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

Among other changes, the reconciliation bill alters the employer penalty provisions contained in the Patient Protection and Affordable Care Act by increasing the fee large employers (more than 50 employees) have to pay if they do not offer health coverage from $750 to $2,000 per the number of full-time employees (excluding the first 30 employees in the calculation). As explained in a fact sheet, (pdf) large employers that do offer insurance but whose coverage is deemed unaffordable or does not cover at least 60 percent of allowable costs will pay $3,000 for any full-time employee that receives a tax credit in the newly-created health insurance Exchange up to an aggregate cap of $2,000 for every full-time employee. Employers with more than 200 employees will be required to automatically enroll all employees in their health insurance plans, allowing individual workers to opt-out, and provide notice to employees of their health insurance options, including coverage through the Exchange.

For more information on how this health care reform package will most likely affect the workplace, see Littler’s Insight: Health Care Reform – What are Key Considerations for Employers? by Ilyse W. Schuman and Steven J. Friedman.

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According to a section-by-section analysis of the reconciliation bill provided by the House Rules Committee, changes to the Senate bill include many endorsed by President Obama in his health care proposal.  For example, under the Senate bill, if any employee of a firm with 50 or more full-time workers obtains tax credits to purchase insurance through a health insurance exchange because the employer’s plan is considered unaffordable, the employer would pay, beginning in 2014, the lesser of $3,000 per full-time worker who obtains a tax credit or $750 times the total number of full-time workers. If the large employer does not offer insurance in the first place, it would need to pay $750 per full-time worker under the Senate bill if any employee obtains tax credits for the purchase of health care. The reconciliation bill includes Obama’s proposal, which would amend the Employer Responsibility section of the Senate bill by stipulating that the first 30 workers would be subtracted from the employer responsibility payment calculation. Therefore, a firm with 51 workers that does not offer coverage would pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount. The reconciliation bill would raise the applicable payment amount for firms with more than 50 employees that do not offer coverage from $750 to $2,000 per full-time employee. In addition, the plan would eliminate the assessment for workers in a waiting period for enrollment, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.

With respect to the contentious excise tax on high-cost “Cadillac” health insurance plans, the reconciliation bill delays the application of this tax until 2018, and increases the dollar thresholds of the 40% excise tax to amounts above $10,200 for single coverage, $27,500 for a family plan, $11,850 for retirees and $30,950 for employees in high risk professions. The reconciliation plan would also exclude stand-alone dental and vision plans from the excise tax, and permit an employer to reduce the cost of the coverage when applying the tax if the employer’s age and gender demographics are not representative of the age and gender demographics of a national risk pool. The dollar thresholds would be indexed to inflation and would be automatically increased in 2018 if the CBO turns out to be incorrect in its forecast of the premium inflation rate between now and 2018.

The reconciliation bill also delays the annual $2,500 limitation on contributions to health flexible spending arrangements and the elimination of the deduction for expenses related to the Medicare Part D prescription drug subsidy until 2013. The bill delays the excise tax on medical device manufacturers by two years and delays the industry fees on sales of brand name pharmaceuticals for use in government health programs by one year. Furthermore, the industry fee on health insurance providers would be delayed until 2014. The bill would also provide fee exemptions for voluntary employee benefit associations (VEBAs) and certain nonprofit providers.

The reconciliation bill also includes changes to the federal student loan program, which would shift the program to direct federal lending for postsecondary education. The CBO and JCT preliminary report predicts that the package – which includes the Senate health care bill plus the reconciliation proposal – would cost $940 billion over the coming decade and provide health insurance coverage to an additional 32 million people yet reduce the deficit by $138 billion over that period. The estimated “penalty” fees paid by employers from 2014 through 2019 would amount to $52 billion. Tax credits provided to small employers through 2019 are projected to total $40 billion.

The release of the amended reconciliation bill and the CBO estimate sets up likely votes on the health care package in the House this Sunday. The House is expected to vote on a rule to ”deem” the Senate bill passed as well as vote on the reconciliation bill. With all Republicans expected to vote against the measure, Democratic leadership is seeking to secure the necessary 216 votes in the House. If successful, the reconciliation bill will proceed to Senate next week under an expedited process requiring majority rather than supermajority support.

