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March 22, 2010
Healthcare Overhaul: What It Means for Employers
The U.S. House of Representatives has voted 219-212 to approve healthcare reform legislation that would affect some employers in significant ways.

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The House decided to approve a version of the healthcare overhaul package that the Senate had already approved in late 2009, adding some important changes. The bulk of the legislation will go to President Obama's desk, where he intends to sign it Tuesday. Meanwhile, the House's changes will go to the Senate, where proponents only need a simple majority on those changes to send them to Obama.

If the Senate gives its OK to the changes that the House made, the legislation would affect employers in the following ways.

Employer Responsibilities. The legislation would require an employer with more than 50 full-time employees to pay $2,000 per employee if the employer fails to offer health coverage and has at least one full-time employee receiving a premium assistance tax credit or cost-sharing reduction created by the legislation. The first 30 employees of the employer would be excluded from the calculation of the penalty. Therefore, an employer with 100 employees that fails to offer insurance would pay a penalty of $140,000.

Dependent Coverage. The legislation would also require that health plans that provide dependent coverage to provide it up to age 26. Under the modified legislation, this provision would apply to existing health plans in addition to new plans beginning six months after enactment. For coverage of these non-dependent children prior to 2014, the requirement on group health plans is limited to those adult children without an employer offer of coverage.

Breaks for Breastfeeding. The legislation 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. Beginning in 2018, there would be an excise tax on any “excess benefit” of employer-sponsored coverage. The legislation defines “excess benefit” as one that exceeds $10,200 for individual coverage and $27,500 for family coverage. The thresholds would be indexed to inflation.

Automatic Enrollment. The legislation would require that employers with more than 200 employees automatically enroll full-time employees in health coverage. The legislation would allow employees to opt-out of the coverage after automatic enrollment.

Several other provisions would affect employers as well, including the creation of state-based exchanges for purchasing health plans and incentives for small employers to offer healthcare coverage.

Before the House made it changes to the Senate bill, the Congressional Budget Office estimated that the 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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