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January 21, 2010
Healthcare Reform: What Now?

While the prospects of a healthcare overhaul are less certain now that Massachusetts elected a Republican to the Senate, Democrats still have options. If they are successful, the changes would have a significant effect on employers, even those that already offer healthcare coverage to employees.

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On Tuesday, Republican Scott Brown won the special election for the late Ted Kennedy's seat in the Senate. During the campaign, Brown said he would vote against the proposed healthcare overhaul currently in Congress. However, under some scenarios, the Democrats wouldn't need his vote.

What Are Democrats' Options?

Here are some of the options Democrats have.

  • Pass the Senate-approved version. The House and Senate have passed different versions of healthcare-reform legislation. One option for Democrats is for the House to pass the Senate-approved version of the overhaul. In this scenario, the legislation would go to President Obama's desk without going back to the Senate. However, some House Democrats have already voiced resistance to following through with this approach.
  • Push a compromise between House and Senate versions. Another option is for Democrats try to pass a compromise between the House and Senate versions of the legislation. This compromise legislation would have to be approved by the House and Senate, where Democrats need at least 60 votes (supermajority) to end debate and force a vote. With the election of Brown, Democrats have 59 votes. The least likely scenario is for Democrats to try to push through a current version of the healthcare overhaul before Brown takes the Senate seat. A Democrat has been filling the seat since Kennedy's death. However, President Obama already came out against such a strategy.
  • Introduce a scaled-back version. A third option is for Democrats to propose new legislation that would at least get some Republicans on board.
  • Retool existing legislation to avoid supermajority rule. A fourth option is for Democrats to strip the legislation of the provisions that require a supermajority's approval in the Senate. In this approach, Democrats would be able to pass the scaled-back legislation with a simple majority.

What Would an Overhaul Mean for Employers?

Both the House and Senate versions of the overhaul would have a substantial effect on employers. Here is a list of some of those provisions that would affect employers.

Employer mandate to offer health insurance. Both the House and Senate bills would, in effect, require employers to offer health insurance or pay a penalty to the federal government, but they go about it in different ways.

For example, the House-approved legislation (the Affordable Health Care for America Act) would require employers with more than $500,000 in revenue to pay a fee (8 percent of wages) into an insurance exchange if they don't offer a “Qualified Health Benefits Plan,” which is defined as one that offers a specific range of services and has an out-of-pocket maximum of $5,000 or less for individuals and $10,000 or less for families. The legislation would require that employers pay 72.5 percent of the cost the plan for individuals and 65 percent of the cost for families. The House legislation would prohibit annual and lifetime limits on coverage. Obviously, this legislation would have a significant effect on employers who offer no health insurance, but it would also affect employers that offer health coverage that doesn't meet the threshold to be considered a “Qualified Health Benefits Plan.” The House legislation has an additional requirement for employers to give certain employees a voucher. An employer would be required to provide a voucher to employees if they:

  • Elect to purchase insurance through the exchange,
  • Have incomes less than 400 percent of the federal poverty level, and
  • Would have had to pay between 8 percent and 9.8 percent of their income for their share of the premium for their employer's plan.

The Senate bill, the Patient Protection and Affordable Care Act (HR 3590), would require an employer with more than 50 full-time employees to pay $750 per employee if the employer fails to offer health coverage and has at least one full-time employee receiving a premium assistance tax credit created by the legislation. The bill would also eventually prohibit lifetime and annual limits on coverage.

Automatic enrollment. Both versions of the healthcare legislation include provisions requiring automatic enrollment in an employer's health plan. The House-approved legislation would require that if an employer offers health coverage, the employer must automatically enroll employees in a plan with the lowest employee premium. The Senate-approved version would require that employers with more than 200 employees automatically enroll full-time employees in health coverage. Under the Senate version, employers would also have to pay a penalty if they require new employees to wait 30 or more days before enrolling in the employer's health plan. Both versions allow employees to opt-out of the coverage after automatic enrollment.

Extension of dependent coverage. Health plans would be required to provide dependent coverage for a longer period (up to age 26 under the Senate bill or up to age 27 under the House bill).

FLSA change for breastfeeding breaks. The Senate bill would amend the Fair Labor Standards Act to require that employers provide unpaid breaks for employees to express breast milk. The legislation would also require that employers provide a private location for employees to have these breaks.

Tax on “Cadillac” plans/tax for highly paid individuals . The Senate bill would create an excise tax on any “excess benefit” of employer-sponsored coverage. The legislation defines “excess benefit” as one that exceeds $8,500 for individual coverage and $23,000 for family coverage. While employees would be the ones who pay the tax, employers that rely on these plans to recruit and retain workers could be affected. The House bill would create a surtax for taxpayers with adjusted gross incomes of $500,000 or more ($1 million if filing a joint return).

Would Premiums for Employer-Based Coverage Increase?

The Congressional Budget Office has said that the Senate-approved legislation would have a relatively small effect on premiums for employer-based healthcare insurance. The CBO compared premiums that employers would pay under current law in the year 2016 and those they would pay in 2016 if the Senate-approved healthcare reform legislation becomes law. For employers with more than 50 employees, premiums could be as much as 3 percent lower under the Senate legislation than they would be under current law in 2016, according to the CBO's projections.


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