As Congress takes a "time out" from health reform, and President Obama urges lawmakers not to give up on legislation stalled in the House and Senate, employers wonder what lies ahead for them and their employee benefits plans.  

Health care reform legislation: So near, yet so far

As Congress takes a "time out" from health reform, and President Obama urges lawmakers not to give up on legislation stalled in the House and Senate, employers wonder what lies ahead for them and their employee benefits plans. 

Both the House and Senate have approved versions of a comprehensive health care overhaul that would significantly affect all employers, including those who already offer health care coverage to their employees. What remains is for Congress to reconcile the two bills and send a compromise measure to the president to be signed into law. 

The prospect of timely health reform legislation, however, seems more uncertain now than ever. In Massachusetts' special election, the upset victory of Republican candidate Scott Brown to succeed the late Senator Edward Kennedy has been a game-changer: Senate Democrats no longer enjoy a filibuster-proof, 60-vote super-majority. 

Because the Massachusetts election resulted in a switch of one seat from the Democrats to the Republicans, the Senate probably won't be able to pass any legislation written exclusively by the Democratic Congressional leadership. Also, several centrist Democratic senators, eyeing the message sent by Massachusetts voters, now seem reluctant to vote again for a new government program that could cost in excess of $1 trillion over 10 years. 

"Health reform is definitely in a state of suspended animation" said Jim O'Connell, Ceridian's legislative affairs expert in Washington, D.C. "But it's important to understand that health reform, even passage of a comprehensive bill, is by no means dead." 

One possible scenario, O'Connell said, is that Democrats will work quietly over the next weeks to find "a magic formula" that would allow the House to pass the same bill the Senate approved on Christmas Eve, thereby avoiding another Senate vote. The difficulty with that scenario is that many House democrats oppose certain provisions in the Senate-passed measure. That would require some follow-on legislation to modify those provisions, which itself would involve a Senate vote. 

Another possible scenario is that Democrats and Republicans would set aside the previously approved bills and work together to craft a new bill that would enjoy bipartisan support. "President Obama's call for a Bipartisan Summit on Healthcare Reform, slated to take place in Washington, D.C., February 25, could set the stage for a new legislative consensus," O'Connell said. 

As your benefits partner, Ceridian Benefits Services will continue to closely monitor health reform legislation and activities in Congress. We will provide legislative updates as well as insight into how your business would be impacted if reform is passed. 

In his State of the Union address, President Obama laid to rest any doubt that he intends to keep working on health care reform. He wants legislation that will bring down the cost of premiums and the deficit, cover the uninsured, strengthen Medicare for seniors and stop insurance company abuses. 

It's now up to the Democratic Congress to provide an acceptable solution to fix the country's broken health care system. 

It won't be easy. Approximately 70 percent of employers believe that the currently proposed legislation would actually increase their costs for employer-based benefit programs; 35 percent say health reform will lead to fewer employers offering subsidized benefits, according to recent studies by Towers Watson and the National Business Group on Health

The Congressional Budget Office has said that the Senate-approved legislation would have a relatively small effect on premiums for employer-based health care insurance. In other words, the legislation would do little to reduce insurance premiums over time -- one of the original purposes of health care reform legislation. 

What's to come? 
The Democrats now have several options. Among these are: 

  • Pass the Senate-approved version. Some House Democrats, however, have already voiced resistance to this approach, particularly as the Senate bill includes new taxes on high-value employee health benefits.
  • Push for a compromise between House and Senate versions. This legislation would have to be approved by both the House and the Senate, where Democrats would need at least 60 votes, a supermajority, to end debate and force a vote. With the recent election of Republican Scott Brown to the late Senator Kennedy's seat, the Democrats have only 59 votes.
  • Propose scaled-back or incremental legislation that would garner Republican support and target areas such as insurance reform that have consensus support.

What would reform mean for employers? 
There are some provisions in both bills that Congress might be willing to take a closer look at and even eventually pass, even if it's outside a comprehensive, sweeping health reform bill. These provisions would: 

  • Give employers with fewer than 25 employees and average annual wages less than $50,000 a tax credit when they purchase employee health insurance.
  • Provide affordable credits to individuals with salaries up to 400 percent of the federal poverty level.
  • Prohibit individual and group health plans from placing lifetime limits on the dollar value of coverage.
  • Create a temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare.
  • Establish a temporary, national, high-risk pool to provide health coverage for individuals with preexisting medical conditions.
  • Prohibit insurers from rescinding coverage except in cases of fraud.

What's most at stake right now, however, are those provisions that have been hotly debated by both parties. These include: 

  • There is wide support for health insurance exchanges, where individuals can shop for insurance. But the big issue is whether to have a single national exchange, as proposed in the House bill, or 50 separate exchanges, as proposed in the Senate bill.
  • A tax on high-cost health plans, called "Cadillac" plans, for individuals and families.
  • A surcharge on individuals with annual incomes above $500,000 or families with incomes above $1 million.
  • Expansion of Medicaid coverage for individuals just above the federal level. The House called for 150 percent above the level; the Senate, 133 percent.

With rising health costs and a still-struggling economy, many employers are wondering just what will happen next, including the possibility that health care reform may fail. 

"Because of the inexorable pressure of rising health costs, health care reform will happen whether or not there is comprehensive legislation," O'Connell said. 

O'Connell noted that employers have been hoping for years that new national legislation would do something to rein in skyrocketing costs. That's the main reason employers, including the U.S. Chamber of Commerce, have supported health care reform legislation. But without the help of federal legislation to contain costs, employers will need to become even more innovative in finding ways to manage employee health costs. 

"With or without reform, employers realize they have entered a new era characterized by fundamental changes in the way they must think about health care and business strategy," O'Connell stated.