Thursday, November 19, 2009

Minimal Employer Penalties For Not Offering Health Coverage In Senate Health Reform Bill

Now that Sens. Harry Reid (Nev.), Max Baucus (Mont.), Christopher Dodd (Conn.), and Tom Harkin (Iowa) have introduced the Patient Protection and Affordable Care Act, (an amendment introduced as a substitute to an unrelated H.R. 3590), sixty Senators will have to vote to bring H.R. 3590 to the floor of the Senate to be debated and amended. If this happens, maybe as soon as tomorrow, debate is expected to continue at least until the Christmas recess in the Senate.

So what’s in H.R. 3590?

The bill combines elements of earlier bills that came from the Senate Finance Committee and Health, Education, Labor, and Pensions Committee.

The legislation would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance “exchanges” through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare’s payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the federal tax code, Medicare, Medicaid, and other programs.

The options available in the insurance exchanges would include private health insurance plans and could also include a public plan that would be administered by the Secretary of Health and Human Services (HHS). The public plan would negotiate payment rates with all providers and suppliers of health care goods and services; providers would not be required to participate in the public plan in order to participate in Medicare. The public plan would have to charge premiums that covered its costs, including the costs of paying back start-up funding that the government would provide. State governments could elect not to make the public plan available in their state. The legislation also would provide start-up funds to encourage the creation of cooperative insurance plans (co-ops) that could be offered through the exchanges; existing insurers could not be approved as co-ops.

Provisions Affecting Employer Plans

Employer-sponsored plans would be affected by H.R. 3590 in a variety of ways including these:

Immediate Actions to Expand Coverage. A high-risk pool would established until 2014 to provide coverage for those denied benefits because of preexisting conditions; a temporary reinsurance program would provide reimbursement to participating employment-based plans for a portion of the cost of providing health insurance coverage to early retirees (those between 55 and 65); the Health Insurance Portability and Accountability Act would be amended to improve the electronic transmission of claims information;

Other Improvements In Coverage. All group health plans would be prohibited from establishing lifetime limits or unreasonable annual limits on health coverage; plans would be required to provide certain wellness benefits with no cost sharing requirements; dependent coverage would be extended to unmarried dependent children until age 26; a summary of benefits and coverage explanation that accurately describes benefits and coverage would be standardized to fit within four pages and would include all the essential benefits required under the legislation; plans would be prohibited from discriminating in eligibility for coverage on the basis of salary; plans would be subject to new data reporting requirements on the quality of care; plans would be required to provide rebates when premium revenues for non-claims costs exceed 20%. In general, these provisions would take effect six months after enactment.

Market Reforms. For plan years beginning on or after Jan. 1, 2014, the following would be required: elimination of preexisting condition exclusions; premium rating allowed by individual or family coverage, geographic area, age (limited to a 3 to 1 ratio), and tobacco use (limited to a 1.5 to 1 ratio); guaranteed issue and renewability; a blanket prohibition against discrimination because of health status; coverage under an essential benefits package defined by the law; and elimination of waiting periods that exceed 90 days. An exemption to these rules would be provided to plans in existence on the date of enactment (grandfathered plans).

Employer Credits And Payments. For employers with 25 or fewer employees, a small employer health insurance credit up to 50% of nonelective employer contributions would be available. An employer with more than 200 employees would be required to offer automatic enrollment in any of its group health plans. All employers would be required to inform employees of the National Insurance Exchange and that employees might be eligible for the Exchange if the employer’s share of premium payments in the employer sponsored plan is less than 60%. Employers with more than 50 employees which do not offer health care coverage could be subject to fines of up to $750 per employee per year, for those employees who obtain subsidized coverage through an exchange; employers with waiting periods of more 60 days could be fined $600 per employee. These employers also would be required to submit a report to the Secretary of Health and Human Services detailing employee coverage.

Other Provisions. Full-time employees who were offered coverage from their employer would not be eligible to obtain subsidies via the exchanges. However, an exception to that “firewall” would be allowed for workers who had to pay more than a specified percentage of their income for their employer’s insurance—9.8% in 2014, indexed over time—in which case the employer would be penalized. Beginning in 2013, insurance policies with relatively high total premiums would be subject to a 40% excise tax on the amount by which the premiums exceeded a specified threshold. That threshold would be set initially at $8,500 for single policies and $23,000 for family policies (with certain exceptions); after 2013, those amounts would be indexed to overall inflation plus 1 percentage point.


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