substance-abuse services, family planning, pregnancy-related care, 
 hospice care, home health and extended-care services following an acute 
 illness, ambulance services, outpatient laboratory and diagnostic 
 services, prescription drugs and biologicals, outpatient 
 rehabilitation, durable medical equipment, vision and hearing care, 
 periodic medical checkups and preventive dental services for children.
 
      The plan includes coverage for a full range of preventive 
 screening and care often not covered in traditional health insurance 
 policies.  Covered preventive care includes well-baby checkups and 
 immunizations for children, periodic physical examinations, routine 
 laboratory work and screening tests, with no charge to the patient.
 
      Additional benefits, including preventive dental care for adults 
 and a more comprehensive mental health and substance-abuse benefit, are 
 phased into the nationally guaranteed benefits by the year 2001.  
 
      Individuals or employers who wish to purchase benefits beyond the 
 nationally guaranteed package may do so. 
 
      All individuals in a health plan pay the same premium for the 
 nationally guaranteed comprehensive benefits regardless of health 
 status, age, place of residence or employment status.  Health plans are 
 prohibited from discriminating based on existing medical conditions and 
 other individual characteristics. 
 
      Medicare beneficiaries continue to receive all current benefits 
 and, in 1996, receive a new benefit covering outpatient prescription 
 drugs.  Financial support for long-term care also expands.  
 
 
 COST-SHARING
 
      Health plans adopt one of three standard cost-sharing 
 arrangements: 
 
      *     Low cost-sharing: This follows the existing model for 
            integrated health plans, such as health maintenance 
            organizations.  Consumers pay $10 co-payments for 
            outpatient and professional services and do not make 
            additional co-payments for inpatient services, preventive 
            services, or home health care following an acute illness. 
 
            To obtain care from providers outside the network, plans 
            may offer a point-of-service option that allows patients to 
            visit any doctor, including those who may not belong to the 
            patient's plan.
 
      *     Higher cost-sharing: Following the existing model for fee-
            for-service plans, consumers may choose to see any 
            provider.  Individuals pay $200 annual deductibles before 
            coverage begins; families pay a $400 deductible.  Consumers 
            pay 20 percent co-insurance after meeting the deductible.  
            No individual pays more than $1500, and no family pays more 
            than $3000.  Consumers are not charged for preventive 
            services included in the benefits package.
 
      *     Combination: Following the existing model for preferred 
            provider organizations, consumers pay low cost-sharing ($10 
            co-payments) when seeing physicians and other professionals 
            in the provider network and higher cost sharing (20 percent 
            co-insurance) when they consult providers who are not 
            participants in the network.  Preventive services are 
            provided without charge.
 
 
 CHOICE OF HEALTH PLANS
 
 
      The Health Security plan allows individuals, rather than 
 employers, to choose their health plans on the basis of quality and 
 price.  Today, only half of employed individuals have a choice of 
 health plans.  For the rest, employers choose their health plans, 
 locking individuals and families into a system of care delivery and 
 determining how much they pay out of pocket. 
 
      Because the Health Security plan requires that alliances provide 
 at least one traditional fee-for-service plan, it preserves consumers' 
 ability to choose their own doctors and other health providers -- an 
 option that is not available to many today.
 
      Likewise, doctors and other health providers may choose to 
 participate in as many or as few of an alliance's health plans as they 
 want.
 
      Individuals whose employers provide more generous benefits than 
 the nationally defined comprehensive benefits may continue those 
 benefits at their current level without
 any change in coverage or cost.
 
 
 SUPPLEMENTAL INSURANCE
 
 
      Health plans may offer standardized supplemental insurance 
 policies to cover cost-sharing or health benefits above and beyond the 
 comprehensive benefits package.  Employers may contribute to purchase 
 supplemental coverage for their employees.  Health plans that adopt the 
 high-cost sharing option must offer their participants the opportunity 
 to purchase supplemental insurance policies that cover cost sharing.
 
