On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (H.R. 3590) and shortly thereafter the Health Care and Education Reconciliation Act of 2010 (H.R. 4872), which changes health care as we know it.  In the coming years there are many adjustments that construction companies need to be aware of in order to comply with the new law. 

The Process
On March 21, 2010, the House voted to pass the health care reform bill that was previously passed by the Senate in December 2009, which made the bill available for the president to sign into law.  After passing the Senate bill, as is, the House then passed a "reconciliation" bill that made several changes to the law. It was then sent to the Senate, modified and passed again by the House. 

While there is a lot of information and commentary about state lawsuits and other efforts to repeal portions of the law, the fact of the matter is that on March 23, 2010, health care reform became "the law" and employers will have to begin complying.  Now that the dust has settled on the bill, AGC will continue to seek regulatory guidance and compliance assistance tools for its members as information becomes available.  

Is your company required to provide health insurance to employees?
The quick answer is "No," companies don't have to provide health insurance to employees. But if your company chooses not to, beginning on January 1, 2014, there may be stiff penalties to pay.  Under the new law, employers with 50 or more employees who choose not to offer qualified health coverage to employees will have to pay $2,000 per full-time employee, excluding the first 30 employees from the assessment, each year if at least one full-time employee receives income-based premiums assistance to purchase coverage through an Exchange.  The number of full-time employees can be determined by adding the number of employees who work an average of 30 hours per week in a month to the calculated number of part-time workers.  This calculation requires employers to divide the total number of hours worked in a month by employees who work fewer than 30 hours per week, by 120.  Originally, there was a requirement that only construction contractors with fewer than five employees be exempt from the penalty, but AGC worked with other construction trade groups to repeal this provision that targeted the industry.  Now, all companies with fewer than 50 employees are exempt from the penalty.     

Available small business pooling options and tax incentives designed to entice those small businesses to offer health coverage may do just that.  For example, by 2014, a Travelocity-like health care exchange system will be created for businesses with fewer than 100 employees to pool together and shop for affordable healthcare plans.  Until then, companies with 10 or fewer employees earning less than an average of $25,000 will be eligible for a tax credit of 35 percent of health insurance costs.  Companies with 11-25 employees with an average wage up to $50,000 are eligible for partial tax credits. Once the exchange is created, the tax credit will increase to 50 percent for the first two years coverage is purchased through the exchange and then the credit would end.  While these tax credits are retroactive to January 1, 2010, it has not been determined how the credit will be claimed. 

In addition to the tax credits, grant programs will also be created to help small and mid-sized companies develop and strengthen workplace wellness programs.

What if your company already provides health insurance?
If your company already provides health insurance coverage for employees, there are still a few things to consider and anticipate.  For example, beginning in 2014, employers who offer health benefits but have at least one employee who applies for a federal subsidy to purchase insurance on their own would be subject to a an annualized penalty of $3,000 for each employee who has qualified for subsidized coverage.  Employees are eligible for the federal subsidy if the employer provided plan does not have an actuarial value of at least 60 percent or if the employee share of the premium exceeds 9.5 percent of their income.  In addition, employers may still be required to help low and middle-wage earners who opt out to buy coverage on their own.  Specifically, an employee who earns less than four times the federal poverty level, $88,200 for a family of four, will have the option to purchase coverage through the exchange.  In turn, the company would have to provide a "free-choice voucher," which must be equal to the amount paid to provide coverage to all other participating employees.  Furthermore, companies with more than 200 employees will be required to automatically enroll new hires into the health plan, but the new hire can voluntarily opt-out after enrollment if they choose.  There is no penalty for workers in a waiting period, but employers must limit the period to 90 days beginning in 2014.

Plans that were in effect on the date of enactment, March 23, 2010, are grandfathered-in and able to keep their existing coverage; however, they must still comply with the following requirements on their respective effective dates: no lifetime limits, restrictions on annual limits, restrictions on coverage rescissions, coverage of dependent adult children, coverage of dependent children with pre-existing conditions, coverage of adults with pre-existing conditions, and maximum 90 day waiting periods.

So, what should be done now?
The good news is that most of the major changes won't occur until January 1, 2014, so there isn't much that employers have to do right away.  There are several plan changes that insurance companies are required to make on your plan's renewal date, so expect to receive communication regarding these changes and communicate them to your employees and new hires appropriately.  The timeline below provides an explanation of when changes are expected to occur that may affect employers.

Note: While this article focuses mainly on the requirements for employers, for companies that self-insure, both the insurer and employer requirements are applicable. 

