Health Care Reform Legislation Passes the House and Is On Its Way to the President – What Does It Mean for Employers?

*By Patrick J. Hoban

Last night, the U.S. House of Representatives passed the “Patient Protection and Affordable Care Act” – H.R. 3590 (the “Senate Bill”) – by a vote of 219-212. The U.S. Senate passed the identical bill on December 24, 2009, and, after President Obama signs the bill, it will become law. Supporters claim that the bill’s combination of taxes, regulations, and health insurance subsidies will result in “comprehensive” reform of health care in the United States. Opponents counter that the bill’s provisions are too costly and that its regulations will only serve to drive up the cost of health care and reduce access.

Among the Senate Bill’s many terms are provisions requiring employers employing more than 50 employees to pay an “assessment” to the federal government when one of its full-time employees is eligible for government health care subsidies based upon their compensation as a percentage of the Federal Poverty Limit. The Senate Bill defines “Full-Time” as any employee who works at least an average of 30 hours per week as determined by regulations to be issued by the Secretary of Health and Human Services in consultation with the Secretary of Labor. The Senate Bill also includes the following provisions which take effect on January 1, 2014:

• Employers who do not offer health care coverage meeting federal minimal essential coverage standards are required to pay the federal government a flat dollar amount per full-time employee;
  
  
• Employers who do offer health care coverage meeting federal minimal essential coverage standards are required to pay either $3,000.00 per subsidy-eligible employee or a flat dollar amount per each full-time employee, which ever is less;
  
  
• Employers who impose a waiting period before employees can enroll in employer provided health coverage are required to pay $400.00 per employee for 30-60 day waiting periods and $600.00 per employee for 60-90 day waiting periods;
  
  
• Employers who provide health care coverage meeting federal minimal essential coverage standards to their employees must provide a voucher equal to the employer’s cost of providing such coverage to employees whose income is less than 400% of the Federal Poverty Limit (e.g., $88,050.00 for a family of four) if the employee’s share of health insurance premiums is between 8% and 9.8% of their income and the employee chooses insurance coverage through a federal health insurance exchange.
  
  
• Employers must automatically enroll all employees for health care coverage, but employees may opt out of coverage.

In addition to the foregoing provisions, the Senate Bill also provides small employers with tax credits for offering their employees health care coverage. In tax years 2010-2013, employers with fewer than 25 employees and average annual wages of less than $50,000.00 may take a tax credit of up to 35% of employee health premiums if the employer pays at least 50% of the premium for minimal essential coverage. Additionally, until January 1, 2014, the federal government will reimburse employers who provide health insurance coverage for retirees over the age of 55 years but not Medicare-eligible for up to 80% of retiree health insurance claims up to $90,000.00. Reports indicate the President will sign the Senate Bill today or tomorrow.

Importantly, in addition to passing the Senate Bill, last night, the House also passed the “White House/Congressional Leadership Reconciliation Bill Health Care and Education Affordability Act of 2010” – H.R. 4872 (the “Reconciliation Bill”) by a vote of 220-211. The Reconciliation Bill contains a series of amendments to the Senate Bill and will have to get through the reconciliation process with at least 51 votes (as President of the Senate, Vice President Joe Biden can break any ties) and be signed by the President before becoming law. Importantly, the Reconciliation Bill changes some of the employer-specific provisions contained in the Senate Bill. The Senate is expected to take up the Reconciliation Bill this week.

In addition to the President’s signature, full implementation of the Senate Bill will require regulatory guidance from the Internal Revenue Service, the Department of Health and Human Services, and the Department of Labor. However, all employers should consult with their health insurance brokers, tax advisers, and review collective bargaining agreements to develop a strategy that allows them to best adapt to the drastically changed national health insurance landscape.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about the effect of recent health care legislation on employers, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.