      Supplemental insurance policies may not duplicate coverage of any 
 services provided under the nationally guaranteed comprehensive benefit 
 package.  
 
 
 LONG-TERM CARE
 
 
      Existing nursing home coverage under Medicaid continues.  
 Disabled Americans of all ages gain access to a wider variety of home 
 and community-based support services, making it possible to continue to 
 live at home.  The Health Security plan also provides the following 
 expansions and improvements in coverage for long-term care: 
 
      *     Improvements in Medicaid coverage for institutional care 
            expand eligibility for nursing home coverage.  The amount 
            of income and assets Medicaid beneficiaries may retain 
            increase to $12,000 and the $30-a-month living allowance 
            rises to $100.
 
      *     The establishment of national standards improves the 
            quality and reliability of private long-term care 
            insurance, while tax preferences encourages its purchase.
 
      *     Tax incentives also support the efforts of people with 
            disabilities to work, covering 50 percent of their costs 
            for personal assistance and other necessary support.
 
 
 MEDICARE 
 
 
      Medicare recipients experience no change in how and where they 
 obtain health care or their existing benefits.  In 1996, Medicare 
 benefits expand to include coverage for prescription drugs under the 
 Medicare Part B policy.
 
      Medicare continues as a federally run program for individuals 
 over age 65.  Once the new health care system is in place, individuals 
 have the option of enrolling in Medicare or remaining in their health 
 plan when they turn 65.    
 
      Medicare beneficiaries have a broader range of choice through the 
 expansion of managed care plans. 
 
      As the alliance system is fully implemented, states may provide 
 Medicare benefits through alliances, provided the interests of Medicare 
 beneficiaries and the Federal Treasury are safeguarded, and there is no 
 reduction in benefits.  
 
 
 MEDICAID 
 
 
      Medicaid recipients under the age of 65 who are not eligible for 
 cash assistance either through Aid to Families with Dependent Children 
 or Supplemental Security Income no longer enroll in Medicaid.  They 
 choose a health plan through their area alliance, with 80 percent of 
 the premium covered by employer contributions if they are employed, or 
 premium discounts if they are unemployed and have low incomes.  
 
      Medicaid continues to pay the cost of health insurance for 
 recipients of AFDC and SSI, who also pick a plan offered by the 
 regional alliance.  They may choose any plan priced at or below the 
 weighted-average premium without making additional payments.
 
      Like other members of the alliance, former Medicaid recipients 
 with incomes below 150 percent of poverty are eligible for discounts to 
 cover a portion of the cost of co-payments and deductibles if no plan 
 with low cost sharing is available at or below the average premium.  
 Health plans receive the same payment for Medicaid recipients as for 
 other participants, reducing any stigma associated with obtaining 
 coverage through Medicaid.
 
      To pay for services covered in the comprehensive benefits to 
 families that receive Aid to Families with Dependent Children and 
 Supplemental Security Income payments, Medicaid pays health plans a 
 fixed rate for each participant.  Payments from the alliance to health 
 plans are risk adjusted.  
 
      Medicaid coverage for other services, including nursing home 
 coverage and special services for the severely disabled and 
 supplemental services, continue as a public program.
 
 
 RETIREES
 
 
      Americans who retire before age 65 and were employed for at least 
 the amount of time used as a standard to qualify for Social Security 
 purchase health coverage through their regional alliance and pay only 
 the employee share of the premium for their health plan.  The federal 
 government pays the 80 percent employer share.
 
      Although they may choose to pay more, employers whose retirement 
 plans cover health insurance premiums for retired workers are 
 responsible for paying only the employee's share, or 20 percent of the 
 average premium.
 
 
 
                  CONTROLLING COSTS: MARKETPLACE REFORMS 
 
 
      The Health Security plan controls rising costs and improves the 
 quality of health care by enlisting the power of a competitive market 
 and empowering consumers to make choices that suit their needs.
 
      Reform reduces administrative costs and frees up resources to 
 improve quality and access for all Americans.  The Health Security 
 plan: 
 
      *     Changes incentives in the insurance market so that health 
            plans compete on the basis of quality, service and cost -- 
            not risk selection. 
 
