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What Obama’s New Health Care Reform Proposal Means for Employers

This morning, President Barack Obama released a health care reform proposal that “bridges the gap between the House and Senate bills.” The President released his proposal in advance of the upcoming televised health care summit on Thursday, February 25, and White House officials have noted that the proposal will serve as the starting point for the bipartisan summit.

Changes to “Cadillac Tax”
There are several provisions in the proposal that would affect employers, including an amendment to the Senate bill’s “Cadillac tax” provision. The original provision in the Senate’s Patient Protection and Affordable Care Act (H.R. 3590) created a tax on employer-sponsored high-end “Cadillac” coverage. Under the original provision, the tax would have been 40 percent of the “excess benefit” of plans that exceed the thresholds of $8,500 for individual coverage and $23,000 for family coverage. The President’s proposal would:

  • change the effective date of the Senate provision from 2013 to 2018;
  • raise the original thresholds to $10,200 for individual coverage and $27,500 for family coverage;
  • make adjustments for firms that have higher health costs because of their employees’ age or gender; and
  • exempt dental and vision benefits from the tax.

Changes to Health Plans
The President also suggests making several changes to health plans. The proposal mentions the Senate bill’s “grandfather” policy, which allows individuals to keep their current coverage if they are satisfied with it. The proposal would add several consumer protections to such “grandfathered” plans and would require plans to change several things within months of legislation being enacted. More specifically, plans would have to:

  • offer coverage for adult dependents up to age 26;
  • eliminate provisions that would provide for rescissions of coverage;
  • add a stronger appeals process; and
  • require state insurance authorities to conduct annual rate reviews.

Beginning in 2014, the President’s proposal would also ban all annual and lifetime limits, prohibit preexisting condition exclusions, and ban discrimination in favor of highly compensated individuals. Additionally, in 2018, “grandfathered” plans would be required to cover proven preventive services without cost sharing.

Employer Responsibility
Similar to the Senate bill, the President’s proposal doesn’t require employers to provide health insurance to employees. However, the proposal would require employers with more than 50 employees to help offset the cost of health insurance if their employees are receiving help from the federal government to purchase insurance.

Other Issues
Among other things, the proposal would also:

  • offer small businesses tax credits to help them with the cost of providing health care coverage for their employees;
  • create a Health Insurance Rate Authority “to provide Federal assistance and oversight to States in conducting reviews of unreasonable rate increases and other unfair practices of insurance plans;”
  • prevent delays in access to generic drugs; and
  • close the Medicare prescription drug “donut hole” coverage gap.

Keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits Complete Compliance and with changes in federal employment laws in the Federal Employment Law Insider.