Today, the House released a draft reconciliation bill that will be used to move the Senate's Health Care Reform package that passed last December through Congress. A vote is expected by Sunday, March 21 in the House. If the bill passes on Sunday, it would be sent to the President for his signature, and the Senate would then begin the process of debating a reconciliation bill to amend the new law.

The process that Democratic leaders are taking is unprecedented for such a large piece of legislation and a provision that removes the small business exemption, commonly known as the Merkley Amendment, remains included in the bill. AGC is urging Congress to eliminate the provision for the following reasons: unions and construction associations who endorsed the amendment represent less than 15 percent of total construction employees and represent less than 3 percent of America's construction companies; the five employee and $250,000 threshold is out of line with the House bill and the Senate bills passed out of committee; the provision is out of line with other human resource laws and out of step with very common concerns about the impact of government regulations on small businesses; and, finally, the provision is an inexcusable and direct attack on small businesses in the industry most battered by the recession.

AGC urges members to continue to communicate on the need to remove this provision via the AGC Legislative Action Center.

Democratic leaders are finalizing health care reform legislation this week in a two step process. First the House will pass the Senate bill complete with payoffs to Nebraska, Louisiana and Florida. The bill also includes the Merkley Amendment that singles out construction by repealing the small business exemption for construction contractors employing as few as five people. The House and Senate Budget Committees will then work on a package that modifies the Senate bill. Democrats will use the partisan reconciliation process to pass the final bill. AGC is concerned the final bill will be similar to the Senate bill, which fails to control cost, reduces the quality of coverage and options for coverage, and will result in higher premiums.

The Merkley Amendment, a provision targeting small employers in the construction industry remains in the Senate bill and the only chance for removing it is next week when the Budget Committee amends the bill. The provision specifically targets the construction industry by removing the small business exemption to the employer mandate penalties only for construction firms. Congress originally exempted all businesses that employ less than 50 employees from the employer mandate due to the complexity and costs associated with the mandates in the bill. The change would require small employers in the construction industry to comply with all the employer mandates once they have five employees and their payroll reaches $250,000.

It is important for you to use the tools on the AGC Legislative Action Center to write your elected officials or to call their offices in opposition to the Democrats' approach to reform. Call the Capitol Hill switchboard (202) 224-3121 and ask for your member of Congress, or send a letter by clicking here.

Reasons to Oppose Provision Targeting Construction Industry:

• Few senators were aware of the provision and the amendment was never open to debate.
• The amendment was pushed by a small employer group representing less than 4 percent of construction companies.
• The provision differs from other employee and payroll thresholds elsewhere in the bill, as well as other labor laws and regulations.
• The construction industry is currently experiencing the highest unemployment of any other industry, 27.4%, triple the national rate.
• The provision prohibits small construction companies from having the opportunity to take advantage of the small business exemption that companies in every other industry are eligible for.

As President Obama and Democratic Leaders regroup from last week's White House summit on Health Care Reform, they have begun plotting a strategy and timeline for passage. It appears that the Democrats are considering moving the legislation at an accelerated pace, perhaps beginning as early as next week. In order to accomplish this aggressive timeline, it appears that they will have to pass the Senate bill and also utilize the politically toxic legislative process known as reconciliation.

The outcome of the process and final legislative package remains unknown at this time and some Democrats who initially opposed the legislation are being strongly urged to reconsider their vote by the Democratic leadership in order to ensure they have enough votes for passage in the House.

AGC has considerable concerns with both the process being utilized to enact this sweeping reform of the nation's health care system, as well as the policies in the bills. AGC has long advocated for health care reform that allows employers to provide affordable and quality coverage for their employees, but the current bills and policy changes being trumpeted by Democratic leaders fail to accomplish these goals.

In addition to concerns with rising taxes on individuals and employers, future projected increases on insurance premiums and mandates on employers, AGC remains opposed to singling out the construction industry. The original Senate bill excluded small employers in the construction industry from the small business exemption. While the outline released from the White House last week does not mention this provision, Senate Majority Leader Harry Reid (D-Nev.) has not voiced his opposition to it.

Please communicate with your members of Congress on health care reform and specifically on the construction industry employer provision by using the AGC Legislative Action Center.

Today's nationally-televised health care summit, as well as upcoming November elections, have renewed the urgency for a health care reform bill, despite problems reconciling the House- and Senate-passed versions. The summit included leaders of both parties and the White House.

In the days leading up to the summit, several Democratic senators explored using the partisan reconciliation process to pass reform that includes a public option against the desire of moderates in their party. While the president did release an outline of his own plan this week, it remains uncertain if Democrats will have an official agreement or if the Republicans will make significant contributions to the process.