            Reform requires health plans to accept all applicants, and 
            it forbids them from dropping anyone from coverage or 
            charging some consumers more than others on the basis of 
            age, gender, or health status or any personal 
            characteristic.  
 
      *     Empowers consumers to make more cost-conscious decisions by 
            choosing among health plans on the basis of price and 
            quality.
 
            Consumers reap the savings from enrolling in a health plan 
            that delivers the guaranteed benefits for a lower premium.  
            If they prefer a plan that costs more, they pay the 
            difference.
 
      *     Promotes the development of health plans that give 
            consumers better value for their money.
 
            In the current system, doctors and hospitals get paid extra 
            for each service they perform.  Under reform, health plans 
            become accountable for both quality and price.  The 
            incentives change from "doing more" to giving consumers 
            better value.
 
      *     Improves information about quality of care. 
 
            The program calls for regular monitoring of access, 
            consumer satisfaction and the appropriateness and 
            effectiveness of care.   Consumers receive annual 
            performance reports on health plans.
 
            The Health Security plan also expands research related to 
            the effectiveness of medical treatments and courses of 
            care, fosters the development of practice guidelines and 
            provides other information to help doctors, nurses and 
            other professionals deliver more effective care. 
 
      *     Creates standard reimbursement forms and requirements that 
            simplify the business side of health care.  
 
            With some 1,200 different payers of health costs, 
            hospitals, clinics and doctors contend with thousands of 
            forms, conflicting regulations and inspections by a variety 
            of federal, state, local and private agencies.  The plan 
            creates standard reimbursement rules and inspection 
            procedures that streamline the system, reducing 
            administrative overhead for providers.
 
      *     Lowers administrative costs for small groups and 
            individuals as firms with fewer than 5,000 employees and 
            the self employed join alliances, consolidating 
            administration and purchasing tasks. 
 
            These groups currently pay as much as much as 30-40 percent 
            of premiums to support administrative overhead, compared to 
            5-7 percent for large firms.
 
 
 
          ENFORCEABLE CAP: THE BACK-STOP FOR COST CONTAINMENT
 
  
      While ample evidence demonstrates that competition and increased 
 efficiency control costs, the Health Security plan builds in a back-up 
 measure to control health care costs: an enforceable cap.
 
      The cap is met through capping the growth in insurance premiums 
 paid by individuals and businesses to cover the guaranteed benefits.  
 The Health Security plan guarantees comprehensive benefits and limits 
 the rate of growth in premiums paid by employers and consumers for 
 these benefits.  By the end of the decade, insurance premiums are held 
 to the rate of inflation.
 
      Those limits are reasonable and achievable, given reforms that 
 enhance competition in the health insurance market, simplify the system 
 and reduce administrative costs, expand consumer choice and strengthen 
 the negotiating power of employers and consumers through health 
 alliances.
 
      The projected rage of growth in federal and state spending for 
 Medicaid is similarly limited, with coverage for Medicaid recipients 
 provided through regional alliances.  Specific reforms hold Medicare to 
 comparable, but slightly higher, limits.
 
      Health insurance premiums pay for coverage in the new system, 
 just as health insurance premiums pay for coverage today.  The Health 
 Security plan limits how fast the cost of those premiums increase.
 
      Alliance premium targets are based on the current level of health 
 care spending in each area.  They, therefore, vary substantially from 
 alliance to alliance.  The National Health Board appoints a commission 
 to explore methods to reduce these variations over time.
 
        In each regional health alliance, health plans bid each year to 
 provide the guaranteed benefits, and alliances negotiate with them over 
 premium levels.  Premiums vary from plan to plan.
 
      If the average premium across all plans is less than the 
 alliance's premium target -- that is, if premiums, on average, are 
 increasing consistent with inflation -- then no enforcement is 
 triggered.
 
