Great is the Art of the Beginning, but Greater is the Art of the Ending – Health Care Reform on the Floor of the House and Senate
October 13, 2009

Senator Olympia Snowe of Maine became the first Republican in the United States Senate to support Health Care Reform, although she did it tepidly quoting Longfellow, "Great is the art of the beginning, but greater is the art of the ending." The Senate Finance Committee's vote to approve Health Care Reform clears the final hurdle toward reconciliation and floor debate in both the House and Senate.

Review of the Process

Several bills of healthcare reform have been debated in various committees in both the House and Senate. The complexity of health care reform and the oversight of health care reform in various committees have made the process seem without end. However, as the committee process is over, the process of reconciliation will begin in the House and Senate.

House of Representatives Health Care Reform Reconciliation

The House of Representatives received bills from three committees and have already begun the informal process of reconciliation of the bills. The committees in the House largely provide for an individual mandate to purchase health insurance, an employer mandate to offer health insurance or face an 8% excise tax calculated as a percentage of payroll (over $750,000), and for a public plan option likely tying reimbursement rates to Medicare.

The employer mandate specifically provides that employers must contribute 72.5% of the cost of single coverage and 65% of family coverage. Employer health insurance must offer "essential benefit packages," a value of 70% of a determined actuarial benchmark, and out-of-pocket limits of $5,000 for individuals and $10,000 for family coverage.

The House bill is financed through Medicare savings and an additional tax on "wealthy individuals and families."

Senate Health Care Reform Reconciliation

The Senate Finance Committee's bill will be reconciled with the Senate Health, Education, Labor and Pensions (HELP) Committee. The Senate bills both require an individual mandate to purchase health insurance, employer mandates to offer insurance or pay a fee, and defined mandates on coverage options.

The Senate HELP Committee requires employers to pay a fee based on the number of employees who do not receive health insurance of at least 60% cost of an individual policy. Part-Time employees will cost $375/employee if they do not receive qualifying coverage. The Senate Finance Committee simply requires employers to reimburse the government for those employees who are eligible for the subsidy and are not offered qualifying health coverage. Qualifying coverage for the Senate Finance Committee must meet 65% of an actuarial benchmark and limit cost sharing to $5,950 for individuals and $11,900 for families. The HELP Committee's "essential benefits package" is not yet well defined.

The Senate Finance Committee funds its proposal through program efficiencies and a tax on health plans with an aggregate value of $8,000 per employee and $21,000 per family. This aggregate value includes all health plans including flexible spending accounts and dental/vision plans.

Next Steps for Health Care Reform

Most of the debate in the coming weeks will be regarding the public plan option, including two issues: (1) whether it will be an opt-out provision for states (similar to the HIPAA high-risk opt-out pools), and (2) at what level the public option is triggered. Any public plan option is tied to Medicare.

For employers, there are some very specific issues which are certain at this time:

• Health Care Reform will be effective January 1, 2013, as all the bills use 2013 as the beginning date.
• Individuals will be required to purchase health insurance and employers will be required to offer health insurance to employees or pay a fee as all of the bills include an individual mandate and an employer mandate.
• There will be a "Cadillac tax" on health plans but at a higher limit than the Finance Committee. It will be dangerous for many of the Senators to agree to an additional tax on "wealthy Americans" to pay for part of health reform. To help fund the process and keep the cost down will require an additional tax and that will likely stay in the final bill, however, the thresholds by which the tax is paid will be raised (and need to be offset by savings elsewhere).
• Employers will likely pay some level of a fee that will be equal in dollars to the subsidy related to their employers, either as a direct dollar amount or as a per-employee fee and the methodology to calculate such fee will be neutral to employers.
• Employers will be mandated to provide some coverage to part-time employees or pay a fee to opt-out of coverage.
• Self-insured plans will be required to have certain benefit levels based on actuarial benchmarks to be determined in the bill.
• Health Care Reform will pass.

Employer Action Steps

As the final bill is reconciled and its provisions are known, employers should proceed cautiously with any medical plan overhauls, including the use of health reimbursement accounts, health savings accounts, and other cost-shifting programs to employees. However, employers should be aware that the health care reform bill will likely contain some form of phase-in or grandfathering for current health plans and employers making changes due to cost or competitive reasons should do so in the 2010 plan year if possible and not wait until after the bill's passage.

We expect passage of Health Care Reform in mid-November 2009.