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Senate Finance Committee Marks up Health Care Reform

September 28, 2009

The Senate Finance Committee is "marking up" America's Healthy Future Act, introduced by Chairman Max Baucus (D-MT). The bill outlines more than $850 billion in reforms aimed at expanding access and affordability of health care coverage, lowering costs, and promoting preventive care.

Affordability

The bill provides a refundable tax credit for low- and middle-income individuals to subsidize the purchase of health insurance. Beginning in 2013, tax credit will be available on a sliding scale for individuals and families between 134 and 300 percent of the federal poverty level (FPL) to help offset the cost of private health insurance. The bill creates state-based web portals or "exchanges" to help consumers find, compare, and purchase health care coverage in their ZIP code. In addition to offering standardized enrollment applications, insurance plans will be required to present their marketing and plan information in standardized formats. The exchanges will also assist consumers in determining their eligibility for health care affordability tax credits.

Employer Provisions

While the bill would not require employers to offer health insurance, beginning January 1, 2013, all employers with more than 50 employees that do not offer coverage will be required to reimburse the government for each full-time employee (individuals working 30 hours or more per week) receiving a health care affordability tax credit.

Excise Tax on High Cost Plans

Beginning in 2013, a 35 percent nondeductible excise tax will be imposed on insurance companies and plan administrators for any health insurance plan that costs more than $8,000 annually for singles and $21,000 for family coverage. The thresholds will be indexed for inflation, and a transition rule will increase the threshold for the 17 highest-cost states for the first three years. The tax will be applied to the amount of the premium in excess of the threshold; it would apply to self-insured plans and plans sold in the group market, but not to plans sold in the individual market.

W-2 Reporting

Employers will need to disclose the value of each employee's health insurance coverage on the annual Form W-2, effective beginning in 2010.

Limit on Contributions to Flexible Spending Plans

Under the bill, beginning in 2013, employees will permitted to contribute no more than $2,000 per year to health care Flexible Spending Accounts (FSAs).

Standardization of Definition of Qualified Medical Expenses

Beginning in 2011, the definition of qualified medical expenses for Health Saving Accounts (HSAs), health FSAs, and Health Reimbursement Accounts (HRAs) will be changed to reflect the definition used for the itemized deduction. An exception to this rule would allow amounts paid for over-the-counter medicine with a prescription to still qualify as medical expenses. However,, employees would no longer be able to obtain reimbursement from their FSAs for the non-prescription purchase of over-the-counter medicines that is available under current law.

Nonprofit Hospitals

The bill would establish new requirements for nonprofit hospitals beginning in 2010, including a mandatory periodic community needs assessment.

Outlook

The Finance Committee is expected to report the bill out this week. It will need to be merged with S.1679, the bill approved in July by the Senate Health Education Labor and Pensions Committee. Senate floor consideration of the combined health care package is anticipated to take place sometime in October.