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The 3 health reform changes most likely to survive this fall

by on
in Small Business Tax Deduction Strategies

After a summer spent getting an earful from vocal constituents advocating for and against comprehensive health care reform legislation, Congress is back in session, trying to muster support for—or stop—competing House and Senate versions of what President Obama now calls health insurance reform.

Many of the most controversial elements are gone. Many details will be firmed up in coming weeks—or not.

There’s no guarantee that Obama will have a bill to sign before the end of the year.

But if he does, it will almost certainly include three elements that will affect comp and benefits pros: requirements that everyone have health insurance, that most employers offer it to employees and that an alternative exists for individuals and employers that can’t afford health insurance.

If passed, these provisions would take effect no sooner than 2013.

Individual coverage mandate

Under both House and Senate versions of health care reform legislation, individuals and their dependent children would be required to have at least basic health insurance. Those who don’t would face tax penalties.

Chance of enactment: High

Employer mandate

The House and Senate both would require most employers to either “play or pay,” providing employer-sponsored health insurance to employees or paying into a state-based insurance exchange (House version) or an insurance “gateway” (Senate).

The House is holding out for employers to pay at least 72.5% of premiums for individual coverage and 65% for family coverage. The Senate figure will probably come in around 60%.

Small businesses would generally be exempt from the employer mandate. The House bill defines businesses as “small” if payroll is $500,000 or less; those with payrolls between $500,000 and $750,000 would be subject to a sliding scale of penalties if they don’t provide coverage. The Senate is leaning toward a threshold of 25 or fewer employees.

Both houses of Congress envision providing subsidies to small businesses to help them offer insurance benefits.

Chance of enactment: High

Insurance exchanges or gateways

Individuals who lack coverage and employers that can’t otherwise afford to provide insurance would be able to buy coverage through insurance exchanges or gateways. This isn’t to be confused with the so-called public option, in which the government directly provides insurance, as it does now with Medicare.

These would essentially be statewide risk pools that individuals and employers could join to comparison-shop for coverage provided by many health insurers. The idea is that economies of scale and head-to-head competition among providers would keep prices relatively stable and quality high.

The House envisions a national exchange, with the possibility of state exchanges, such as the one Massachusetts has established. The Senate wants gateways to be state-based.

Each exchange would offer three tiers of coverage: basic, enhanced and premium.

A basic package would cover inpatient and outpatient hospital services, physician and specialist services, medical equipment and supplies, prescription drugs, rehabilitation services, mental health and substance abuse counseling
and treatment, preventive services and maternity care. More coverage would be available for higher premiums.

Chance of enactment: Probable

None of the health care reform proposals would really work without exchanges as a fallback option. So if negotiations hang up on exchanges, don’t be surprised if health care reform legislation goes down in flames.

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