Following a year-long contentious debate, Congress finally passed the President’s top domestic agenda item: Health Reform.
Sunday, the House of Representatives passed the Senate version of the Health Reform Bill by a slim margin (three votes more than required) and no Republican support. The Bill contains broad reforms that make numerous significant changes to the ways in which healthcare is accessed, delivered and financed. Some of the noteworthy changes (and effective dates) for employers to consider are the following:
- Employers with 200 or more employees that sponsor a health plan must automatically enroll all employees in the employer-sponsored plan. Employees may opt-out of the employer plan if they demonstrate they have coverage from another source. (January 1, 2014)
- Employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be assessed a fee equal to the lesser of $3,000 for each employee receiving a premium tax credit or $750 for each full-time employee. (January 1, 2014) (Note this provision may be modified in the reconciliation bill discussed below.)
- Employers that offer coverage to employees must provide a “free choice voucher” to employees with incomes less than 400% of the federal poverty level (currently the federal poverty level is $10,830 for an individual, and $22,050 for a family of four) if that employee’s share of the premium exceeds 8% but is less than 9.8% of the employee’s income and the employee enrolls in a health plan through the newly created Exchange. The amount of the free choice voucher is the amount the employer would have paid for the employee under the employer-sponsored plan. Employer’s providing free choice vouchers are not subject to the assessment for employees that receive premium credits for coverage purchased through the Exchange. (January 1, 2014)
- Employers with 25 or fewer employees and average annual wages of less than $50,000 per employee will be eligible for a tax credit. The full amount of the tax credit is phased in over several years, and the tax credit phases out as firm size and average wages increase. (January 1, 2010)
- Creates a temporary reinsurance program for employers that provide health coverage to retirees (55-64) not eligible for Medicare. The reinsurance program provides for payment of claims at 80% of eligible expenses incurred between $15,000 and $90,000. (June 21, 2010 through January 1, 2014)
- Over-the-counter drugs will no longer qualify for reimbursement under a health reimbursement account or health flexible spending account. (January 1, 2011)
- The tax on distributions from health savings accounts that are not used for qualified medical expenses increases to 20%. (January 1, 2011)
Contributions to health flexible spending accounts will be limited to $2,500 (subject to certain adjustments). (January 1, 2011)
Increases the Medicare Part A payroll tax to 2.35% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing joint returns. (January 1, 2013)
Tax deduction for employers who receive Medicare Part D drug subsidy payments is eliminated. (January 1, 2013)
The House of Representatives also passed a bill which includes a number of proposed amendments to the Health Reform Bill it approved on Sunday. Over the coming days, those amendments will be considered in the Senate through a process known as reconciliation, which allows bills to be approved based upon a simple majority vote (51) rather than the usual 60 vote super majority required in the Senate. The reconciliation process is likely to generate considerable controversy and debate and should be closely followed for any further modifications to the recently approved Health Reform Bill.