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New Details of Senate Health Reform Bill Emerge; Employers Must Pay Some Insurance Costs or Face ‘Annual Fee’

July 2, 2009
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Democratic senators added key details to a health reform bill, saying employers would have to pay 60 percent of the cost of insurance for employees or face a $750 “annual fee” per full time employee.

The latest draft from the Senate Committee on Health, Education, Labor and Pensions also prohibits employees who can afford their employer’s health insurance from purchasing a plan through the government-regulated health insurance exchange, which would include an option run by the federal government.

A premium that costs an employee more than 12.5 percent of his or her adjusted gross income would be considered unaffordable, according to the new draft of the bill, the Affordable Health Choices for All Americans Act. These employees would be allowed to drop employer coverage to seek cheaper alternatives elsewhere.

“We want people to retain their employer-based health care program and not have a great migration out of that,” said Sen. Christopher Dodd, D-Connecticut, who has guided the legislation’s evolution in the absence of Sen. Edward Kennedy, D-Massachusetts, who is suffering from brain cancer.

A majority of employees already work for employers that pay 50 percent or more of their health care premium costs, according to the Kaiser Family Foundation’s 2008 survey on health benefits. In 2008, the average covered worker paid 16 percent of the premium and families paid 27 percent, though those numbers vary sharply according to an employer’s size, employee salary and whether an employee is part of a labor union.

The latest draft from the Senate health committee does not specify what minimum employer coverage must look like, except that mini-medical plans would not qualify nor would plans with high out-of-pocket maximums. The out-of-pocket limit would be defined by Section 223 of the Internal Revenue Code used to determine what qualifies as a high-deductible plan.

That code specifies that, for 2010, a health plan’s out-of-pocket maximums (including deductibles, co-payments and other costs other than premiums) could not exceed of $5,950 for individuals or $11,900 for families.

The secretary of the Department of Health and Human Services would add more details to the kinds of health coverage that meet the proposed employer mandate.

Small businesses with fewer than 25 employees would be exempt from the employer requirement. They would be eligible for a subsidy to provide coverage to employees.

Dodd said the reform bill, combined with requirements in a draft developed by the Senate Finance Committee, would insure 97 percent of legal residents in the U.S. by 2019. The health committee bill alone, however, would reduce the uninsured population to 34 million people by 2019, down from the current 46 million.

The Congressional Budget Office has said the health committee bill would cost $611.4 billion over 10 years, though the total cost of health care reform would be more than that. Last week, Senate Finance Committee Chairman Max Baucus, D-Montana, said his committee’s bill would cost around $1 trillion over 10 years. It remains unclear what the total cost estimate in the Senate bills would be.

The House and Senate finance committees have drafted their own versions of health care legislation.

The House’s version is more onerous for businesses. It would require employers to pay 72.5 percent of the premium cost for full-time employees and 65 percent for a family policy while meeting minimum coverage standards. Employers that do not offer health insurance would pay a tax equal to 8 percent of its payroll costs that would help fund the national health insurance exchange.

The Senate Finance Committee has offered fewer details but is considering a “free rider” provision instead of an employer mandate that would target only employers whose workers obtain health coverage with the help of public subsidies or from Medicaid. That committee is also likely to specify whether the value of employees’ health benefits would be taxed—a proposal seen as key to paying for health care reform without adding to the budget deficit.

The public plan option would compete alongside private plans in a health insurance exchange regulated by the federal government and would be priced according to each market. Reimbursement rates would not exceed those paid by private plans, though they could be lower.

Employer groups such as the U.S. Chamber of Commerce, the American Benefits Council and the National Retail Federation have strongly opposed an employer mandate and a public plan option.

On Tuesday, June 30, however, Wal-Mart publicly declared its support for an employer mandate. In a letter to President Barack Obama that was co-signed by the president of the Service Employees International Union, the retailer said: “Not every business can make the same contribution, but everyone must make some contribution.”

—Jeremy Smerd

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