If President Obama’s health-insurance reform package gets enacted in anything like its current shape, the role of employers as benefit providers will shift from that of a steward to that of a gatekeeper, accounting industry lobbyists and consultants say.
In other words, corporate executives will have far less leeway in designing their company’s benefits because the federal government would be dictating more about how plans should be structured, according to representatives of Ernst & Young who spoke during a Webcast last Thursday.
One of the provisions under discussion in the Senate would limit the current tax exclusion for employees who receive employer-provided benefits. If employees are taxed in this way, “the employer’s going to be a gatekeeper, collecting tax through payroll systems,” said Anne Phelps, an E&Y Washington counsel.
Although no reform bill is now given much of a chance of enactment before Congress’s summer recess, Phelps predicted that a reform plan will become law by the end of the year. “I do still think there is a huge, huge push on the part of the President and Congress to enact health-care reform in 2009,” she said. (The House and Senate summer recesses are slated to start on August 3 and August 10, respectively.)
Under the plans envisioned, there would be much more insurance regulation at the federal level, including coverage guarantees and the elimination of preexisting-condition coverage exclusions, according to Phelps. “It’s very, very significant that for the very first time, we’re moving into mandatory rather than voluntary” employer-provided benefits, she said. “There’s going to be some loss of control by an employer of his benefit package.”
Under “pay or play” options currently on the table, employers would be required to either provide coverage above a certain threshold to employees or make a payment to a health-insurance exchange. Under the proposals, the insurance exchange is envisioned to be a national or state-based network of providers that will enable people and small businesses to shop for health-insurance coverage.
Currently, there are three major bills — one in the House and two in the Senate — that seek to spell out a program for health-care reform. The House bill is the product of the work of three committees: Ways and Means, Education and Labor, and Energy and Commerce. In the Senate, one bill stems from the Health, Education, Labor, and Pensions Committee and one is from the Finance Committee.
The decision to pay or play under a health-reform system — even the purely financial aspects of the decision — won’t exactly be a no-brainer for many employers. Under the three-committee House bill, for instance, employers who choose to play would be required to make a minimum contribution toward a qualified health-benefit plan of 72.5% of the premium for covering an individual and 65% of the premium for covering a family, according to E&Y. Employers who choose to opt out of the game of providing benefits, on the other hand, would have to pay 8% of an employee’s average wages to the health-insurance exchange.
To make the pay-or-play choice, employers would have to perform an analysis that takes into account the wage base — including the wages of highly paid employees — on which the 8% tax would be paid, according to Gary Gasper, an E&Y Washington counsel. “It could hit different employers differently,” he said.