Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

Employers and private insurers will be sure to take notice of the terms governing shared responsibility. According to a summary of these provisions, all Americans would be responsible for obtaining health insurance, with certain hardship exceptions. Employers would be required to chose between providing coverage for their employees or making a contribution on their behalf. If an employer chooses not to offer health coverage to its employees, a penalty would be assessed based on eight percent of its payroll. Employers that choose to offer health coverage would be required to contribute 72.5 percent of the cost of premiums for all full-time employees’ single health coverage or 65 percent for a family policy. Employers would have the option of providing part-time employees with health coverage by contributing a share of the expense, or contributing to the Health Insurance Exchange, a marketplace created by this bill in which individuals and employers could comparison shop among private and public insurers. In the fifth year after the Exchange begins, companies that offer health insurance would have to meet minimum coverage standards.

As for small businesses, employers with annual payrolls below a certain threshold would be exempt from these pay-or-play requirements. Others would be eligible to receive a tax credit for providing its employees with health insurance.

Other controversial aspects of this bill include the development of a public health insurance option, and guaranteed coverage and insurance market reforms. For example, insurance companies would be barred from discriminating on the basis of health status, pre-existing health conditions, and gender, among other factors. This bill would also prohibit lifetime and annual limits on benefits.

Hearings on this bill are expected to begin this week, with markups slated for after the July 4 recess. Congressional leaders have stated that they intend to vote on this bill before the August recess, although increasing divisiveness over healthcare reform will likely render this timeline questionable at best.

Of great significance for employers, the bill mandates that employers either provide health coverage to their workers, or share in the cost of employees obtaining their own insurance. Various options outlined in the bill include such a “pay or play” scenario, whereby employers (excluding small employers) that do not offer specified coverage pay a per-worker fee. Another option known as the “free rider penalty” would not require employers to offer health coverage, but would insist that any large employer whose employees are on Medicaid must repay the government some fraction of the cost for that employee’s Medicaid coverage. Similarly, if an employee chooses a public health insurance option that is deemed more affordable, a third option would require employers to pay the government the amount the employer would have paid for the employee’s coverage had the employee chosen the employer-sponsored insurance plan. Yet another option provides employers with tax incentives for encouraging healthy behavior. Small businesses would be exempt from many of these provisions, and would be eligible to receive tax credits based on the number of full-time employees, the proportion of employees provided health insurance, and employee wages.

Markup of the bill is scheduled to begin on Wednesday, June 17.

Meanwhile, the House has issued a document outlining its own healthcare plan. (pdf)  Drafted by the House Committees on Ways and Means, Energy and Commerce, and Education and Labor, the plan would create a national health “exchange” that would allow individuals and small employers to “comparison shop” among private insurers and a proposed public health insurance option. The proposal would allow states the option of developing a state or regional exchange in place of the national one. According to the House’s proposal, the public health insurance option would compete on a “level field” with private insurers.

Additionally, under the House proposal, individuals, employers, and the government would share the responsibility for providing and paying for healthcare. According to the outline of the plan:

• Once market reforms and affordability credits are in effect to ensure access and affordability, individuals would be responsible for having health insurance with an exception in cases of hardship;
• Employers would choose between providing coverage for their workers or contributing funds on behalf of their uncovered workers (the “pay-or-play” option);
• Government would be responsible for ensuring affordability of insurance through new affordability credits, insurance market and delivery system reforms and oversight of insurance companies; and
• Small, low-wage businesses would be exempt from these requirements. In addition, the plan would provide a new small business tax credit for those firms that provide health coverage.

The House has stated that its goal is to pass such a healthcare bill by the August recess. Since both the House and Senate proposals continue to face criticism from both Republicans as well as Democrats, these bills will likely be significantly amended before they are put up for a vote.

Much of the criticism surrounding these healthcare reform proposals has focused on the public plan option. In place of a government-run plan, some have come out in favor of creating a non-profit insurance cooperative (“co-op”) that would be owned and operated for the benefit of its members, which includes individuals and businesses with fewer than 10 employees. Sen. Kent Conrad (D-ND) suggested such a plan last week.  According to an article by The New York Times, some Republicans have been receptive to this idea, so long as it is not run by the government. Additionally, Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, has also indicated that he is “inclined toward” such a cooperative approach. Whether such an option will work its way into the final legislation remains to be seen.