Mercer exec health reform bills similar

December 7, 2009
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The health care reform bills now under discussion in Washington, D.C., already have some employers running the numbers, said John Sinclair, a principal at the Cincinnati location of Mercer, a human resources consulting company.

But use caution with that exercise, he said at a Mercer presentation last week at Kent Country Club for several dozen benefits specialists from across West Michigan. Just like the weather in Michigan, if you wait, reform measures are sure to change.

“The Senate is now starting discussion to get this thing to a floor vote,” said Sinclair, one of a handful of Mercer consultants who is closely following health care reform. “Unlike the House, where they limit the number of amendments, there’s no limit in terms of the Senate, so it’s very likely we’re going to see lots and lots of noise and political posturing. The biggest issue is going to be Democrats getting their own people in line.”

Sinclair said that he is pessimistic about the goal of Senate Majority Leader Harry Reid, D-Nevada, to enact health care reform before the end of the year.

After a vote of the full Senate, negotiations would begin to meld the House and Senate bills into a single law that would go before President Barack Obama.

Yet the U.S. House bill, which already has been approved by the representatives, and the proposal now being kicked around in the Senate have many features in common, Sinclair said.

“Surprisingly, there are a lot,” he said. “There are things like an employer mandate … individual coverage mandate … market reform such as eliminating pre-existing conditions.”

Those are the features that are most likely to wind up in the final negotiated draft, he said. While the bills may overlap in those areas, the details vary.

Among the common points are employer mandates. Employers would be required to pay at least 60 percent to as much as 72.5 percent of premium costs; pay fees for not providing coverage or for providing coverage that is unaffordable or fails to meet standards; provide auto-enrollment; and report health care coverage on W-2 forms.

Both bills contain provisions to cap Flexible Spending Accounts at $2,500 per year within three years. FSAs allow employees to set aside a federal tax-free amount they choose out of their paychecks to cover health-related items not covered by insurance, co-pay charges, optical services and over-the-counter medications among them.

Both bills call for health insurance exchanges or gateways available to individuals and small employers. Coverage could not be denied for pre-existing conditions, annual and lifetime limits would go by the wayside, and coverage could be extended to dependents as old as 27 without a student requirement.

In addition, the bill now in the Senate demands that employers pay, starting in 2013, a 40 percent excise tax on coverage value that exceeds $8,500 for an individual or $23,000 for a family. No such provision is in the House bill, but Sinclair said many companies are keeping an eye on premium increases to make sure their costs stay below the threshold.

The Senate bill contains penalties for employers whose workers resort to buying coverage through a health insurance exchange, either because the employer does not provide coverage or between the coverage offered by an employer is unaffordable or fails to meet minimum standards. Those penalties range from $750 per full-time employee for no-coverage firms to $3,000 per full-time employee for companies with bad coverage, subject to a cap.

Sinclair said that employers with generous benefits could reduce costs by meeting minimum coverage requirements. Those whose benefits now are spare could be looking at cost increases due to extra enrollment and penalties, or they could drop coverage all together, a more expensive option under the House bill than under the Senate proposal.

The minimums for individuals in the proposals range from deductibles of $500 to $900, co-insurance of 20 percent to 25 percent, and out-of-pocket maximums of $4,000 to $5,000, with preventative care covered 100 percent.

Whatever the details of the plans under debate in Congress, one thing is clear, Sinclair said: Reducing premium costs for employers is outside the goals of health care reform.

“The question of lowering costs for employers is not addressed here,” he said.

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