      If the average premium across all plans exceeds the alliance's 
 premium target, the premium, the cap prevents premiums from rising 
 beyond the target.  In that case, plans whose proposed premium 
 increases exceed the allowed rate of growth are required to accept 
 lower premiums.   The plan must adjust its payment rates to providers 
 or accept lower profits to make up the difference. 
 
 
 CORPORATE ALLIANCES  
 
 
      Large employers that form corporate alliances are expected to 
 comply with the same limits on premium increases as regional alliances.  
 If premiums in a corporate alliance exceed the allowed rate of growth 
 during two of any three years, the Department of Labor may require the 
 corporation to purchase coverage through regional alliances.
 
 
 
                       STRUCTURE OF THE NEW SYSTEM
 
 
      A new national framework organizes the market for health 
 coverage; the federal government, states and alliances divide 
 responsibilities as follows:
 
 **********************************************************************
      Federal Government: Sets the basic framework for the system
 
      *     Defines guaranteed benefits package 
      *     Determines caps on growth in insurance premiums
      *     Reforms insurance system
      *     Establishes quality standards
 
 
      States: Implement health care reform within federal framework
 
      *     Establish alliance(s)
      *     Certify health plans
      *     Monitor quality and availability of care 
      *     Implement insurance reform
 
 
      Alliances: Serve as purchasing agent for employers and 
      consumers 
 
      *     Solicit competitive bids from health plans
      *     Distribute consumer information materials
      *     Collect premiums and pay health plans
 
 **********************************************************************
 
 
 NATIONAL FRAMEWORK
 
 
      The new framework for health security includes these components:
 
      *     An independent National Health Board acts as the board of 
            directors for the health care system, setting national 
            standards and overseeing implementation of reform. 
 
      *     States establish alliances and qualify health plans.  
            Tailoring the system to local needs, states may create a 
            single-payer system by establishing only one alliance and 
            negotiating directly with providers.
 
      *     Regional and corporate alliances bring together consumers 
            and employers, acting as their advocates in negotiations 
            with competing health plans over service and price. 
 
      *     Competing health plans deliver health services covered in 
            the guaranteed comprehensive benefit.  Each alliance offers 
            a menu of plans, including a traditional fee-for-service 
            arrangement, preferred provider organizations and health 
            maintenance organizations. 
 
 
 FEDERAL RESPONSIBILITIES AND NATIONAL HEALTH BOARD 
 
 
      The National Health Board consists of seven members appointed by 
 the President with the advice and consent of the Senate.  The National 
 Health Board assumes certain responsibilities for administering the new 
 health care system, while existing federal agencies assume others.  The 
 Board:
 
      *     Sets national standards for state plans and ensures access 
            to health care for all Americans.
 
      *     Interprets and updates the comprehensive benefits and 
            recommends to the President and Congress changes in the 
            health care system.
 
      *     Establishes a new performance-based quality management 
            program and develops valid measures of health outcomes to 
            be used in annual performance reports for health plans.
 
      *     Develops and implements standards for a national health 
            information system, using a public-private network to 
            support quality improvement and collects enrollment data 
            and comparative information about cost.  
 
      *     Implements the safety net of the national health budget.     
 
 
 STATE RESPONSIBILITIES
 
 
      States ensure that all eligible individuals enroll in a regional 
 or corporate alliance and have access to a health plan that delivers 
 the guaranteed comprehensive benefit.  Each state must implement plans 
 approved by the National Health Board by January 1, 1997.  
 
      States may begin to implement the new system as early as January 
 1, 1995.   Implementation involves adopting federal standards and 
 establish health alliances.  
 
      Within the broad federal guidelines, states exercise flexibility 
 in the design and governance of regional health alliances.  States have 
 the option to implement a single-payer system.
 
      States certify health plans, much as they license health 
 providers and insurance companies today.  They determine mechanisms for 
 evaluating the quality of health plans, their financial stability and 
 capacity to deliver the guaranteed benefits, as well as compliance with 
 prohibitions against discrimination based on race, ethnicity, gender, 
 income and health status. 
 
