Proposed health care legislation to set new standards in employer-based insurance system

If proposed health care legislation is enacted, it would set new standards in the employer-based insurance system. Approximately 18.4 million Californians and 161 million Americans under the age of 65 rely upon employer-based insurance for their health care coverage.

Both House and Senate versions of reform legislation entail specific requirements for employer-based insurance. While the vast majority of employees work for firms that currently comply with most new standards, reform legislation, if passed, would increase protection for many insured workers and their families in California. Firms that buy insurance in the small group market will be most affected by these changes.

A study based on a 2009 survey of 827 private firms with establishments in California finds that:

• The House bill would set limits on out-of-pocket expenses for all employer based plans; the Senate bill would do so for non-self-insured plans. 23 percent of California workers covered by employer plans currently have plans with no out-of-pocket limit, or a limit above those proposed in the bills.
• Lifetime maximum limits on benefits received under an employer plan would be eliminated for about 40 percent of Californians with job-based coverage under both of the bills. Since 89 percent of plans with maximum lifetime limits in 2009 had limits of $2M or more, the impact of this change will be minimal on most employers but meaningful for those employees who meet the limits.
• Both House and Senate bills stipulate that preventive benefits should not be subject to any cost-sharing, including a deductible. About ten percent of California insured workers are enrolled in a plan where preventive benefits are subject to a deductible.
• The House bill would require all employer plans to provide prescription drug coverage; the Senate bill would require small employers to do so. Currently 99 percent of Californians enrolled in an employer plan already have coverage for prescription drugs.
• 98 percent of employees with job-based coverage are in plans that pay at least 60 percent of medical costs on average, the minimum standard in the Senate bill.
• In the Senate bill, the waiting period for eligibility for coverage would be limited to 90 days. Currently, about six percent of covered workers are employed by a firm that requires more than 90 days to wait for eligibility.
• The Senate bill excise tax on high-cost plans would affect at least 17 percent of insured workers with single coverage and 14 percent with family coverage, with PPO plans and plans in the San Francisco area the most likely to be subject to the tax.
• Employer contributions toward the cost of coverage do not currently meet the contribution standard proposed by the House for 12 percent of single coverage enrollees and about 32 percent of family coverage enrollees.