Happy New Year! As everyone (including Congress) gets back to work and kicks off 2010, we thought it might be an opportune time to review one of the primary items of unfinished business from 2009 -- Health Care Reform, with which Baker Hostetler's legislative team has been actively involved for various clients of the firm. In this alert we summarize the status of the Senate and House healthcare reform bills, and provide a side-by-side comparison of the major tax provisions of the competing versions of the proposed legislation.
On December 24, 2009, the Senate passed its health care reform bill, the Patient Protection and Affordable Care Act (H.R. 3590) by a vote of 60-39. More than a month earlier on November 7, 2009, the House passed its version, The Affordable Health Care for America Act of 2009 (H.R. 3962), by a similarly narrow margin of 220-215. Though similar in general purpose and scope, the Acts differ in many significant respects. The goal now is for the House and Senate to reconcile those differences so that a final merged bill can be sent to the President. Though the President has set no deadline for a final bill as of yet, Democratic leaders have said that they would like to have it finalized before the State of Union address, typically given in late January. Although differences in bills are typically worked out via conference committee, it appears that top Democrats may attempt to bypass such a committee in this case as a way to avoid potential delays by Senate Republicans. As a result, it is likely that differences may be informally reconciled here by simply amending one of the bills (likely the Senate's) to account for all agreed-upon changes and then have that bill "re-approved."
With respect to the tax-related provisions of both Acts, the most significant difference is the key revenue raiser. While the House bill plans to raise over $460 billion over the next 10 years by adding a 5.4% surcharge on the modified adjusted gross income ("MAGI") above $1 million for married or surviving spouse taxpayers (MAGI above $500,000 for all others), the Senate bill uses a 40% excise tax on "Cadillac" insurance plans and a 0.9% Medicare tax increase on wages over $200,000 ($250,000 for families) to raise approximately $235 billion in the aggregate over the next 10 years.
Although we expect the final legislation to more closely resemble the Senate version, the core tax provisions in both bills are very much in play and will be a central issue for House-Senate negotiations. As a result, we thought it was important to provide you with a summary of the tax provisions as they currently read in the competing bills so that you may begin to think of how they might, if passed, affect you and/or your business.