      Only certified plans may offer health coverage through alliances.  
 In the case of areas where no health plan forms, the state must assure 
 that at least one health plan is available to cover every eligible 
 individual.  
 
 
 HEALTH ALLIANCES
 
 
      Each state creates one or more regional alliances that organize a 
 menu of health plans, negotiate premiums and enroll individuals in 
 plans.  Within broad federal parameters, states exercise flexibility in 
 the design and governance of regional alliances.
 
      The vast majority of people continue to choose their health care 
 coverage through their employers, who provide information on area 
 health plans available through the alliance.  The following groups 
 obtain health coverage through regional alliances:
 
      *     Employees in firms with fewer than 5000 employees
      *     Employees of federal, state and local governments
      *     Individuals who are self-employed
      *     Part-time workers
      *     Retirees not yet eligible for Medicare
      *     Individuals who are not employed.
 
 
      Health alliances consolidate the purchasing power of individuals, 
 small- and medium-size businesses to secure the best health coverage 
 for the lowest price.  Alliances organize and streamline the fragmented 
 insurance system, replacing health insurance brokers, agents and 
 underwriters with consumer-run organizations focused on providing 
 access, service, quality and affordable care. 
 
      Alliances drive the competitive forces that make the new system 
 work for consumers and employers.  Their mission is to:  
 
      *     Bargain with health plans on behalf of consumers, business 
            and purchasers of health care services. 
 
      *     Negotiate premiums and coverage and ensure the delivery of 
            high-quality care while controlling costs.
 
      *     Assure that all residents in the area enroll in health 
            plans that provide the guaranteed comprehensive benefits. 
 
 
      Where inadequate services exist, alliances may organize health 
 providers or use financial incentives to encourage health plans to 
 expand.
 
      Alliances operate as non-profit corporations, independent state 
 agencies or agencies of the executive branch of the state.  The board 
 of each alliance includes an even number of consumer and employer 
 representatives but may not include health providers and others who 
 profit from the industry.  Each alliance also forms an advisory board 
 composed of health care professionals and providers who practice in its 
 health plans.
 
      Alliances hold an annual open enrollment period during which they 
 offer consumers a menu of health plans, including at least one 
 traditional fee-for-service plan.
 
      Alliances negotiate rates for premiums with each health plan and 
 collect premium contributions.  Alliances pay health plans a fixed 
 premium for each individual or family that enrolls, adjusting the total 
 payments to plans to reflect the health status of that plan's 
 participants.
 
 
 CORPORATE ALLIANCES
 
 
      Firms employing more than 5000 workers, Taft-Hartley plans and 
 rural cooperatives are eligible to organize corporate alliances, 
 although they may also choose to purchase coverage through regional 
 alliances.  Corporate alliances resemble the operation of large 
 employers' benefit departments, arranging premiums and the delivery of 
 services. 
 
      Corporate alliances provide health benefits to their employees 
 either through a self-funded employee benefit plan or through contracts 
 with health plans.  They operate under the same rules as regional 
 alliances except that the population served is limited to company 
 employees and their dependents.  Each corporate alliance contracts with 
 at least one fee-for-service plan and offers at least two other health 
 plans. 
  
      The U.S. Department of Labor monitors the operation of corporate 
 alliances, fulfilling the same role that it assumes under the Employee 
 Retirement Income Security Act of 1974 (ERISA). 
 
      Organizations eligible to form corporate alliances may exercise a 
 one-time option to have individual establishments with fewer than 100 
 employees join regional alliances at community rates.  Large 
 corporations also periodically have the option to join regional 
 alliances at a risk-adjusted rate, which gradually declines to the 
 community rate.
 
      A new chapter in ERISA establishes fiduciary and enforcement 
 requirements for employers and other sponsoring health benefit plans in 
 corporate alliances.
 
 
 HEALTH PLANS
 
 
      Competing health plans provide medical services guaranteed in the 
 comprehensive benefits, delivering them through fee-for-service 
 networks, preferred provider organizations and health maintenance 
 organizations.  Health plans may not:
 
      *     Deny enrollment to any person based on individual 
            characteristics, health status or anticipated need for 
            health care.
   
