Senate Health Care Bill Explained

Barran Liebman LLP
Oregon Law Firm,

On Wednesday, November 18, 2009, the Senate released its take on health care reform through the Patient Protection and Affordable Care Act. While in some ways similar to the recent House bill, the Senate bill reflects some key differences of significance to employers. A summary of important issues for employers follows:

Employer Contributions
Unlike the House bill, the Senate bill does not contain a mandate requiring employers of a certain size to maintain health coverage. It does, however, impose a penalty on those that do not. Specifically, employers with an average of at least 50 full-time employees (“large employers”) would pay a monthly penalty amounting to $750 per year for each employee who receives a federal subsidy to buy insurance. Large employers covering less than 60 percent of employees’ health insurance costs may also be subject to a penalty. Small businesses, on the other hand, could be eligible for a credit to help offset health insurance costs.

Automatic Enrollment
Subject to notice and an opportunity for the employee to opt out, employers with more than 200 full-time employees offering health insurance would be required to automatically enroll new full-time employees upon completion of permitted waiting periods.

Notice of Coverage Options
All covered employers would be required to provide employees with a notice, either at the time of hiring or by March 1, 2013 for current employees, with required information about an employee’s health insurance options.

Penalties for Longer Waiting Periods
Large employers with eligibility waiting periods of more than 30 days could also expect to see a penalty$400 for each full-time employee subject to a waiting period of 31 to 59 days and $600 for each full-time employee subject to a waiting period of 60 days or more.

Health Plan Coverage
Like the House bill, this bill prohibits lifetime maximums on healthcare services and extends dependant care through age 26. In addition, it imposes a fee on self-funded plans, addresses coverage for early retirees, and limits contributions to flexible spending accounts.

Revenue Raising Provisions
The Senate bill takes a diverse approach to cover its estimated cost of $848 billion with provisions, including an excise tax on so called “Cadillac” insurance policies, increases in Medicare payroll taxes on higher-income individuals, and an excise tax on elective cosmetic surgery.

What Employers Can Expect
In the coming months, employers can expect to see a final health care bill melding the House bill, the Senate bill, and President Obama’s proposal. However, no matter what form the final legislation takes, it is safe to say that its financial impact on employers could be significant. We will keep you informed as we learn more about the final bill.

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