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After the loss of a 60-seat Democratic supermajority in the Senate, Democratic Congressional leaders are turning to the budget reconciliation process to complete health care reform. Because it is in the form of a budget reconciliation measure, the Senate would need only a simple majority to approve it. Although the reconciliation bill currently contains many of the elements – including the public health insurance option – from the House-approved Affordable Health Care for America Act (H.R. 3962), these provisions are expected to be deleted and replaced with the agreed-upon compromise language. In a series of parliamentary maneuvers, a House vote on the Senate-passed Patient Protection and Affordable Care Act and on this reconciliation package could come by the end of the week.

It is all but assured that no House Republicans will vote in favor of the Senate health care bill, so Democrats are scrambling to shore up the minimum 216 votes needed for passage. Assuming the House has the necessary votes to pass the Senate bill and the reconciliation measure, the reconciliation measure would also have to be approved by the Senate.

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Obama further remarked that his proposal “incorporates the best ideas from Democrats and Republicans.” Specifically, the President’s legislative blueprint borrows a number of elements from the Senate-approved bill, including the requirement that most Americans obtain health insurance coverage, the creation of a health insurance exchange, penalties on large employers that fail to provide affordable health insurance, the imposition of an excise tax on high-cost “Cadillac” insurance plans, and the lack of a public insurance option included in the more expansive House-passed Affordable Health Care for America Act (H.R. 3962). Obama’s plan also includes popular elements contained in both bills, such as the ban on preexisting condition exclusions and certain lifetime and annual coverage limits in health insurance plans.

In a letter to Congress, Obama signaled his willingness to consider certain GOP proposals, including allocating $50 million to fund state initiatives designed to reduce medical malpractice costs; allowing certain high-deductible insurance plans to be offered in the health insurance exchange; increasing Medicaid reimbursements to doctors in certain states; and permitting medical professionals to conduct random undercover investigations of health care providers that receive reimbursements from Medicare, Medicaid, and other federal programs.

At this point, it is unclear whether the House has enough votes to pass the Senate bill, and whether the Senate can garner 50 votes to proceed with reconciliation, with Vice-President Biden supplying the tie-breaking vote. Republicans are expected to be united in their opposition, leaving Democratic leaders with little margin for opposition within their own caucus.

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 . . . the question that I'm going to ask myself and I ask of all of you is, is there enough serious effort that in a month's time or a few weeks' time or six weeks' time we could actually resolve something? And if we can't, then I think we've got to go ahead and make some decisions, and then that's what elections are for.

Obama concluded the summit by acknowledging that it may be impossible to resolve the differences between the parties, and alluded to the fact that Democrats could proceed with reconciliation: “I don't know, frankly, whether we can close that gap. And if we can't close that gap, then I suspect Mitch McConnell and Harry Reid, Nancy Pelosi and John Boehner are going to have a lot of arguments about procedures in Congress about moving forward.”

Meanwhile, according to a Wall Street Journal article, President Obama might be amenable to advancing a scaled-back version of health care legislation should a more comprehensive overhaul bill fail to garner requisite support. According to the article, this more modest approach would provide coverage to an additional 15 million Americans, which is half the amount a larger bill would have covered. More details about this alternate approach have not been released.

Republicans, by and large, seem to favor a more incremental approach to health care reform. On Wednesday, for example, the House of Representatives overwhelmingly approved by a 406-19 margin legislation that would repeal the anti-trust exemption in place for health insurance companies. The Health Insurance Industry Fair Competition Act (H.R. 4626), would amend the McCarran-Ferguson Act of 1945, which reaffirmed that states are the primary regulators of insurance, and expressly exempted the “business of insurance” from antitrust laws.

At the conclusion of the health summit, however, President Obama indicated that a piecemeal approach to reform was untenable: “. . . a step-by-step approach sounds good in theory, but the problem is, for example, we can't solve the preexisting problem if we don't do something about coverage.”

Transcripts from the summit can be found at The Washington Post’s political blog 44.

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