Budget Deal Eliminates Employer-Paid Health Care Vouchers

By Ilyse Schuman, Littler Mendelson PC Apr 20, 2011

The federal budget bill signed into law by President Barack Obama on April 15, 2011, repealed a health care reform law provision that would have required employers to offer low-wage workers company-paid vouchers to buy coverage in state health insurance exchanges.

Overall, the Department of Defense and Full-Year Continuing Appropriations Act(H.R. 1473), which funds the federal government though Sept. 30, 2011, cut approximately $13 billion in appropriations from the president’s funding request for the U.S. departments of Labor, Education and Health and Human Services.

Employer-Paid Vouchers Axed

Among the spending cuts, the budget bill eliminated the Free Choice Voucher program under the Patient Protection and Affordable Care Act (PPACA). The program would have required employers to provide low-income workers who declined their employer’s health care coverage with an employer-paid voucher to seek potentially cheaper plans in the health insurance exchanges, scheduled to launch in 2014.

Under the program, employees with household incomes at or below 400 percent of the federal poverty level, and whose required contribution for minimum essential coverage through their employer's plan exceeded 8 percent but was less than 9.8 percent of their household income, would have been eligible for employer-paid vouchers. The amount of the voucher would have been the amount the employer would have contributed toward the employee's coverage.

Other Health Care Reform Changes

In addition, the budget bill eliminated the PPACA's government-funded Consumer Operated and Oriented Plan (CO-OP) program, designed to foster the creation of nonprofit health insurance issuers that would have offered qualified health plans in the individual and small group markets. These plans were intended to compete with the private insurance market.

Notably, the budget bill omitted broader efforts to defund the PPACA. The bill does, however, direct the Government Accountability Office (GAO), among other things, to issue a report on the PPACA's implementation and conduct an audit on annual limit waiver requests. In addition, the measure requires the Centers for Medicare & Medicaid Services to submit to Congress a Medicare actuarial analysis of how applying certain PPACA requirements will impact projected premium amounts.

Earlier in April 2011, Congress passed and President Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act (H.R. 4), a measure that repeals the controversial Form 1099 expanded information reporting requirements that were included in the PPACA (see the SHRM Online article "President Signs Repeal of 1099 Tax Provision").

Ilyse Schuman is part of law firm Littler Mendelson's government affairs practice, which provides clients with strategic counsel and substantive knowledge on legislative and regulatory developments impacting employers. A former top congressional staffer and policy advisor, she worked on the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) from 2001 to 2008.

The above article is excerpted from the Washington DC Employment Law Update published online by Littler Mendelson PC, the national employment and labor law firm. Reposted with permission.

Editor’s Note: This article should not be construed as legal advice.

Implications for Plan Sponsors

For plan sponsors, the elimination of the free-choice vouchers is the most significant change to the Patient Protection and Affordable Care Act (PPACA). The free-choice voucher would have required plan sponsors to provide vouchers to a limited group of employees who had employee premiums that represented between 8 and 9.5 percent of household income. The provision would have been extremely difficult to administer and some experts have stated that it could destabilize plans by allowing certain groups to opt out of employer coverage. Elimination of the voucher program makes it easier for plan sponsors to determine the impact of other aspects of the PPACA, such as the excise tax or free-rider penalty, on plan benefits.

Source: "Appropriations Act Repeals Affordable Care Act “Free-Choice Voucher” Rule," Capital Checkup (The Segal Company).​

Job Finder

Find an HR Job Near You
Post a Job


Find the Right Vendor for Your HR Needs

SHRM’s HR Vendor Directory contains over 10,000 companies

Search & Connect