On Tuesday, September 29, the Senate Finance Committee will continue its mark up of Chairman Max Baucus’ (D-Mont.) America’s Healthy Future Act, after postponing some of the most contentious issues until this week. Meanwhile, the House leadership continues to meld and fine tune the Tri-Committee bill, with a possible vote on the resulting H.B. 3200 later this week. Employers will be impacted somewhat differently under the Senate and House legislative proposals, but under each will carry a large portion of the burden for implementing health reform.
The Baucus’ bill requires all U.S. citizens and legal residents to have health care coverage, enforced with a fixed dollar tax penalty based on income at a percentage of the federal poverty levels, with certain exemptions. The House Tri-Committee measure requires all individuals to have acceptable health coverage, with a penalty for non-compliance set at 2.5 percent of adjusted gross income, up to the cost of the average national premium for a basic health plan.
Employers are not required to offer health care coverage under the Baucus proposal, a feature that survived after a spirited attempt to amend the proposal by adding an employer mandate. However, employers with more than 50 full-time employees that do not offer coverage would pay a fee for each employee who receives a tax credit for health insurance through a health insurance exchange. The fee would be based on the amount of the tax credit, but would be capped at an amount equal to $400 times the total number of employees at the firm. All employer-sponsored health coverage would be required to cover prevention services and must limit out-of-pocket expenses to the amount allowed for Health Savings Accounts, an indexed amount that includes deductible and out of network charges of $5,800 for individual coverage and $11,600 for family coverage in 2009. Under the current proposal, there are no other minimum benefit requirements that are required of employer-sponsored coverage.
Under the House Tri-Committee bill, employers are required to provide coverage at established minimum benefit levels and contribute at least 72.5 percent of the cost for employee coverage and 65 percent of the cost for family coverage OR pay an amount equal to 8 percent of total payroll into an Exchange Trust Fund.
Premium subsidies are offered to small employers (currently, 25 or fewer employees with an average salary under $40,000) under both the Baucus bill and the Tri- Committee legislation. The Baucus bill gives premium credits if the small employer offers health care coverage, starting at 35 percent of the employer contribution or 50 percent of a benchmark amount. The Tri- Committee bill offers tax credits that equal 50 percent of the premium costs. The tax credits decrease as the firm size and earnings increase, to a maximum $80,000 annual salary. The Tri-Committee proposal adds a temporary reinsurance program for employer coverage of retirees between ages 55 and 64 for the purpose of minimizing employer group risk for retirees.
The Baucus bill also provides for an excise tax on “Cadillac” plans that would be imposed on the issuer of the plan. The Plan Administrator of self-insured employer programs or the insurer for fully-insured plans would be subject to the tax if the cost and benefits exceeded the established maximums. Flexible spending accounts would be limited to $2,000 yearly in contributions and could be used to pay only for items and services that are allowed as medical expense deductions under the federal income tax rules.
Finally, while both the Senate and House health reform measures require the coverage of various preventive services with no cost-sharing, a provision from the Senate HELP bill (the earlier–completed legislation from the Senate Health, Education, Labor and Pension Committee) has been offered as an amendment to the Baucus bill that would encourage employer wellness programs by increasing the allowable premium discount for employees enrolled in these programs from 20 percent to 30 percent.
As mark-ups of the House and Senate proposals continue, so does the debate on the effect of the potentially dramatic changes on the employer group health plan market. Many employers are reviewing the cost of their health care coverage and beginning consideration, subject to review of final legislation, of whether dropping coverage altogether and paying the resulting penalty would ultimately be a more economical choice than providing more expansive coverage and greater premium contributions for all employees.