Health Care Reform: House & Senate Bill Breakdowns

On Christmas Eve, the Senate passed their version of the health care bill, bringing America one step closer to a new universal health care system. The House version of the health care bill was passed in November, each with their own set of rules and regulations. Now, we play a waiting game. President Obama and his team will now reconcile the differences between the two bills into one bill. The final bill will be voted on by each chamber before being signed into legislation by President Obama. The House and Senate Health Care Bills are VERY different on very important issues that all Americans, especially small business owners, need to be aware of. Below are various topics included in both the House and Senate health care bills broken down, as well as some FAQ about what this means for small business owners.

Abortion

  • The House bill would ban abortion from being covered in the new public plan EXCEPT in the cases of rape, incest, or threat to the mother's life. It also bans people from using government subsidies to purchase private plans with abortion coverage on the exchange.
  • The Senate bill would essentially create a "firewall" to prevent federal subsidies from going towards abortion coverage. In plans that do cover abortion, beneficiaries would have to pay for it separately, and those funds must be kept in a separate account from taxpayer money.


Affordability(note: the costs for individuals will vary by income bracket)

  • Under the House bill, people receiving subsidies would never be required to pay more than 9.8% of their income towards health insurance. Those individuals NOT receiving government subsidies would never be required to pay more than 6.6% of their income towards health insurance.
  • Under the Senate bill, people receiving subsidies would never be required to pay more than 12% of their income towards health insurance. Those individuals NOT receiving government subsidies would never be required to pay more than 18.7% of their income towards health insurance.


Cost

  • The House bill costs $1.1 trillion dollars over a decade, which is over Obama's $900 billion health care spending cap.
  • The Senate bill would cost $871 billion over a decade.
  • The cost for plans for individuals cannot be predicted yet. Income, number of family members, subsidies, employer assistance, insurance policies, state of residence, and other factors contribute to finding out the cost of an insurance policy. Small business owners can gauge about how much they would spend per employee on insurance based on the number of employees, payroll, and cost of insurance that they currently provide. Again, the criteria is still just an estimate; more conclusive information will be available when the bills are merged.


Employer Requirements

  • The House bill requires employers to contribute to health care insurance for employees. Businesses with payrolls under $500,000 are exempt.
  • The Senate bill does not require employers to provide any health insurance. But, the bill would charge companies with over 50 employees a penalty for any employee whose health insurance ends up subsidizing. Additionally, a tax credit would be available for small businesses with fewer than 25 employees and $50,000 in average annual wages. A full tax credit would be available for small businesses with less than 10 employees and $25,000 in average annual wages.


Financial Assistance

  • Under the House bill, subsidies are available to those making up to 400% of federal poverty level (currently $88,000 per year for a family of four) for health insurance premiums. It would expand Medicaid eligibility for low-income individuals and families, cover new preventive services, and increase payments for checkups.
  • The Senate bill also includes subsidies for those making up to 400% of federal poverty level, and expands the Medicaid program to include those making 133% of the federal poverty level.


Funding

  • The House version draws on the wealthy to help fund public health insurance, levying surtaxes on anyone earning more than $500,000.
  • The Senate version imposes a 40% tax on every dollar above the $8,500 threshold for individual insurance premiums and $23,000 for families of four. This is more commonly known as the "Cadillac plan."


Help for Individuals & Small Businesses

  • The House bill sets up "insurance exchanges," in which those who are newly required to get insurance will have the opportunity to shop around to find a good policy. Until the exchanges are set up in 2013, the bill offers immediate assistance to those who have been uninsured for several months or denied a policy because of preexisting conditions.
  • The Senate bill also includes "insurance exchanges," and would open in 2014.


Illegal Immigrants

  • The House version addresses illegal immigrants but refuses to grant them federal funds, allowing them to buy insurance on their own.
  • The Senate bill denies illegal immigrants coverage even if they can pay for it themselves.


Individual Requirements, Mandates, & Penalties

  • Under the House bill, those who fail to buy health insurance face a penalty of up to 2.5% of their income.
  • Under the Senate bill, those who fail to buy health insurance face a penalty of $95 in 2014 and reaches $750 in 2016 for adults or $2,250 per family, maxing out at 2% of income.


New Taxes

  • The House bill would tax the wealthiest Americans. Individuals making over $500,000 and families making over $1,000,000 would pay a surcharge on a portion of their income. This would take affect in 2013.
  • The Senate bill would impose a 40% tax on high-cost health insurance plans, which are those plans valued over $8,500 per individual or $23,000 per family. Additionally, the bill charges a 10% tax on indoor tanning services and increases Medicare payroll taxes, ranging from 1.45% - 2.35%,  on individuals making over $200,000 per year and couples earning more than $250,000 per year. This would take affect in 2014.


Public Option

  • The House bill creates a government-run insurance program that offers plans in competition with the private market. The government would negotiate rates with health care providers. This plan INCLUDES a public option. Medicare expansion would cover more Americans under this bill.
  • The Senate bill does NOT include a public option. Instead, the bill offers national health exchanges, which are private plans regulated by the government, specifically the Office of Personnel Management. This bill draws on Medicaid to expand their coverage.



What does this mean for you?
What does this mean for YOUR small business?


What it boils down to is this: Every American will be required to obtain health care insurance or face annual penalties. There are different requirements for employers in the House and Senate bills.

  • House bill: Most employers that don't provide coverage that meets the minimum standards will pay a tax equal to 8% of their payroll, which provides cause to believe more people will be insured with health care by employers than on their own.
  • Senate bill: A smaller annual fee of $750 per full time employee against employers that do not provide insurance leaves officials believing that less people will be insured through their employers.
  • The penalties are higher in the House bill than in the Senate, which is why more people will be covered by employers if the House version passes.


Small businesses who meet the regulations for receiving tax breaks and are able to shop around for health plans will benefit the most from national health care reform. Unfortunately, many problems arise from spiraling effects of implementing sweeping national reform. Some of the minimum benefit requirements in the House and Senate bills would make insurance too expensive, causing them to drop what they already have than to upgrade their health insurance policies. Some small businesses would even save money by dropping insurance all together and paying the penalty fine.

This brings up an interesting question for small business owners: Is there a "hidden" incentive to eliminating employees to receive various benefits and breaks as a result of health care reform? If you are paying an outrageous amount of money to provide your employers with health care that needs to be upgraded in the reform bill, in some cases, it would be cheaper to drop the insurance and pay the fine. This calculation has many small businesses thinking about what they are going to do in the future regarding number of employees, tax credits, and the cost burden to upgrade insurance.

There are many, many things to think about as a small business owner upon the new regulations for universal health care. But, for now, all we can do is sit back and wait for Obama and his team to combine the two bills and decide the fate of our great nation.