October 30, 2009
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):
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.
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