On July 14, 2009, and July 15, 2009, the U.S. House of Representatives (the “House”) and the U.S. Senate (the “Senate”), respectively, issued bills comprising Congress's first attempt to reform the nation's health care system. Between them, the bills total 1,600 pages of proposed changes that address, among other things, employer-sponsored health plans, Medicare, Medicaid, State Child Health Insurance Programs, and ERISA enforcement. As of the time this alert is published, several sources report that the Senate (led by Senator Max Baucus) will introduce a second health care bill by August 7, 2009. A complete synopsis of all the bills would be too long (and given the stage of the legislative process, possibly irrelevant). However, employers should be aware that these bills contain provisions that may dramatically alter their obligations with respect to employee health benefits. This client alert highlights some of the bills’ features that are most relevant to employers.
America’s Affordable Health Choices Act of 2009 (the “House Bill”).
The House Bill introduces the concept of a Qualified Health Benefits Plan (“QHBP”). Employers that provide health insurance to their employees would have to comply with the Qualified Health Benefit Plan requirements, which fall within three main areas:
- The “affordable coverage” requirements prohibit exclusions for pre-existing conditions, prohibit benefit limits or conditions based on any health-related factors, mandate parity in mental health and substance abuse disorder benefits, and obligate plans with provider networks to assure the adequacy of such networks.
- The “essential benefits” requirements mandate coverage of a variety of health services and prohibit annual or lifetime limits on benefits. Cost-sharing would be prohibited for preventative services, well baby and well child care, and overall cost-sharing could not exceed $5,000 for an individual and $10,000 for a family.
- The “consumer protection” requirements include rules regarding the marketing of health benefit plans, claims review and appeals processes, disclosure of plan information, and the timely payment of claims.
The House Bill proposes to create a Health Insurance Exchange that includes a public insurance option and QHBPs offered by private insurers. Initially, only the uninsured and small employers could purchase insurance through the exchange. Eventually, larger employers could participate. Private insurers offering individual insurance would be required to provide their plans through the exchange, though certain plans would be grandfathered under the House Bill.
Employers that do not provide acceptable coverage to their employees would be required to contribute 8% (0%-6% for smaller employers) of the average wages paid by the employer to a proposed "Health Insurance Exchange Trust Fund". This fund also would be financed by a tax on individuals who fail to maintain acceptable coverage and by excise taxes on employers’ failures to meet certain health coverage participation requirements. An employer meets the health coverage participation requirements if it:
- Offers each employee a choice of individual and family coverage under a QHBP;
- Contributes at least 72.5% of the premium (65% for eligible employees electing family coverage) of the lowest cost plan offered by the employer that is a QHBP. Employers would make a proportional contribution for employees working less than full-time; and
- Contributes to the Health Insurance Exchange on behalf of employees who decline employer coverage.
Other proposed features include:
- Assistance for employers providing health benefits to retirees and their dependents;
- Small business employee health coverage tax credit;
- Increased reporting requirements; and
- A tax “surcharge” ranging from 1% to 5.4% on individuals with incomes over $350,000.
Affordable Health Choices Act (the “Senate Bill”).
The Senate Bill proposes similar requirements upon group health plans and group and individual health insurance coverage. Under the Senate Bill, pre-existing condition exclusions are prohibited. The Senate Bill also prohibits plans from imposing lifetime or annual coverage limits.
The Senate Bill requires that a plan provide a minimal level of coverage for certain preventative services and that cost-sharing for such services may only be permitted by the Secretary of Health and Human Services (the “Secretary”).
The Senate Bill proposes to create state-based "Affordable Health Benefit Gateways" intended to facilitate the purchase of health insurance coverage and related products by certain residents and qualified employers. States are encouraged to provide these Gateways themselves; however, the Secretary will do so if a state does not. It appears that only employers with fewer than 50 employees could initially participate in a Gateway.
While not part of the released Senate Bill, the Senate’s press release indicates that employers that do not provide acceptable coverage to their employees would be required to contribute $750 per year per uninsured full-time employee and $375 per year per uninsured part-time employee. The press release does not disclose to whom these amounts will be paid, i.e., the IRS, the Gateway or a third-party. This penalty would not apply to employers with 25 or fewer employees.
The Senate Bill requires employers to:
- Contribute at least 60% of the monthly premium; and
- Provide "qualifying coverage"—a standard which the Senate Bill does not specifically define. Instead, the Senate Bill designates another government group (the Medical Advisory Council) to determine what levels of coverage must be provided under a plan.
The Senate's press release mentions an amendment to the Fair Labor Standards Act requiring employers to provide break time and accommodations for breastfeeding mothers. However, this provision did not appear in the Senate Bill’s text.
The Senate Bill also requires that group health plans and health insurance issuers develop and implement a reimbursement system providing financial incentives to health care providers for developing programs to avoid readmission, improve patient safety, promote child health measures, and implement certain activities geared towards creating efficiencies in medical care.
- Assistance for employers providing health benefits to retirees and their dependents.
- Temporary tax credit for small business employers who provide Gateway coverage to their workers.
- Dependent coverage availability until age 26 (regardless of student status).
- Substantial increase in the regulation of Multiple Employer Welfare Arrangements.
- Ability for individuals to enroll in coverage when they experience a qualifying life event as defined under the cafeteria plan rules—this is broader than what HIPAA now permits.
Michael Best will continue to follow the progress of these and any future House and Senate Bills. If you have any questions about the content of this client alert, or potential effects upon your group health plan, please contact one of the authors or your Michael Best attorney.