      *     Terminate, restrict or limit coverage for the comprehensive 
            benefit package for any reason.  
 
      *     Cancel coverage for any eligible individual until that 
            individual is enrolled in another health plan.
 
 
 COMMUNITY RATING
 
 
      Health plans offer coverage at the same rates for all 
 participants, regardless of age, health or other personal 
 characteristics.  Alliances adjust payments to health plans to account 
 for the level of risk among individuals enrolled in each plan.
 
 
 
                         IMPROVING HEALTH SERVICES
 
 
      The Health Security plan seeks to remove financial and non-
 financial barriers that limit care for Americans who live in urban 
 centers, rural communities and those who suffer from certain illnesses.  
 Because a disproportionate number of residents of rural communities and 
 urban centers lack health coverage today, universal coverage will bring 
 major new health resources into those communities.  
 
      The plan improves access specifically for Americans who live in 
 rural areas through initiatives to:
 
      *     Develop communications links between rural health 
            professionals and academic health centers.
 
      *     Create incentives to expand community-based networks of 
            health providers and plans, such as long-term contracts for 
            health plans in rural areas and federal loan guarantees for 
            capital improvements.
 
      *     Attract health professionals to rural areas through the 
            expansion of the National Health Service Corps, tax 
            incentives to encourage practice in rural areas, and 
            changes that increase compensation for primary care 
            physicians who serve Medicare beneficiaries.
 
      *     Expand the rural public health system, including support 
            for transportation, outreach, case management, translation, 
            health education, nutrition, social support, child care and 
            home visiting services.
 
 
      The Health Security plan makes federal grants and loans available 
 in underserved urban communities for capital investment.  The 
 government further supports the efforts of traditional health care 
 providers, such as community-based clinics, to adapt to the new system 
 through designation as essential community providers.
 
      Essential community providers receive special protection: For 
 five years, health plans are required to reimburse these providers for 
 services.  At the end of that period, health plans must either 
 demonstrate their capacity to provide access for all participants -- 
 including residents of undeserved areas -- or continue contracting with 
 essential providers.
 
      Federal block grants that support community health centers, 
 family planning clinics, health care for homeless families and maternal 
 and child health programs continue.  New initiatives include funding 
 for school-based clinics.
 
 
 
                                TRANSITION
 
 
 STATE IMPLEMENTATION
 
 
      States begin implementation of the new system as early as January 
 1, 1995  Most states come into the system in 1996; the rest are 
 required to begin implementation by 1997.
 
      At the time of state implementation, federal discounts for small, 
 low-wage employers and low-income individuals and families become 
 available.  States that expedite implementation receive financial 
 incentives including special start-up funds, and early access to 
 federal funding for discounts.  
 
      Organizations eligible to establish corporate alliances must 
 begin providing the guaranteed benefit package by January 1, 1997. 
 
 
 INSURANCE REFORM
 
 
      To reduce the potential for disruption during transition, interim 
 insurance reform imposes new rules including:
  
      *     Prohibitions against dropping consumers from coverage. 
 
      *     Prohibitions against profiteering. 
 
      *     Prohibitions against reducing coverage.
 
      *     Creation of a national risk pool to assure access to 
            coverage during the transition. 
 
      *     Assurance of portability of coverage
 
 
 
             FINANCING HEALTH COVERAGE IN THE PRIVATE MARKET
 
 
      The Health Security plan caps employer contributions for 
 insurance premiums as a percent of payroll.  The cost of providing 
 health coverage declines for most firms that currently provide 
 insurance. 
 
      *     The plan eliminates the $25 billion that employers 
            pay each year to cover the cost for uninsured patients. 
 
      *     In the current system, many employers pay the entire 
            premium for family policies, while the employer of a 
            worker's spouse makes no contribution.  Under reform, both 
            employers share the cost for families in which two spouses 
            work.
 
