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President to Sign Health Reform Legislation

March, 23 2010

Late Sunday night, the House of Representatives passed sweeping health reforms, paving the way for the President to sign them into law on Tuesday, March 23, 2010. The House also voted on a separate compromise package to be taken up by the Senate. The legislation will mean some changes for employer-provided health coverage.

Broad changes include prohibitions on pre-existing conditions, which expand the prohibitions employers are already used to under HIPAA. Health insurance exchanges intended to make obtaining coverage easier for individuals and small businesses are also part of the plan. Employers with more than 50 employees will be required to provide coverage or pay a penalty of $750 per worker. The legislation also requires individuals without other coverage to buy health insurance or face a fine of $750 or 2% of income. Additional changes include a 40% tax on expensive health plans (so called “Cadillac plans”) valued at more than $8,500 for individuals or $23,000 for families.

If the separate compromise package also passed by the House passes the Senate and is signed into law, it would alter some of the current legislation’s new mandates. The threshold for taxing expensive health plans would increase to $10,200 for individuals and $27,500 for families. Fines for not having coverage would decrease for individuals and increase for employers, to the higher of $695 or 2.5% of income and $2,000 per employee, respectively.

Many of the reforms contained in both pieces of legislation do not take effect right away. Short term changes from the legislation include the elimination of lifetime benefit caps, financial assistance for the uninsured with pre-existing conditions to buy insurance, and mandated coverage for children up to age 26.

Employers should stay tuned as the compromise legislation is taken up by the Senate and begin preparing to discuss with their insurers and employment counsel how the changes in the law will affect their business. If you have questions about your organization’s group health coverage obligations, please contact your employment counsel or contact us.

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