President Obama Signs Historic Health Reform Legislation – Many Provisions Impact Employer Health Plans
By: Lesley A. Russo , Jill E. Hall and Lenna R. Chambers

President Obama’s campaign promise of major health care reform comes to fruition today as he signed historic legislation adopting widespread changes to health care in the United States.  The twists and turns in health care reform are far from over, however.  Only one part of the reform package has actually been signed into law.  This part is House Resolution 3590, called the Patient Protection and Affordable Care Act and passed by the House on Sunday.  It is the same health care reform bill passed by the Senate in December 2009 (which is why although technically a House Resolution, it is often referred to as the Senate’s health reform bill, or the “Senate Bill”).  The second part of the reform package, House Resolution 4872, called the Health Care & Education Affordability Reconciliation Act of 2010 (the “Reconciliation Act”), is actually still under consideration by the Senate. 

Why this two-part legislative process?  
To break the juggernaut in the legislative process.   By approving the same health care reform bill passed by the Senate in December, the House was able to immediately send a health care reform package directly to President Obama for signature.  The House desired a number of changes to the Senate Bill, but instead of amending H.R. 3590, which would have required the bill to go back to the Senate to be once again debated and approved by 60 members, it passed H.R. 3590 to President Obama, and passed a separate bill (H.R. 4872) including the desired changes.  As an appropriations (or budget) bill, H.R. 4872 needs only 50 votes in the Senate.  H.R. 4872 is under consideration and although House Democrats are hopeful that this second bill will be approved by the Senate this week, the political wrangling has already begun. 

Where does this leave employers?
In limbo at the moment.   H.R. 3590 has now become law.  It is a voluminous bill (more than 2,000 pages) that will take some time to completely digest.  Many of its provisions would be changed if the second bill (H.R. 4872) passes the Senate and is signed by President Obama. In addition, ten state Attorneys General filed suit today, challenging the constitutionality of HR 3590.  This lawsuit is not expected to be resolved quickly, and even if successful, would change only some of the provisions adopted by the federal government.  It is also clear that many of the new provisions will require extensive regulatory explanations over the years to come.  The effective dates of the changes also stretch over the next 9 years, making it likely that further changes will be debated and made in the years to come. 

Employer Health Plan Changes (2010-2011)
Given the above uncertainty, below is a recap of a few of the major employer health plan reform provisions as of today and based solely on President Obama’s signature of H.R. 3590:

• Dependent Coverage:  Change in dependent definition mandating coverage for unmarried children up to age 26
• Lifetime Benefit Maximums:  Prohibited
• Annual Benefit Maximums:  Restricted per federal regulations to be issued
• Out of Pocket/Cost-Sharing Provisions:  New standards imposed
• Preexisting Condition Exclusions:  Eliminated for children under 19 (extended to adults in 2014)
• Eligibility:  Nondiscrimination rules apply  
• Flex Plan, Medical Reimbursement Plans:  Reimbursement prohibited for over-the-counter medications

The above changes are only a few of the many enacted provisions.  These changes generally become effective for the first Plan Year beginning after 6 months from today.  For calendar year plans, this is January 1, 2011.  Importantly, H.R. 3590 includes a grandfathering provision exempting existing group health plans from most of the above requirements. This grandfathering provision, however, would be eliminated if H.R. 4872 is passed by the Senate and becomes law.  It will therefore be critical for employers currently sponsoring group health plans to monitor the Senate developments. 

Other Employer Health Care Changes Beyond 2011
Many of the provisions bandied about in the political forum and in national news (such as the “pay or play” provisions or the tax on “Cadillac” health plans) will not become effective for several years (2013 or 2014 for many of these provisions).  Brief highlights follow (these reflect only from H.R. 3590):

• Employer Coverage Mandate (”Pay or Play”): Employers must provide health coverage or pay a $2000 per employee tax  (2014 effective date)
• High Cost Group Health Coverage (“Cadillac Plans”):  New tax imposed (2018 effective date)
• Waiting Period:   Cannot exceed 90 days; tax imposed for periods between 60-90 days (2014 effective date)
• Automatic Enrollment:  Required for employers with over 200 employees (2014 effective date)
• Health Care Flex Spending Account Limits:  $2,500 per year (2013 effective date)
• State Created Health Insurance Exchanges:  Created to provide coverage to small businesses and individuals (2014 effective date)

We are continuing to analyze these new legislative provisions and will provide follow-up alerts in the upcoming days and weeks.  We are also closely monitoring developments in the Senate as the outcome of the Reconciliation Act (H.R. 4872) is of critical importance in understanding the overall impact on employer group health plans. 

If you have questions in the interim, please contact Lesley Russo at 304-347-1717 or lrusso@bowlesrice.com, Jill Hall at 304-347-1128 or jhall@bowlesrice.com or Lenna Chambers at 304-347-1777 or lchambers@bowlesrice.com.