Now that the House has passed a health care reform bill and the Senate is considering its own version, we are beginning to get a better picture about what might be presented to President Obama.
The Affordable Health Care for America Act (H.R. 3962) is estimated by its supporters to reduce federal budget deficits by $109 billion over the 2010-2019 period. The bill was passed on November 7 with the support of only one Republican in the 220-215 vote. The Senate version of the bill entitled the Patient Protection and Affordable Care Act (H.R. 3590), is estimated by its supporters to reduce the federal budget deficits by $130 billion over a ten year period. The text of the bill takes up more than 2,000 pages.
What’s In The Sausage? Bismarck famously said that most people really don’t want to see the law-making process, just like they don’t really want to see what goes into sausage. But health care reform is too important to just wait and see how it comes out. Following are some of the key provisions addressed in the two bills and how the bills differ.
Play or pay? The House bill would require employers with annual payrolls of $500,000 or more to offer coverage to employees or to pay a new federal tax of up to 8% of payroll. The Senate bill would impose a penalty of $750 per full time worker on employers if (1) they have 50 or more full time workers; (2) they do not offer health benefits; and (3) any of their workers obtain subsidized coverage through the new health insurance exchange. Although small employers (with fewer than 50 employees) escape the obligation to provide health care in the Senate bill, everyone else has a new mandate.
What choice do we have? Both the House and the Senate bills provide for an insurance exchange program that would allow individuals who do not have health benefits through their employer or a public program to obtain benefits. The insurance exchange programs differ slightly, but both allow small employers to participate in the exchange program. The House version of the insurance exchange program is open to employers with 25 or fewer employees in the first year of implementation, employers with 50 or fewer employees in the second year, and employers with 100 or fewer employees in the third year. The exchange program in the Senate bill is open to employers with 50 or fewer employers, but permits states to allow employers with up to 100 workers to participate. Both bills provide that, in the future, the insurance exchange programs may be expanded to include larger employers. Get in line early.
A little help? Both bills provide that employers with 25 or fewer employers and average wages of $40,000 or less per employee would qualify for a tax credit. A full tax credit is 50% of the premium cost. The amount of the credit phases out as employer size and average wages increase. The House bill caps the credit for employees earning more than $80,000 per year. Both bills also provide that the government will subsidize 80% of a retiree’s medical claims in excess of $15,000. The House bill permits this subsidy from 2013 to 2015 while the Senate bill only includes this provision through 2013. Both bills cap this subsidy at $90,000 and require the employer’s plan to pay the remaining amount.
How will we pay for all this? The Senate bill imposes a 40% excise tax on “Cadillac” health plans but the House bill does not. Specifically, this tax will apply to sponsored group health plans that have annual premiums in excess of $8,500 for individual coverage and $23,000 for a family. Employers who provide high cost health plans will be significantly impacted by this provision. No good deed goes unpunished.
Is It Done Yet? Health care legislation still has a long way to go before reaching President Obama’s desk, and it’s impossible to know what it will look like by the end of the process. The Senate bill has yet to be chopped up in debate, and then comes the grinding and combining with the House bill. Even though the process may be hard to look at, all of us need to pay close attention on this one. We’ll be dining on it for years to come.