News & Information

 

FEATURED PRODUCT

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

Learn More »

CCH® BENEFITS — 11/10/08

With Democratic Win, What Happens Now In Health Care?

From Spencer's Benefits Reports: The next few years in employee benefits will be shaped by a Democratic President and a Democratic Congress. Even if President-elect Barack Obama follows through on all of his benefits proposals, as outlined below, those proposals must be championed by members of Congress and then passed in both the House and the Senate. Furthermore, there are many different approaches in addition to Mr. Obama’s, from health care reform to fixing Social Security.

Nevertheless, Mr. Obama’s policy statements during the election campaign provide a guide to the direction of employee benefits legislation in the next few years, and the following provides some suggestions for the future in health care.

Overall employer-related approach. The health care reform proposal of Mr. Obama is directly aimed at increasing the number of individuals covered by health insurance. The plan concentrates on a mixture of private and public group insurance programs that include an employer mandate and an individual mandate for children.

Under the Obama plan, employers that do not offer or make a meaningful contribution to the cost of quality health care coverage for their employees would be required to contribute a percentage of payroll toward the costs of a national plan (see below). This percentage has not been specified.

The Obama plan would provide small employers with a refundable tax credit of up to 50% of premiums paid on behalf of their employees. A small employer is not defined, although the Obama campaign does use figures from the Small Business Administration, which in general define a small business as an entity with fewer than 500 employees.

The costs for employers that currently provide health care coverage would not be directly affected. Employers that do not provide coverage or that fall under the “meaningful” threshold would pay an additional percentage of payroll.

The Obama approach largely would leave intact the employer-based system. Whether more employers would adopt coverage or would simply pay toward the national plan is unclear and likely would depend on the level of required payment.

Guaranteed eligibility. The Obama proposal would require insurance companies to cover preexisting conditions.

Health insurance options. A National Health Insurance Exchange would be established to help individuals purchase new affordable health care options if they are uninsured or want new health insurance. Through the Exchange, any American would have the opportunity to enroll in the new public plan or an approved private plan, and income-based sliding scale tax credits would be provided for people and families who need it. Insurers would have to issue every applicant a policy and charge fair and stable premiums that do not depend upon health status. The Exchange would require that all the plans offered be at least as generous as the new public plan and meet the same standards for quality and efficiency. Insurers would be required to justify an above-average premium increase to the Exchange. The Exchange would be in charge of evaluating plans.

The Exchange would have the following features:

• Benefits. The benefit package will be similar to that offered through the Federal Employees Health Benefits Program (FEHBP), the program through which members of Congress get their own health care.
• Portability and choice. Participants will be able to move from job to job without changing or jeopardizing their health care coverage.
• Quality and efficiency. Participating hospitals and providers that participate in the new public plan will be required to collect and report data to ensure that standards for health care quality, health information technology and administration are being met.

Required coverage for children. Mr. Obama would require that all children have health care coverage. Young people up to age 25 would be able to continue coverage through their parents’ plans.

ERISA preemption. Mr. Obama’s health care reform proposal from in general would retain the principles of ERISA preemption. Nonetheless, at least two major effects on ERISA would result from the Obama proposal, including these:

The Obama proposal would affect ERISA because employers would be required to provide a certain level of health care coverage or contribute to the cost of coverage. Maryland, Massachusetts, and the city of San Francisco have attempted to impose similar requirements.

The Maryland law was challenged and struck down under ERISA preemption provisions. The San Francisco plan has been challenged, so far unsuccessfully, under ERISA. The Massachusetts plan has not yet been challenged, but several benefits experts have predicted a lawsuit if employer costs increase.

Despite these disparate results, ERISA preemption would need to be addressed in any federal law that required employer contributions to health care.

In addition, as noted above, the Obama plan would make available a new national health care plan to all Americans, including the self-employed and small businesses, to buy affordable health care coverage that is similar to the plan available to members of Congress. The plan would include guaranteed issue and renewability and a specified minimum set of benefits. This provision would significantly dilute the ability of the states under ERISA to devise their own requirements for insured plans.

Consumer-driven health plans. The administration of President George Bush has been a strong proponent of consumer-driven health care in general and health savings accounts (HSAs) in particular. Mr. Obama’s administration is expected to be less enthusiastic, but the laws and the rules regarding HSAs do not appear immediately threatened. One proposed revision, requiring more reporting on the use of health savings accounts (HSAs), is likely to reappear.

Medicare. Mr. Obama would allow the federal government to negotiate for lower drug prices for the Medicare program, would close the “doughnut hole” in the Medicare Part D prescription drug program, and supports allowing seniors to import safe prescription drugs from overseas. He also proposes to eliminate subsidies to the private insurance Medicare Advantage program.

The 111th Congress is scheduled to convene on Jan. 3, 2009. Mr. Obama’s inauguration will be on Jan. 20, 2009.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

Visit our News Library to read more news stories.