Should Employers Be Concerned About Health Care Reform and Other Proposed Legislation?

We have all seen the beautiful effect of sand moved by strong winds thereby creating unique patterns of hills and valleys known as sand dunes. These dunes constantly evolve, as does health care reform. In early January, health care reform seemed almost inevitable, and then came the wind of change through the election of Massachusetts State Senator Scott Brown as the 41st Republican in the U.S. Senate. Following the election, political commentators expressed conflicting views as to whether health care reform remained viable. Recently, in his State of the Union address, President Obama challenged Congress, “if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.”

Currently, the House of Representatives and the Senate have each passed their respective versions of health care reform legislation. And each was roughly 2,000 pages. While neither Bill has been portrayed as employment legislation, both place significant demands on employers. It is impossible to predict when, or even if, health care reform will pass. Moreover, the look of health care reform may change like the sand dunes, with the winds. However, certain key employer obligations presumably will be contained in any final health care reform legislation.

Health care reform will likely offer employers a “play” or “pay” alternative. Employers will either “play” by offering their employees a health care plan that provides coverage for essential services, or they will ”pay” an assessment because their employees are using the government regulated health plan. The extent of the “playing” and “paying” has been the subject of much debate. For example, concern exists as to whether employers will have to “play” or “pay” for all employees, including part-time, seasonal and temporary employees or just full-time employees. Full-time employees have been defined as those working an average of 30 plus hours per week. Under the Senate Bill, even if an employer was willing to “play” by offering coverage to its employees, the employer may still be required to “pay” if an employee opts out of the employer’s plan and chooses the government subsidized coverage. The House’s “play” or “pay” mandate requires a “playing” employer to pay up to 72.5% of the premium or else “pay” a fee into the government program. Plus, rigorous standards being placed on employer-sponsored plans may cause companies simply to opt to “pay” rather than “play.”

A potential benefit to employers under health care reform may be a federal reinsurance program providing reimbursement to employers for part of the cost for providing health benefits to retirees and their families (who are older than age 55 but are not yet eligible for Medicare). The program would reimburse employers a percentage of the cost of the retiree benefits that exceed a threshold limit. Employers must use the reimbursement payments to lower the cost for the employer-sponsored plan. They cannot be used as general revenues of the company. Remembering, of course, increased federal oversight would be associated with the receipt of federal funding.

Amidst the various methods of providing and paying for health care coverage, there are other unique provisions such as the one requiring employers to extend unpaid break time to employees to allow them to express breast milk for their infants up to one year after the birth of the child. Additionally, employers must supply a private location free from intrusion. Smaller employers may be exempt from this provision, but only if such breaks would “impose an undue hardship” on the employer, a difficult standard to satisfy.

Employers will have increased reporting and notice obligations. For example, employers will be required to disclose the aggregate value of employer-provided health coverage on employees’ W-2s. Employers may also be required to automatically enroll their employees in a long-term care insurance program known as CLASS (Community Living Assistance Services and Support Program) offered through the Department of Health and Human Services. Because health care reform will have these and various other mandates and reporting requirements, federal regulatory authorities will increase their auditing of employers. In order to determine compliance, audits will likely include a review of company records as well as records of independent contractors whom the employer deems are not eligible for health care coverage. Thus, the definition of "employee" under health care reform will be critical for employers.

Moreover, health care reform legislation could transform the regulatory framework established by the Employee Retirement Income Security Act of 1974 (ERISA). This federal framework governs litigation relating to employee benefit plans and has been a long established method by which employers and employees have understood their respective rights and responsibilities under employer-sponsored health care plans. The proposed health care reform legislation may allow waivers to states regarding numerous aspects of the employer responsibility provisions.

These waivers could undermine the uniformity of rules applicable to employers who offer health care benefits to their employees.

There is no question that the Obama Administration and Congress have been bogged down by health care reform for many months, and while health care reform remains unsettled going forward, other employment legislation may take center stage. With the Obama Administration touting a pro-employee agenda, legal practitioners should maintain a keen awareness of not only health care reform but other legislative and regulatory action that may change the landscape of employment law. Some proposed bills to keep an eye on include:

1. Employment Nondiscrimination Act (ENDA) which essentially deems gay, bisexual, or transgender as protected classes;
2. Healthy Families Act which provides employees with seven days of paid sick leave per year;
3. Family Medical Leave Enhancement Act and Family Fairness Act (FMLA Amendments) which extends FMLA coverage to employers of 25 or more employees and expands FMLA leave to include a child’s education or extracurricular activities as well as a relative’s medical appointments, and the latter expands coverage to include part-time employees;
4. Paycheck Fairness Act shifts the burden on equal pay cases to employers who must prove that differences in pay are not gender-related but rather related to job performance;
5. Protecting Older Workers Against Discrimination Act effectively reverses the U.S. Supreme Court’s decision in Gross v. FBL Financial Services finding that a “mixed motive” case is not proper under the Age Discrimination in Employment Act;
6. Arbitration Fairness Act which basically prevents arbitration of employment disputes unless provided for under a collective bargaining agreement; and
7. Employee Free Choice Act (EFCA-which doesn’t have much chance of passing in its current form) eliminates the secret ballot election for union representation and requires binding arbitration for first contract collective bargaining agreements.

Employment legislation and regulation remains at the forefront of Congress’ and the Obama Administration’s agenda. Health care reform and the host of other “alphabet soup” bills can significantly impact the relationship between employer and employee. Even if the passage of new legislation is dimmed by the current makeup of the Senate, the Administration does have the power to step up and even change the method of enforcement of existing laws. So, what may not be possible through legislative measures may be feasible through regulatory means. Thus, depending on how the winds of change blow and where the dust settles, the landscape of employment law could look different this time next year.

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