The Baucus proposal and larger employers

Under the 200-page proposal (no bill text yet!) issued last week by Senate Finance Committee Chairman Max Baucus (D-MT) and scheduled for mark-up on Tuesday, an employer would not be required to offer health insurance coverage. However, employers with more than 50 employees that do not offer coverage would have to pay a fee for each full-time employee who receives a tax credit for health insurance through a state exchange. The new fee would kick in beginning January 1, 2013.

How is the fee determined? It’s a bit complicated, so stay with us. Employers will be required to pay a flat dollar amount for each employee covered through a state exchange. The dollar amount will be contained in a fee schedule to be published annually by the Department of Health and Human Services. Generally, the flat dollar amount would be equal to the average tax credit offered in the state exchanges. (The payments would be contributed to a general fund and would not be linked to the individual employees.)

The good news for employers is that this fee is capped. The total fee for any one employer cannot be higher than an amount equal to $400 multiplied by the employer’s total number of employees. So consider, for example, an employer with 100 employees that does not offer insurance and has 30 employees receiving a tax credit in a state exchange. If the HHS flat fee is set at $3,000, then under the HHS schedule that employer should owe $90,000. Given the cap, however, that employer must pay only $40,000.

What’s been the reaction to the fee proposal so far? Some progressives aren’t happy—they’d prefer a less complicated fee structure. Other SFC Democrats have signaled they want to change the employer responsibility provisions as well.

So, is this proposal likely to be included in any final bill (assuming we get that far)? Well, with over 500 amendments awaiting discussion by the committee (if you really want to, see here, here, and here), what do you think?