      *     In the current system, health insurance premiums for 
            many employers total more than 10 percent of payroll. Under 
            reform, premiums paid by employers purchasing through 
            regional alliances are capped at 7.9 percent of payroll.  
 
            Businesses that employ fewer than 50 workers receive 
            additional discounts on their insurance premiums, reducing 
            their contributions to between 3.5 percent and 7.9 percent 
            of payroll.
 
      *     Under reform, employers in regional alliances pay 
            community rates that do not vary according to the age, 
            gender or health status of their workers.  
 
            Employer obligations for insurance premiums are calculated 
            based on the average premium among health plans in their 
            area.  As competition among health plans -- backed up by 
            national caps on premium increases -- brings the rate of 
            growth in health costs under control, the projected rate of 
            growth in health costs declines throughout the business 
            sector.
 
 
 EMPLOYER PAYMENTS
 
 
      *     Employers pay 80 percent of the average premium in the 
            alliance toward the cost of the policy chosen by the 
            employee, which depends on the employee's family status.
 
            For employees with a spouse, the employer contribution is 
            reduced to reflect the contributions on behalf of dual wage 
            earners in the alliance region.
 
      *     For part-time workers, employers pay a pro-rata share of 
            the 80 percent employer contribution based on the number of 
            hours worked.
 
 
 CONSUMER PAYMENTS
 
 
      Working Individuals and Families: Individuals and families in 
 which at least one person works pay a maximum of 20 percent of the 
 premium to enroll in the average-cost health plan in their area.
 
      *     Those who choose a lower-cost plan pay less than the 20 
            percent average.
 
      *     Those who choose a more expensive plan pay more, as they do 
            today.
 
      *     Employers who currently pay 100 percent of the premium for 
            their employees may continue to do so.
 
 
      Working individuals and families may have their share of the 
 premium deducted from their paychecks or write a check to the local 
 health alliance.
 
      Consumers pay premiums based on the type of policy they need to 
 purchase:
 
      *     Two parent family with children.
 
      *     Couple.
 
      *     Single parent family.
 
      *     Single individual.
 
      Individuals and families with incomes below 150 percent of the 
 federal poverty level  -- $21,525 for a family of four -- are eligible 
 for discounts on the employee's share of the premium.
 
      Part-Time Workers:  Part-time workers are responsible for the 20 
 percent employee share of the premium, and workers with incomes below 
 150 percent of the poverty level receive discounts.  
 
      The number of hours an employee works determines how much of the 
 employer share of the premium is paid by the employer and how much by 
 the worker.  For example, an employer would pay 40 percent of the 
 premium for someone who works half-time.  The worker is responsible for 
 the remaining 40 percent of the premium, with discounts provided on a 
 sliding-scale basis.
 
      A part-time worker with more than one job receives contributions 
 from more than one employer toward the employer's share of the premium.
 
      Unemployed Individuals:  Unemployed individuals and families are 
 responsible for the 20 percent employee share of the premium and 
 receive a discount if their incomes are below 150 percent of the 
 poverty level.  They also are responsible for what would be the 
 employer's share of the premium but receive discounts on a sliding-
 scale basis to help cover the cost.
 
      Self-employed Individuals: The self-employed worker pays the 20 
 percent employee share of the premium and receives a discount if his or 
 her income is below 150 percent of the poverty level.  Self-employed 
 workers also are responsible for the 80 percent employer share and 
 receive the same discounts as small employers.  They may deduct from 
 their taxes 100 percent of their health care premiums.   
 
 
 TAX DEDUCTIBILITY
 
 
      Employer contributions toward the premium and toward cost sharing 
 related to the nationally guaranteed comprehensive benefit -- as well 
 as for additional benefits phased in by the year 2001 -- are fully tax 
 deductible and not counted as taxable income for employees.
 
      Tax preferences continue for benefits in excess of the nationally 
 guaranteed benefit package offered as of January 1, 1993, for ten years 
 after enactment of health reform. 
 
 
