Still, employers oppose the bill on numerous grounds. A chief concern among employers as well as some economists is that a requirement for all individuals to purchase insurance—deemed necessary to spread risk—is enforced by a relatively weak penalty.

Individuals would be required to purchase health insurance, but the penalty for not doing so would be small—$95 per person in 2014, rising to $750 in 2016. 

Likewise, some economists said a weak penalty against employers not offering insurance could make dropping coverage an appealing alternative.

Large employers with more than 50 full-time employees would be assessed a fine up to $750 for every employee who works more than 30 hours a week if any employee received health insurance subsidies from the government.

The fine is still smaller than penalties introduced in the House’s plan, which would assess a tax of up to 8 percent of payroll. Employers would have to pay for the cost of any employee who receives a government subsidy to purchase health insurance.

Small employers would receive subsidies based on the average income of the firm to help defray the cost of providing insurance to full-time workers.

Employers and insurers also criticized the expansion of government health programs they fear will cause underpaid hospital and medical providers to shift costs to private employers.

An estimate by the Congressional Budget Office put the cost of the bill at $848 billion over 10 years. That money would help extend health insurance to an estimated 31 million uninsured Americans and legal residents by expanding eligibility for federal programs and providing subsidies to lower-income workers and tax credits to small businesses.

The bill would be paid for by increased taxes on the health industry, an excise tax levied against insurers and employers who self-insure on “Cadillac” health plans, as well as other fees, such as a 5 percent tax on cosmetic surgery. The House plan, by contrast, paid for the bill in large part through a 5.4 percent tax on wealthy Americans.

A 40 percent excise tax would be levied against employers that offer so-called Cadillac plans, which total more than $8,500 for individuals and $23,000 for families. That threshold would grow along with inflation. Employers whose workers engage in high-risk professions would be exempt from the tax. The U.S. Chamber of Commerce called that a loophole to exempt union plans.

Ultimately, the Senate health care reform proposal is estimated to reduce the budget deficit during the next 10 years by $130 billion, according to the CBO.

Most provisions would be enacted in 2014, though some changes would take place immediately, including the creation of a reinsurance pool to make insurance for individuals and small groups more affordable as well as new laws that would prohibit insurers from denying people coverage for having pre-existing conditions.

Though insurance would still be offered through the open market as well as by self-insured employers, economists expect many of the newly insured to purchase coverage through an insurance exchange managed by states.

Legislation in the Senate would create health cooperatives to be included in the exchanges. It would also create a government-funded public health option, known in the bill as the community health insurance option, but states could exclude it from the exchange.

The Senate bill’s relatively minor penalty against employers that do not provide insurance could lead some to drop coverage, economists say. According to an analysis of the bill by health research foundation The Commonwealth Fund, overall enrollment in employers-based health care will stand at 152 million by 2019, a drop from about 160 million today. Many employers would shift to offering employees coverage through health insurance exchanges.

According to the Senate plan, the exchanges would be set up in 2014 and would initially be open only to small employers. By 2017, large employers could choose to purchase insurance through the exchange.

Employees could opt to purchase health insurance on the exchange if their employer offers health care coverage that costs more than 9.8 percent of their household income.

The health insurance industry argued Thursday, November 19, that the weak penalty against individuals could create an incentive for people to hold off on purchasing health care until they become sick. Because the new laws would guarantee coverage, a sick person could buy insurance without penalty only when they felt they needed it.

In an important caveat, self-insured employer plans and multiple-employer welfare arrangements, known as MEWAs, would not have to meet the “essential health benefits package” minimums as defined in the bill. These plans would be protected by ERISA, which allows them to define the plans as they see fit, though employees could opt out of the plans if they were too expensive, according to the bill. Self-insured plans would still have to provide a health plan that meets the minimum actuarial value standard of 60 percent.

The basic coverage requirements, however, are aimed at health plans providing coverage through the state-based insurance exchanges.

The bill would allow children up to age 26 to stay on their parents’ health plans.

Though the bulk of attention has focused on changes in the way insurance is offered, much of the 2,074-page bill focuses on changes to the health care system, including an intensified focus on wellness and prevention.

Employers, for example, would be able to increase incentives to participate in wellness programs from 20 percent of the cost of a health plan to 30 percent. That number could be increased by the secretary of Health and Human Services to as high as 50 percent.

Senate Democrats need 60 votes to avoid a Republican filibuster of the measure.

—Jeremy Smerd

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