Final Senate Bill Summary 12/24

DECEMBER 24, 2009  

Conner Strong's Overview of Final U.S. Senate Healthcare Reform Bill

During a Christmas Eve voting session, the US Senate passed their version of Health Insurance Reform. The bill was passed on a strict party line vote without any Republicans voting in favor of the bill. The Senate's bill must now be merged with the bill passed last month by the House of Representatives in the conference committee. The conference committee includes leaders from both the Senate and House who now have the chore of melding together the two bills so that a single bill can be agreed upon by both chambers and sent to the President for signature. If ultimately enacted into law, this mammoth legislation would be the greatest health insurance overhaul since the passage of Medicare in 1965. According to current data, health care consumes nearly 17% of the gross domestic product (GDP) so the impact of this legislation will be significant and wide spread.

In sum, the Senate's bill is estimated to cost nearly $900 billion over ten years. It includes a provision to create state operated insurance exchanges that will allow consumers and small businesses to buy health insurance across state lines. The bill allegedly shall cover an additional 31 million eligible Americans. The details of the bill are still emerging but below is a high level synopsis of its main features, some of which have been previously reported by Conner Strong. The Conner Strong perspective of the bill is based on its potential impact on employer based plans with an eye towards how it will effect our health and welfare clients.

Major Highlights:    

• The Senate bill is financed through a host of new taxes, tax increases, new taxes on insurance companies and major reductions to funding of Medicare.
  
• Starting in 2011, there will be a new $2 billion annual fee/ federal tax levied on health insurance companies. This new tax cannot be built back into the cost of policies to consumers or group health plans. This amount will be increased to $4 billion in 2012, $7 billion in 2013, $9 billion for years 2014 through 2016 and $10 billion for years after 2016.
  
• There remains no "public option" or government run health plan. In its place, the government will oversee an insurance exchange that will offer deeply subsidized government funding to help Americans pay for premiums. The bill requires the federal government to contract with at least 2 multi-state qualified health plans (at least one of which will have to be a non-profit) that meet the benefit standards established by the HHS Secretary and the minimum requirements of the Federal Employee Health Benefits Plan (FEHBP). States could require additional benefits, but would have to pay the extra cost.
  
• By 2014, all Americans will be required to carry health insurance or face government penalties. Penalties for individuals are listed as $95 in 2014, $495 in 2015 and $750 in 2016, or up to 2% of income by 2016 capped at the national average bronze plan premium in the Exchanges. The penalty for families would be capped at $2,250 for the entire family. Then after 2016, the dollar amounts would increase by an annual cost of living adjustment.
  
• Starting immediately, insurance companies would be banned from applying pre-existing exclusions from policies for children. In 2014, the prohibition will begin applying to adults.
  
• Starting in 2013, Americans earning $200,000 or more will be charged with an additional Medicare payroll tax at 0.9% above the current rate. The tax would be imposed only on the employee portion of the Medicare tax, not on the employer portion.
  
• Insurance companies will be required to spend at least $0.80 cents of every premium dollar on claims.
  
• A new package of $12 billion in tax credits will be made available to help small businesses provide insurance to their employees.
  
• Medicaid will be significantly expanded to the poor and new subsidies shall be available for those that need help in buying insurance.
  
• A tax on cosmetic surgery has been replaced with a tax on tanning salons which may be as high as 10%. The proceeds are expected to help defray some of the cost of the new plan.
  
• Employers would be subject to what has been coined a "free rider" penalty, under which employers with at least 50 full-time employees would pay a penalty if a full-time employee receives a federal subsidy to purchase health insurance in the exchanges. The penalty would be assessed if the employer does not offer health coverage at all, if the employee is offered coverage that is considered "unaffordable," or the plan has an actuarial value of less than 60 percent.
  
• Employers will be required to issue "vouchers" equal to their plan contributions to" qualified employees" with incomes up to 400% of federal poverty ($43,000 for individual or $88,000 for a family of four) whose required employer plan contributions are between 8% and 9.8% of their total household incomes (indexed for general inflation after 2014). These workers may then use the voucher to purchase coverage through the health insurance "exchanges" being set up. This part of the law would take effect in 2014. Vouchers are not taxable to employers (deductible) or employees. These employees would also not be eligible for low-income tax credits.
  
• A new 40% excise tax would be imposed on the aggregate value of health coverage offered by employers if the actuarial value of the coverage exceeds a certain threshold. This has often been referred to as the "Cadillac plan" tax. There remains some ambiguity if this new tax shall apply to certain Union plans. Organized labor lobbied against this tax.
  
• Employers that offer health care coverage and make a contribution toward the cost of that coverage will be required to provide "free choice vouchers" to qualified employees for the purchase of qualified health plans through the exchanges.
  
• Employers will be required to report the annual cost of health care coverage received by their employees.
  
• Employers with more than 200 employees will have to automatically enroll new full-time employees in health care coverage, subject to any new waiting period authorized by federal law.
  
• Employers receiving the Medicare Part D Retiree Drug Subsidy will have to include the payment in income for tax purposes.
  
• Maximums on essential health care services will be prohibited by 2014. According to the bill, essential care includes ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse (including behavioral health treatments), prescription drugs, rehabilitative services, laboratory services, preventive and wellness services and chronic disease management, and pediatric services including oral and vision care. The inclusion of dental may be problematic for employers since "oral" is not well defined in the law and most dental plans have annual limits. Plans will be able to have an annual of lifetime maximums on non-essential care.
  
• The maximum allocation for FSAs will be adjusted for general inflation to the $2,500 limit, beginning in 2012.
  
• All employer plans will be required to implement internal appeals processes for coverage determinations and claims. Self-insured plans would have to use an external review process established or approved by the HHS Secretary. It is unclear when this provision will take effect.
  
• All plans will be prohibited from requiring prior authorization or increased cost-sharing for emergency services, whether provided by in-network or out-of-network providers.

The conference committee includes representation from both the US House of Representatives and the Senate. Their leaders will have to merge the House and Senate bills into a single bill that both chambers will then have to pass. There remains considerable differences in the House and Senate bills so the timing of that process remains unclear. Yet, according to statements by the Senate Majority and the Speaker of the House, they expect the process can be concluded quickly with an eye towards having a final bill on the President's desk in January.