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How the Health Care Reform Measures Compare

December 29, 2009
Having passed separate reform legislation at the end of 2009, the House and the Senate must now reconcile their differences and craft a final bill on which the two chambers will vote. Democrats hope to pass a bill and have it ready to be signed into law by President Barack Obama by the end of the first quarter.

The coming weeks are likely to feature heated arguments over which of the elements in each bill should be included in a final version. Expect to hear a lot of talk about whether to include the House’s public plan option or whether to expand Medicaid eligibility.

Parsing the nuances between the bills can be a full-time job. To help employers understand what is at stake for them in each bill, Workforce Management (with help from the Kaiser Family Foundation) has compiled a side-by-side comparison of the provisions in each bill that are likely to affect employers. A complete version of the differences between the two bills is available through the Kaiser Family Foundation here.

Both the House and Senate bills expand coverage by requiring most U.S. citizens and legal residents to have health insurance or pay a penalty. Individuals and families that make less than 400 percent of the poverty level will have access to tax credits to defray the cost of premiums and cost-sharing. (In 2009, the federal poverty level was $18,310 for a family of three.)

Individuals and small businesses—and large businesses in 2017—will be allowed to purchase insurance on newly created health insurance exchanges.

Here is how each bill will affect employers in these areas:

• Employer requirements

• Subsidies for employers

• New taxes on employers

• Other exemptions and subsidies

Employer requirements

 Senate Bill: Patient Protection and Affordable Care Act (H.R. 3590, passed December 24, 2009)House Bill: Affordable Health Care for America Act
(H.R. 3962, passed November 7, 2009)
Employers face
penalties if:
At least one employee uses government tax credits to purchase health insurance. An employer offers health benefits that do not meet minimum requirements.
Employer minimum benefit requirements:Employer health plan must pay at least 60 percent of total actuarial value. The bill limits annual cost sharing to the 2010 health savings account out-of-pocket maximums of $5,950 per individual and $11,900 per family.

Premiums cannot exceed 9.8 percent of income.

If these minimums are not met, employees who make less than 400 percent of the federal poverty level are eligible for tax credits to purchase health insurance through an insurance exchange, resulting in fines against employer.

Employers must provide vouchers to employees who make less than 400 percent of the federal poverty level and whose premium exceeds 8 percent of income but is less than 9.8 percent. Vouchers are equal to what the employer would have paid to provide coverage to the employee under the employer’s plan. Vouchers are to be used to purchase insurance on the exchange. Employers are not penalized, though, if employees who receive vouchers also receive tax credits to purchase insurance.
Health plans offered to full-time employees must pay at least 70 percent of total actuarial value. The bill limits cost sharing to $5,000 for individuals and $10,000 for families.

Employers must contribute at least 72.5 percent of the premium cost for individual coverage and 65 percent of the premium cost for family plans.
The penalties: $750 for every full-time employee, or $3,000 for every full-time employee who receives a tax credit to purchase insurance, whichever is less.

Employers that impose waiting periods before an employee can enroll in health coverage will pay $400 for every full-time employee in a 30- to 60-day waiting period; $600 for any employee in a 60- to 90-day waiting period.
Employers whose benefits do not meet the minimum standards face fines of up to 8 percent of payroll, with the following exceptions:

• Annual payroll less than $500,000: exempt
• Annual payroll between $500,000 and $585,000: 2 percent of payroll
• Annual payroll between $585,000 and $670,000: 4 percent of payroll
• Annual payroll between $670,000 and $750,000: 6 percent of payroll
Automatic enrollment:Employers with 200 or more workers must automatically enroll eligible employees into health plan. Employees may opt out. Employers that offer coverage must automatically enroll employees into health plan. Employees may opt out.

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Subsidies for employers

 Senate Bill: Patient Protection and Affordable Care Act (H.R. 3590, passed December 24, 2009)House Bill: Affordable Health Care for America Act
(H.R. 3962, passed November 7, 2009)
Premium subsidies for small employers:Small employers with no more than 25 full-time employees or average annual wages of $50,000 or less:

• for 2010 to 2013: provide a tax credit up to 35 percent of employer’s contribution to employee’s premium if employer covers half of the total premium cost.
• after 2014: small businesses that purchase coverage through an exchange can receive a tax credit up to 50 percent (35 percent for small, tax-exempt organizations) of the employer’s contribution to an employee’s premium if employer pays at least half the total premium cost. Credit is available for two years.

Small employers with 10 or fewer full-time employees and average wages of $20,000 or less can receive a tax credit equal to 50 percent of employee premium costs paid by employers. Credit is phased out as average wages reach $40,000 and firm size increases to 25 full-time employees. Credit is not available to employees earning more than $80,000 a year. Tax credit is available for up to two years and is effective January 1, 2013.
Retiree health care:Creates a $5 billion reinsurance pool to help cover health care costs of retirees older than 55. Pool would reimburse employers or insurers for 80 percent of claims between $15,000 and $90,000. Pool will be used to lower health care premiums for retirees in employer plan.Effective 90 days after enactment until January 1, 2014.Provides $10 billion over 10 years for reinsurance pool to cover health care costs of retirees older than 55. Pool would reimburse employers or insurers for 80 percent of claims between $15,000 and $90,000. Pool will be used to lower health care premiums for retirees in employer plan. Effective 90 days after enactment.

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New taxes on employers

 Senate Bill: Patient Protection and Affordable Care Act (H.R. 3590, passed December 24, 2009)House Bill: Affordable Health Care for America Act
(H.R. 3962, passed November 7, 2009)
Tax on employer-sponsored health plans:Imposes a 40 percent tax on employer-sponsored health plans with aggregate values that exceed $8,500 for individuals and $23,000 for family coverage.Exceptions: threshold amount for individuals 55 or older and workers engaged in so-called high risk professions is raised by $1,350 for individual plans and $3,000 for family plans. The threshold is increased 20 percent in the 17 states with the highest health costs.None.
Tax on income:Limits deductibility of executive and employee compensation to $500,000 for health insurance executives.Imposes a 5.4 percent tax on individuals with modified gross adjusted income exceeding $500,000 and on families with income exceeding $1 million.

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Other exemptions and subsidies

 Senate Bill: Patient Protection and Affordable Care Act (H.R. 3590, passed December 24, 2009)House Bill: Affordable Health Care for America Act
(H.R. 3962, passed November 7, 2009)
Exemptions for grandfathered plans:Existing employer-sponsored plans do not have to meet the new benefit standards. However, if the plans do not meet the minimum requirements, individuals enrolled in them do not satisfy the individual mandate.Employer plans have five-year grace period after which they must meet new coverage standards.
Wellness programs:• Provides grants for up to five years to small employers that establish wellness programs. (Funds appropriated for five years beginning in fiscal year 2011.)
• Provides technical assistance and other resources to evaluate employer-based wellness programs. Conducts a national survey of worksite health policies and programs to assess employer-based health policies and programs. (Study would be conducted within two years following enactment.)
• Permits employers to offer employees rewards—in the form of premium discounts, waivers of cost-sharing requirements, or benefits that would otherwise not be provided—of up to 30 percent of the cost of coverage for participating in a wellness program and meeting certain health-related standards. Employers must offer an alternative standard for individuals for whom it is unreasonably difficult or inadvisable to meet the standard.
Provides wellness grants for up to three years to small employers for up to 50 percent of costs incurred for a qualified wellness program. (Effective July 1, 2010.)

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