Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Reform moves closer, details remain unclear

Reprints

WASHINGTON—House and Senate negotiators are about to start hammering out a final health care reform bill, a process some experts say they expect to be completed sooner rather than later.

While the House and Senate health care reform bills present problems for employers, the measure the Senate approved Dec. 24 appears more palatable, observers say. Both measures have to be reconciled into one final bill, which analysts say is likely to pass.

Before the Senate bill came to a vote, Democratic leaders agreed to drop a provision that would have created a public option, or government-run health insurance plan, and a proposal to expand Medicare to allow individuals as young as age 55 to purchase coverage through Medicare. These changes allowed Democrats to pick up support needed for the measure to pass. The bill approved in November by the House, however, includes a public option.

The Senate bill also was revised in other ways. The original version imposed a $2,500 cap on employees' contributions to flexible spending accounts starting in 2011. The revised bill retains the cap, but it will rise to match Consumer Price Index increases for urban areas, starting in 2012.

Another Senate bill revision will benefit employers in high-turnover industries that impose significant waiting periods before new employees can enroll in corporate health plans. Under the previous version, employers with waiting periods between 31 and 90 days would have paid a penalty. Under the revised bill, an employer could have up to a 60-day waiting period without being penalized for not offering coverage to new employees. After that, the penalty would be $600 per employee. The Senate bill would prohibit waiting periods exceeding 90 days.

Other key provisions in the revised Senate bill are similar to the previous measure proposed by Majority Leader Harry Reid, D-Nev. For example, the bill retains a 40% excise tax on health insurance premiums that exceed $8,500 for individual coverage and $23,000 for family coverage, starting in 2013. The cost threshold would be slightly higher for plans covering early retirees and employees in certain high-risk industries. The House bill contains no such provision.

The House bill, however, does have a provision that would require employers to extend COBRA health care continuation coverage years longer than they anticipated. The House bill also would remove employers' ability to design health care plans and the government would tell them what benefits they must offer and the cost-sharing limitations they can impose. That loss of control could occur through a provision that would establish a new commission charged with developing recommendations on benefits to be covered and health plan enrollee cost-sharing that could be required. The Department of Health and Human Services secretary would have the authority to adopt and impose commission recommendations.

The House measure also would bar employers offering retiree health care plans from reducing benefits unless they make comparable reductions for active employees. Such a requirement could force employers to maintain retiree health care plan designs they need to change or lead them to eliminate retiree health benefits before such a requirement would kick in.

While employers have much to dislike in both bills, the House bill is more objectionable, experts say.

“Employers will have varied opinions, but in general there is much greater dislike for the House bill,” said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington. “There are provisions in the Senate bill that employers are concerned about and they will try to work on some of these issues during the House-Senate negotiations.”

But Senate bill's excise tax is particularly troublesome, observers say.

The excise tax on “Cadillac” benefit plans will have “a much larger impact on employers than what the administration and the Senate are acknowledging,” said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington. Employers with older workforces would be affected most by this tax, as would some union benefit plans, she said.

“Removing this is supported both by employer groups and the unions,” Ms. Sheaks said. “It's more likely than not it will stay in; we're hoping to have the threshold amounts increased.”

“All along, we've been concerned about the tax on "Cadillac' plans because we're concerned it's going to hit certain plans that don't necessarily qualify as "Cadillac,'” said Dena Battle, director-tax policy for the National Assn. of Manufacturers in Washington. Companies with older workforces, a lot of retirees covered by health care plans and companies that have small risk pools could be affected, she said. “We think they're going to get roped into this tax and a 40% excise tax is a pretty egregious amount, and they'll have no choice but to scale back benefits.”

Gretchen Young, vp-health policy for the ERISA Industry Committee in Washington, described the excise tax as “incredibly objectionable” and an administratively cumbersome and expensive way to raise money. “You're going to be taxing people who are older and sicker.”

But she and others cited numerous problems with the House bill as well.

“The House basically allows people to use COBRA until the changes are up and running,” said Ms. Young, referring to the House bill's call to establish state-based health insurance exchanges beginning in 2013. She said employers already have a difficult time with COBRA because they're allowed to charge 102% of the premium, “and that really doesn't begin to cover the costs.” In addition, beneficiaries choosing COBRA coverage tend to be a more expensive pool of people.

Ms. Sheaks said another critical issue is the House bill's call for government-determined mandated benefits. If a commission recommends offering additional benefits, “that's where the slippery slope begins.”

Ms. Young said the House bill's prohibition on employers reducing retirees' benefits unless they make corresponding reductions in active employees' benefits also is a “huge issue.”

“We're pretty disappointed with both bills,” said NAM's Ms. Battle.

Ms. Sheaks said “there's going to be a lot of haggling on how to pay for this.” Nevertheless, “I'd be shocked if they can't come to an agreement,” she said. “I think the biggest issue for employers is going to be the excise tax.”

“There definitely is momentum already for them to get together on a relatively fast track and reach an agreement that can win sufficient votes,” said Hewitt's Mr. McArdle. “For that to happen, it will have to look more like the Senate bill,” he said, adding, “I don't think it will be a long, drawn-out conference. I still think this is on the fast track.”