The president's proposal attempts to bridge the gap between the House and Senate and the summary released outlines some changes to the employer mandate provisions.  The proposal:

•  Continues to cost about one trillion dollars.
• Requires employers to help defray the cost of coverage for their employees who receive tax subsidies to purchase health coverage on their own.
• Changes the transition to the employer responsibility policy for employers with 50 or more workers by subtracting out the first 30 workers from the payment calculation (e.g., a firm with 51 workers that does not offer coverage will pay an amount equal to 51 minus 30, or 21 times the applicable per employee payment amount).
• Changes the applicable payment for firms that do not offer coverage and have more than 50 employees to $2,000, one-third less than the average House assessment for a typical firm and less than half of the average employer contribution to health insurance in 2009.  (A significant note to the construction industry is the proposal applies the same firm-size threshold across the board to all industries, unlike the Senate version that singled out the construction industry.)
• Fully eliminates the assessment for workers in a waiting period, while maintaining the 90-day limit on the length of any waiting period beginning in 2014.

The Senate is expected to extend unemployment insurance and COBRA benefits later this week.

Despite problems thus far to deliver a health care reform bill to the president, Congressional Democrats remain committed to reconciling differences between the House- and Senate-passed versions, and may have an agreement soon. With a nationally-televised health care summit scheduled next week and November elections approaching, discussions and urgency has been renewed. The summit will include leaders of both parties and the White House.

As leaders prepare for the summit, several Democratic senators are exploring using the partisan reconciliation process to pass reform that includes a public option, against the desire of moderates in their party. It remains uncertain if Democrats will have an official agreement next week, if the president will present his own plan for reform, or if the Republicans will make significant contributions to the process.  Other issues that must be addressed include extension of unemployment insurance and COBRA benefits.

Republican Scott Brown's win in the Massachusetts special election is reverberating through Congress. It appears the House lacks enough votes to pass the Senate version of the legislation, which means the Senate and House leaders must continue to work on a compromise of their two differing approaches.

Democratic leaders appear unsure of the next move on reform, and are evaluating all of their options, which include passing a pared down bill using the partisan and controversial procedural motion known as reconciliation. AGC continues to monitor the developments and advocate for reform that is affordable and increases choice and competition in the marketplace. The current legislative proposals fail to do so.

The provision causing the most consternation for the industry is the language in the Senate bill that explicitly targets the construction industry. The provision places mandates on the smallest of construction companies to provide coverage or pay penalties if they have more than five employees and a payroll that exceeds $250,000. This provision is unique to the construction industry, as companies in other industries with less than 50 employees are exempt from the mandate. AGC continues to meet with members of Congress and congressional staff to educate them on the impact of this provision, which has resulted in members on both sides of the aisle writing the Democratic leadership on removing this language from the final package.

AGC's opposes the provision because: 1) few Senators were aware of it and it was never open to debate; 2) it was pushed by a small employer group representing less than 3 percent of construction companies; 3) it differs from other employee and payroll thresholds elsewhere in the bill, as well as other labor laws and regulations; and 4) the construction industry is currently experiencing the highest unemployment of any other industry, double the national rate.

In addition to AGC's direct lobbying, AGC members have heeded the call by sending thousands of letters and making phone calls to their elected officials, and AGC has joined with other trade associations to advocate on removing the provision.

The race to merge the House and Senate health care proposals continues, and once completed, the revised bill will be sent to the Congressional Budget Office to determine its cost. Despite the Democratic leadership's goal of presenting a bill to the president before the State of the Union Address, the negotiations remain fluid and the timeline continues to shift.

Democratic leaders are skirting the traditional conference procedures to merge the bills and have resorted to closed-door meetings to finalize the differences in the bill. These negotiations have centered around increasing the threshold for the "Cadillac" tax, a national health insurance exchange vs. a state-based one and the size of federal subsidies for low income individuals. Additional sticking points include the creation of a commission to recommend Medicare cuts and costs of Medicaid expansion.

The employer mandate, which would have a major impact on construction industry employers, is another issue that remains unresolved, as well as the small-business exemption associated with it and the penalty for not following the mandate. AGC remains concerned that the Senate singled out the industry most negatively impacted by the economic downturn, construction, with the Merkley amendment (named after the Oregon Senator who sought the provision, Jeff Merkley). AGC believes the amendment, which lowers the threshold for employer mandates from 50 employees to five, was astoundingly poorly-timed. Few senators knew the amendment was in the bill, and the unions and construction associations who endorsed the amendment represent less than 15 percent of total construction employees and less than 3 percent of America's construction companies. The Merkley amendment's five employee and $250,000-threshold is out of line with the House and Senate bills passed by committees. It is also out of line with other Human Resource laws and raises concerns about the impact of government regulations on small businesses.

