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Employer-Related Changes in Democrats’ New Health Care Reform Compromise Bill

Yesterday, congressional Democrats released the Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872), a compromise bill designed to provide a package of “fixes” to the U.S. Senate’s original health care reform bill — the Patient Protection and Affordable Care Act (H.R. 3590). Similar to the original Senate bill, there are several provisions in the new reconciliation bill that would affect employers in many different ways.

Audio Conference: Health Care Reform Is Here: Impact and Answers for Employers offered April 22, May 6 and May 20

Employer Responsibility
Employers aren’t required to provide insurance to their employees under the legislation. However, employers with 50 or more full-time equivalent employees will have to pay an assessment ($2,000 for each full-time employee) to help offset the cost of health insurance if their employees are receiving help from the federal government to purchase insurance.

Changes to “Cadillac Tax”
The new legislation also amends the original Senate bill’s “Cadillac tax” provision. The original provision in the Senate’s bill 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 new bill 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;
  • exempt standalone dental and vision benefits from the tax; and
  • allow certain employers to make adjustments to their cost of coverage if they have higher health costs because of their employees’ age or gender.

Insurance Reforms
All existing health insurance plans would be subjected to several reforms soon after the reconciliation bill’s enactment. More specifically, the legislation would:

  • prohibit lifetime limits and rescissions;
  • restrict annual limits;
  • place limitations on excessive waiting periods; and
  • require certain plans to provide coverage for dependent children up to age 26.

Additionally, group health plans would face several new reforms in the next several years. For example, the legislation would prohibit preexisting condition exclusions and annual limits.

Other Changes
The new legislation would also:

  • delay the annual limitation on contributions to health flexible spending arrangements under cafeteria plans until 2013; and
  • delay the elimination of the deduction for expenses allocable to the Medicare Part D subsidy until 2013.

Future of the Legislation
The U.S. House of Representatives is expected to vote on the legislation as early as Sunday. The Senate would then be able to pass the reconciliation bill by a simple majority vote instead of the 60 votes needed to overcome a Republican filibuster. We will continue to keep you updated on its status.

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.