June 6 (Bloomberg) -- Under a draft bill to overhaul the U.S. health-care system all employers would be required to supply health insurance for workers or contribute to the cost.

The bill, by Senator Edward M. Kennedy, would create a public health plan to compete with private insurers, a priority of President Barack Obama’s that is opposed by Republicans. It would provide all Americans with health benefits, penalize those who don’t buy them and bar insurers from limiting coverage.

The “America Health Choices Act,” circulated in Washington late yesterday, offered the first detailed glimpse of legislation being discussed in Congress. Many of its provisions would expand coverage for uninsured Americans. “It is the sense of the Senate that Congress should establish a means for all Americans to enjoy affordable choices in health benefit plans,” the bill said.

On May 28, the president spoke in a conference call to his grassroots supporters urging them to campaign to remake the U.S. health-care system. Obama wrote this week to Kennedy, a Massachusetts Democrat, to say the next few months were “make or break” for designing a health-care overhaul.

In his letter, Obama said he was willing to consider a universal mandate for insurance if health-care costs could be lowered, and said he “strongly” supported a public plan.

More Competitive

A government-backed insurance plan, Obama wrote, would “make the health-care market more competitive, and keep insurance companies honest.”

Obama set aside $635 billion in his 2010 budget proposal to act as a “down payment” on the cost of reconstructing the health-care system and expanding coverage to the estimated 46 million uninsured Americans.

Kennedy’s draft did not include details of how its proposals would be paid for. The Massachusetts senator, who has been battling brain cancer, heads the Senate health committee which will begin debating the draft bill the week of June 15. His committee has been working with the Senate Finance committee, chaired by Montana Democrat Max Baucus, which is writing its own bill.

The two committees will merge their bills and their staffs say they aim to get the legislation to the Senate for debate by July.

Kennedy’s bill opened with an affirmation of a patient’s rights to choose his or her doctor and the importance of the patient-doctor relationship. “Doctors, nurses and other health professionals have the right to judge what is best for their patients,” the bill stated. Republicans have opposed a public plan, arguing that it would lead to the rationing of drugs, medical devices and treatment.

Gateways

The bill would create state-level marketplaces where consumers could comparison shop among different plans, learn about benefits and get help enrolling. The federal government would provide states with grants to establish these “gateways.”

Participation in the gateways would be voluntary. The bill would establish a requirement that all Americans get coverage of some kind. Those who don’t comply would face penalties unless affordable coverage wasn’t available. The bill would create exemptions for the poor. Small businesses would also be exempt from the mandate that companies provide or contribute to workers’ coverage.

The public plan, designed to compete with private insurers, would be run by the secretary of health and human services.

Offer Subsidies

Under the bill, the government would offer subsidies to people with income up to 500 percent of the poverty level to help them purchase insurance. The program would pay doctors and hospitals at Medicare rates, plus 10 percent. The bill would also expand Medicaid, the federal insurance program for the poor, to cover uninsured people earning up to 150 percent of the poverty level.

A panel of experts would recommend to the health secretary a minimum level of health insurance benefits that companies would have to provide. The bill sets out certain “essential” benefits, including hospital care, maternity and newborn care, prescription drugs, mental-health and substance-abuse services and doctors’ services.

The bill would also establish protections for “fair” insurance coverage, setting limits on how much premiums can vary. Insurers would be forbidden from turning away customers due to pre-existing conditions.

Each health insurer that offers coverage in the individual or group market in a state would have to accept every employer and individual in the state that applied for coverage.

Companies that provided coverage for children through their parents would have to extend “dependent” coverage for those children through the age of 26.

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net.

Last Updated: June 6, 2009 02:11 EDT