Final Health Care Reform Bill Released: Let the Reconciliation Begin
Barran Liebman LLP
The Senate Finance Committee officially released its health care bill, the last of the 5 bills to be introduced in the health care debate. This alert focuses on the impacts on employer based health insurance and not the broader issues of health care reform
How a Bill Becomes a Law
It is important to understand the procedural rules of Congress to predict the final outcome of a health care bill. Both chambers of Congress have committees with jurisdiction over healthcare. Each chamber has or will pass its own versions of health care bills. The bills are then combined into a full bill and voted upon. To avoid a filibuster or controversial amendments, the Senate needs 60 votes to pass a bill. The House, with its Democrat majority, is likely to pass any version of a bill that it wishes. The House and Senate bills are then combined and another vote is scheduled on the combined bills and the President will sign or veto the final bill.
Politics vs. Reality
The House members know they can pass any bill that they wish and know the Senate cannot as it has 57 Democratic members with 2 allied independents and a vacant Massachusetts seat. Thus, you will see many expanded political discussions from Democratic and Republican House members but the real focus should be on the actual negotiation in the Senate.
The Senate has 2 versions of health care reform bills, but the bill most likely to move forward comes from the Senate Finance Committee. This is because the Committee’s Chairperson Senator Max Baucus is a moderate leaning Senator and has worked with Republicans to find a compromise health care bill.
To predict a final bill and thus the impact on employers, we need to review the bills and the provisions.
Common Provisions in All Bills – Likely Part of Health Insurance Reform
All bills contain the following provisions; it is likely that we will see these provisions in any final health care reform bill:
• Individual mandate to obtain health insurance. All individuals will be required to maintain some level of health insurance.
• Tax credits to allow certain individuals below an income threshold to purchase health insurance.
• Limitations on insurance companies’ ability to deny coverage based on health factors and restrictions on premium rating based on health claims experience. This will affect the individual market more than the employer market.
Comparing the Senate Finance Committee bill and the Senate HELP Committee bill provide a framework for the final bill as well.
Senate Finance Committee Bill – Relevant Provisions
The Senate Finance Committee released its bill September 16, 2009, and it is scheduled for Committee mark-up on September 22, 2009. Its provisions currently include the following and are effective January 1, 2013, unless otherwise noted:
• Employers with 50 or more employees who offer health insurance to employees that costs more than 13% of an employee’s adjusted gross income or do not offer benefits that meet a certain minimum benefit level, or do not offer full-time employees health insurance, must pay an amount no more than $400/employed employee (not based on who receives the credit but based on all employees).
• Expanded use of cafeteria plans for small employers (100 employees). Safe Harbor from nondiscrimination requirements for small employers to allow use of cafeteria plan to provide healthcare dollars. Limit on flexible spending accounts to $2,000 for all employers. Effective 2010.
• Required automatic enrollment by employers with 200 or more employees in employer health plan.
• Excise tax on employers offering insurance benefits to an employee exceeding a cost to employer or value to employee of $8,000 ($667 per month) individual coverage or $21,000 family coverage. Excise tax is 35% of benefit above thresholds. Includes dental, vision, and health FSA.
• W-2 reporting of health insurance costs. Effective 2010.
Senate HELP Committee Bill – Relevant Provisions
In comparison to the Senate Finance Committee, the Senate HELP Committee requires the following with provisions effective January 1, 2011:
• Employer mandate for those with 25 or more employees to provide health insurance. Fee of $750 for full-time employees and $375 for part-time employees if employer does not provide health insurance.
• Public government option with regional health care insurance exchanges. These exchanges would have an impact on the flexibility of self-insured health plans.
• Limits on lifetime maximums and deductibles/copayments limiting options of plan design.
Final Bill Predictions
Cost is a major issue for Republicans and Democrats, so the use of the employer mandate may survive. A direct employer mandate rather than a Free Rider provision saves additional dollars in taxes due to the $750 per employee rather than $400 and the 25 versus 50 employees. It is likely that this provision enters the final bill with greater insurance and plan design provisions than what is maintained in the HELP Committee bill.
Another major issue will be the excise tax from the Finance Committee bill as many labor unions receive generous health insurance benefits and any provision which taxes those benefits provides an incentive for employers to reduce the level of benefits; in turn that will cause concern for labor union leaders in a final bill. Finding the revenue to replace any excise tax will come from expanded employer mandates.
Next Steps for Employers
We will continue to update you as Congress reconciles the various bills and their provisions. At this point, be cautious about providing any new benefits to employees greater than the $8,000/individual and $21,000/family coverage and to focus on implementing plan design changes, cost-shifting decisions and any incentive-based health plan design options for expected grandfathered plan provisions for those plans that may not meet minimum acceptable plan coverage definitions in a final bill. Provisions in a final bill may be effective as soon as January 1, 2011, and employers should begin planning now for restricted plan design choices and an employer mandate for full-time employees.
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