Prohibitions on cost-sharing and limits on charges for preventive services, in particular, would be extended to both Medicaid and Medicare. Changes to Medicare would decrease the cost of prescription drugs for certain seniors, permit the federal government to negotiate the price Medicare pays for these drugs, improve the delivery of care by incentivizing more efficient treatment, and eliminate overpayments to Medicare Advantage, a program of private health plans that receive payments from Medicare.

The bill prohibits rescissions, an insurance industry practice that denies health cover to policyholders after they have become sick or have had an accident. It also extends the same protections available in the Exchange to employer-sponsored plans, but phases these changes in over time.

The legislation requires every individual to purchase insurance or face a penalty of 2.5 percent of income, but allows exemptions for hardship. Individuals who like their current insurance policy are able to keep it. Employers with payrolls greater than $500,000 must provide coverage to their employees and contribute a minimum amount to this coverage (72.5 percent of the premium for individuals).

The so-called public option would fund itself through the premiums of its beneficiaries but would be administered by the Secretary of Health and Human Services who would negotiate rates for participating health care providers.

The Health Insurance Exchange will offer a limited range of private insurance plans, all of which must provide a minimum level of benefits.

Although eligibility for Medicaid varies, currently low-income childless adults generally do not qualify and only parents with incomes significantly below the poverty line are eligible. The bill shifts coverage of lower-income children from the State Children’s Health Insurance Program (SCHIP) into general Medicaid coverage.