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House Health Care Bill Explained in Business Terms

October 30, 2009

The House of Representatives Releases Its Health Care Reform Bill
Barran Liebman LLP
Oregon Law Firm,

Today, the House of Representatives released its reconciled Health Care Reform bill providing employers with half the blueprint for what their group health plans will look like in the future. The House bill is very similar to the Senate Finance Committee bill issued a few weeks ago providing a fairly clear blueprint for the future of American Health Care. We should expect to see a reconciled Senate bill in the near future.  The important issues for employers related to the House Health Care bill are as follows (most are effective January 1, 2013):

Employer Mandate

The House bill provides an employer mandate for businesses with an annual payroll of greater than $750,000. Employers with annual payroll of $750,000 who do not elect to provide health benefits must contribute 8 percent of payroll to a health care fund. Employers with payroll of greater than $500,000 but less than $750,000 have a graduated tax requirement if they elect not to provide compliant health care.

A grace period exists for employer group health plans to grandfather existing provisions and have applicable benefit mandates phase in over a five-year period.

Individuals will receive affordability tax credits based on income level by which to purchase insurance if employer provided insurance is not offered.

Qualifying Health Care Coverage

An employer must provide 72.5 percent of the premium of individual coverage and 65 percent of the cost of family coverage to full-time employees. Employees working less than full-time must be offered a proportional share of the cost of health coverage. All employees must be automatically enrolled in the health plans.

Health Plan Provisions

The bill provides several interesting mandates for health care plans, including self-funded plans. The bill will prohibit lifetime maximums on health care services and require dependent care coverage through age 26.

Impact on COBRA, FSAs, DOMA, and Retiree Health

The bill provides opportunities to continue on COBRA until the health exchanges provide individual access. This presents an obvious administrative issue for employees with current COBRA beneficiaries if this provision is in the final bill.

The House bill limits flexible spending accounts to a maximum of $2,500, increases penalties for non-health withdrawal from health spending accounts, and provides for tax parity for domestic partners in a change to policies under the Defense of Marriage Act (“DOMA”).

The bill prohibits revisions to retiree health plans unless similar changes are made to active employee health plans. This provision presents a particular concern for companies with an active and high cost retiree health program.

In an interesting provision, the bill requires “chain” restaurants to provide calories directly on menus.

Revenue Raising Provisions

A major issue for employers is how to pay for the new provisions in the bill. The House aims to pay for the bill by raising money through increased taxes on married income tax filers with adjusted gross income exceeding $1 million or individual filers with adjusted gross income exceeding $500,000.

Next Steps for Employers

Employers should keep a close watch on the floor debate in the House and the resulting bill in the Senate. The House bill has a potentially enormous impact on employers in cost sharing provisions with employees and future budgets and forecasting. Employers should also consider very carefully their plan design in the future for purposes of the grandfathering provisions. We will continue to keep you informed.

*****
Electronic Alerts are written by Barran Liebman attorneys for their clients and friends. Alerts are not intended as legal advice, but as employment law, labor law, and employee benefits announcements. If this has been forwarded to you, and you would like to begin receiving Electronic Alerts directly, please call Traci Hopfe at 503-276-2115 or email [email protected] Copyright © 2009 by Barran Liebman LLP

  
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Discuss this article

L Davis November 12, 2009

This is going to crush many businesses. Especially small businesses.

It is going to cripple the economy even further.

L Davis November 12, 2009

It requires employers pay 72.5% of full-time worker’s coverage and 65% for their family or face an 8% tax on payroll. This is going to massively increase payroll expenditures of many businesses.

In order to mitigate these new costs, I see employers do any or all of the following:

1. Cut wages of current workers.
2. Reduce workforce size. Layoffs.
3. Convert workers from full to part time.
4. Outsource more labor to foreign countries.
5. Hire only unmarried people, not those with families.
6. Hire only young workers whose premiums are much lower.
7. Refuse to hire people with genetic predispositions to certain diseases.

Many employers are already doing much of the above and I do not see how this new bill is not going to further drive these trends.

Jake March 22, 2010

If my employer cuts my salary, Ill go work for a smaller business who will finally be able to compete, and I will be able to get health care no matter what.

Stop crying and coming up with illogical responses. Employers will probably buy folgers instead of starbucks coffee and still be able to compete for the asset I can bring to a given company.

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