AGC believes the provision is a direct attack on small businesses in the industry most battered by the recession. AGC remains committed to removing the provision during the conference negotiations and encourages all AGC members to utilize the Legislative Action Center to voice their opposition to the provision to their elected officials.

In a rare early morning vote today, the Senate passed the Patient Protection and Affordable Care Act, 60 to 39, along party lines with all Republicans opposing it (Jim Bunning (R-Ky.) did not vote).  The bill fails to lower premiums, increases federal health care spending, imposes $500 billion in new taxes on health care and small businesses and exacerbates the growing federal deficit.  The bill expands Medicaid and shifts millions in costs to the states, adds regulatory burdens that will add to the cost and risk of doing business for employers, and includes a waiting period that lacks flexibility and may result in fewer full-time workers and less hiring overall.

A change made to the legislation just this week singles out the construction industry. The provision, added by Senator Merkley (D-Ore.) singles out small construction firms for harsher treatment than any other industry. Whereas most employers with fewer than 50 workers that do not offer health coverage are exempt from fines and the new regulatory regime that applies to larger employers, under the newly added provision construction firms employing as few as five workers will be subject to health care coverage fines and regulatory requirements.  AGC received an overwhelming response from the call to action of the membership. In 24 hours, over 3,500 letters were generated to the Senate, giving voice to construction employers' displeasure with this amendment. The amendment appears to have been added without full knowledge of a number of senators in both political parties.

The legislation now moves into conference where it will have to be merged with the House. This process will involve the Democratic House and Senate leadership, the president and his aides. The final outcome of the legislation remains uncertain but Democratic leaders are guessing that the final outcome will be a bill similar to the Senate bill, and it will be delivered to the president for his signature in early 2010.

This week, AGC delivered a letter to Congress on the health care bill and the Merkley amendment. It remains important for the construction industry to remain engaged on the issue; although the process has moved into conference we must remain united in opposition to a public option, expansion of employer and individual taxes and excessive spending. It is extremely important to keep the pressure on Congress to remove the language excluding the construction industry from the small employer exemption. You can use the tools of the Legislative Action Center to voice your concerns.

The U.S. Senate began debate and votes on amendments to the "Patient Protection and Affordable Care Act." The Democratic leadership remains committed to holding a final vote on the legislation prior to Christmas, followed by sending a final bill merged with the House to the President in early January. The major hurdles for passage remain provisions on abortion, cuts to Medicare, the structure of a public option and immigration status issues.

Major employer groups like AGC remain opposed to the legislation because it does not reduce health care costs, will impose new mandates on employers, will likely increase the cost of employer provided health care, and could significantly increase human resource costs.

Beginning in 2013, the legislation would eliminate lifetime limits and rescissions, and extend dependent coverage to age 26. A year later, plans could no longer price policies based on preexisting conditions. The legislation includes an individual mandate with subsidies for low-income workers, and employer mandates that penalize some employers if employees receive government subsidies. The tax credits for small employers offer limited values. The bill expands Medicaid eligibility and reduces the growth in Medicare payments. It also places an excise tax on insurance plans with high premiums, as well as fees on insurance and manufactures of certain medical devices.

The construction industry is unique due to its fragmentation, relatively short duration of individual projects and the use of transient workers, making it susceptible to several provisions of the legislation. The failure of the legislation to define full-time, part-time and seasonal workers is a concern for many employers, and the use of other industries' definitions on the construction industry could contrast with our diverse work force needs. The short waiting period in the proposed legislation is particularly troubling due to the high turnover of employees in the industry. The capping of contributions to FSA accounts will remove today's health care options rather than increase them. Other concerns include the administrative burdens on employers to deliver increased paperwork to the government, how to handle credits, and partial payments as well as changes to COBRA benefits.

AGC remains concerned that the Senate bill shifts rather than contains costs and fails to offer more affordable choices to individuals and employers alike.  AGC is currently working on identifying ways to improve the legislation. AGC encourages members to use the Legislative Action Center to urge their senators to expand health care opportunities and innovation and not impose billions in taxes to fund the expansion of existing health care programs that should instead be reformed.

For more information, contact Jim Young at (202) 547-0133 or youngj@agc.org.