Employers see bill as less threatening than House plan

Jerry Geisel

WASHINGTON—Sweeping health care reform legislation is awaiting its toughest test: approval by the U.S. Senate.

Senate Majority Leader Harry Reid, D-Nev., last week completed melding different reform bills passed earlier by the Finance and Health, Education and Labor and Pensions Committee into one measure, moving that test one step closer.

“We have traveled really a long ways to where we are and tonight begins the last leg of this journey that we been on now for some time,” Sen. Reid said at a news conference last week when he unveiled the measure.

While the Senate was expected to vote during the weekend whether to begin consideration of the legislation, there was uncertainty late last week whether Sen. Reid had the 60 votes needed to start the debate. Should he fall short of 60 votes, observers said Sen. Reid likely would make changes to expand support and then bring the measure for a vote on whether to proceed.

The most critical vote—one not expected until after Thanksgiving—will be to limit debate and end an expected Republican filibuster. Supporters also need 60 votes to stop debate and move the legislation to a final vote on the Senate floor.

With House passage of reform legislation this month and Senate action ramping up, “health care reform has moved further than ever before,” said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington. “We are now in the home stretch.”

Observers say a handful of moderate Democrats will determine the fate of the Senate legislation.

At this point, though, business groups say the Senate plan is preferable to the House-passed bill. In particular, they applaud Sen. Reid for not including a provision in the House bill that would cripple the ability of employers with retiree health care plans from cutting benefits and another that would require employers to extend COBRA continuation coverage years longer than under current law.

“This is definitely an improvement over the House bill,” said Gretchen Young, vp-health policy at the ERISA Industry Committee in Washington.

“In general, employers felt the House bill was unacceptable,” Mr. McArdle said. “The Senate (bill) may be preferable, but where an individual employer will stand will depend heavily on its facts and circumstances.”

In fact, the National Assn. of Manufacturers last week said it opposes the Senate bill. The Senate bill “would do real damage to employer-provided health care,” John Engler, NAM’s president and chief executive officer, said in a statement.

For example, the Senate bill would hammer employers with high health care costs by imposing a 40% excise tax on the portion of health insurance premiums that exceed $8,500 for single coverage and $23,000 for family coverage. The tax—to be paid by insurers and third-party administrators but likely passed on to employers—would start in 2013. The cost thresholds would be somewhat higher for plans covering employees in high-risk industries such as construction and mining or early retirees. From 2014 on, the maximum nontaxed premiums would be linked to the Consumer Price Index, plus one percentage point.

Such a tax would be inequitable, said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington. The tax could be triggered, not because of the richness of an employer’s health care benefits, but because of demographics, such as a company that has a high proportion of older employees with significant health care needs, Ms. Sheaks said.

To avoid the tax, employers might scale back coverage, hurting employees. “You are between a rock and a hard place,” she said.

Employers in high-turnover industries, such as retail and fast-food, that typically impose significant waiting periods for employees to enroll in their health care plans, also would face a new tax under the Senate bill.

Under the measure, employers with waiting periods between 31 and 60 days would pay a penalty of $400 per year for each full-time employee affected by the waiting period. For waiting periods between 61 and 90 days, the penalty would be $600. Waiting periods longer than 90 days would be prohibited.

In addition, employers with low-wage workforces and that require employees to pay a significant portion of the premium would face another new penalty. It would affect employers whose workers pay more than 9.8% of their income for employer-provided coverage and those who receive premium subsidies through new state health insurance exchanges.

The annual penalty would be $3,000 for each employee receiving subsidized coverage, or $750 for every employee in the company, whichever is less.

To avoid that penalty, one strategy employers could use would be to reduce premiums for lower-paid employees, Mr. McArdle said.

Like the House bill, the Senate plan would place a $2,500 cap on the maximum pretax contributions employees could make to health care flexible spending accounts starting in 2011.

In a significant departure from the House, though, the Senate plan would freeze the cap; the House bill would link the $2,500 cap to future index increases. Washington observers say, though, attempts will be made on the Senate floor to liberalize the FSA cap.

The heart of the House and Senate bills is identical: providing health insurance premiums to the lower-income uninsured and moving the nation closer to universal coverage.

That could benefit employers because of an expected reduction in the volume of uncompensated care, a cost that providers, where possible, now shift to insured patients.

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This entry was posted by Adam V. Russo on Wednesday, November 25th, 2009 at 2:07 pm and is filed under Health Care Legislation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.