The Senate-passed health care reform bill, the Patient Protection and Affordable Care Act, which must be merged with the House-passed health care measure, was characterized as "deeply flawed" by James A. Klein, president of the American Benefits Council, a national trade association representing U.S. employers that sponsor benefit plans.
In a letter to the Senate, Council President James A. Klein stated, “Sound health care reform legislation must protect the vitality of — and indeed strengthen — the employment-based health care coverage system that serves the vast majority of Americans. Regrettably, taken as a whole, the Senate bill still does not meet that test.”
“The Senate bill avoids some of the onerous provisions of the House of Representatives measure,” Klein said, “but unfortunately, it includes several others that are very problematic.”
Among the constructive features, in Klein's view:
• Employer flexibility. “Unlike the House bill, with its rigid benefit mandates, the Senate bill generally allows employers to tailor their benefits to the needs of their workforce,” Klein said.
• ERISA pre-emption. “The Senate bill preserves the long-standing federal regulatory framework that keeps employer-sponsored benefits equitable and affordable for all workers, regardless of geographic location, and unlike the House bill, does not expose employer-sponsored coverage in an insurance exchange to costly state law remedies,” he noted.
• Wellness incentives. “Unlike the House bill, the Senate bill permits employers to offer stronger incentives to individuals who participate in wellness and chronic disease management programs, which will lower costs in the long run,” he commented.
• Avoidance of far-reaching provisions that would threaten to destabilize employer coverage. “The Senate bill avoids other provisions — such as the House-inspired retiree health plan restrictions and Sen. Ron Wyden’s, D-Ore., ‘free choice’ amendment — which would have significant unintended consequences for employer plan sponsorship. Such provisions would likely compel many employers to exit the system rather than absorb steep cost increases or pass them along to their employees,” Klein contended.
'Urgent' Improvements Sought
However, there remain a number of areas in which the measure would seriously, and negatively, impact employer-provided health care, Klein cautioned, identifying several outstanding issues:
• The “Cadillac” plan tax. “Despite increased thresholds for the imposition of this new tax, large numbers of public and private employer plans are certain to exceed the new tax thresholds, simply because health care costs are increasing at many times the rate of typical inflation. If left to stand, this tax will eventually force employer plan sponsors to make significant benefit changes to avoid additional taxation,” he observed. (See Employers Would Reduce Health Benefits to Avoid Excise Tax.)
• The retiree drug tax. “Taxation of the subsidy for Medicare-eligible retirees’ prescription drug coverage will not only compel employers to curtail these programs, it will ultimately hurt seniors and push additional costs to the already-overwhelmed Medicare program,” according to Klein.
• An annual tax on insurers and third-party administrators: “The Senate bill imposes an annual tax on insurers on the premiums they collect and their earnings for administering self-insured employer plans, and these taxes are clearly going to be passed long to employers and employees resulting in higher costs,” he warned.
• Long-term care programs. “The Council supports efforts to provide adequate lifetime care for the elderly and disabled, but the Senate bill’s establishment of a new public long-term care insurance program will confer burdensome administrative responsibilities on employers and establish a large new funding obligation if premiums for these new benefits are not sufficient,” he charged.
• Lack of liability reform. “Despite lawmakers’ repeated intention to ‘bend the cost curve,’ the Senate measure includes no meaningful medical liability reform, which nearly everyone acknowledges would reduce costs,” Klein concluded.
Klein said his group was prepared to support health care reform "if it is done right — on a bipartisan basis, with consideration for the economic challenges facing employer health plan sponsors.”
Senate Health Bill Would Curtail FSAs
Following the introduction of the Senate health care bill, Joe Jackson, chairman of Save Flexible Spending Plans, an advocacy organization, and CEO of WageWorks Inc., a benefits provider, took issue with the bill's provisions limiting contributions to health care flexible spending accounts (FSAs) to $2,500 annually.
FSAs are voluntary, account-based plans that enable participants to use pre-tax dollars to pay for eligible out-of-pocket health care expenses including prescription drug co-pays, vision and dental costs, office visits and medical supplies. Currently, limits on contributions to FSAs are set by individual employers.
“It is disappointing that the Senate is determined to fund health care reform by restricting access to flexible spending accounts, a valuable benefit relied upon by more than 35 million Americans to help hold down health care costs," Jackson said. "Especially damaging to plan participants is the Senate bill’s failure to index an already unreasonably low $2,500 cap on FSA contributions. Failing to adjust the cap for inflation will cause the value of a $2,500 FSA to plummet to less than half that amount within a decade."
The Senate bill, he added, "will force approximately seven million hard-working Americans who use their FSAs to cover out-of-pocket health care expenses greater than $2,500 to pay higher taxes and health care costs." And federal employees, who currently have a $5,000 limit on FSA contributions, would see their access to FSAs cut in half.
Individuals and families with chronic illnesses typically receive the most benefit from FSAs, Jackson contended. They incur annual out-of-pocket expenses averaging $4,398 per year, the Robert Wood Johnson Foundation found—well above the proposed limit. Approximately 44 percent of Americans have one or more chronic conditions.
"Sadly, those with the highest out-of-pocket health care costs—the sickest—will be hit the hardest by restrictions on FSA use," Jackson warned. "The bottom line is FSAs work and should be persevered. They empower millions of Americans to play a more active role in managing their health care and getting the care they need while keeping costs down—a major goal of health care reform.”
According to a recent survey by Mercer, an HR consultancy, FSAs are offered by 27 percent of all U.S. employers, and by 85 percent of those with 500 or more employees. The average employee contribution is $1,424.
Stephen Miller is an online editor/manager for SHRM.
Employers Would Reduce Health Benefits to Avoid Excise Tax, SHRM Online Benefits Discipline, December 2009
Employers Hold the Line on Health Benefit Cost Increases, SHRM Online Benefits Discipline, November 2009
House Passes Landmark Health Reform Bill, HR News, November 2009
SHRM Statement in Response to House Health Care Vote, SHRM Government Affairs, November 2009
House Passes Reform Bill; Issue Now Moves to the Senate, SHRM Government Affairs, November 2009
SHRM Online Benefits Discipline