Builders Face Health Reform Without Onerous Provision
Just one week after landmark health care legislation became the law of the land, President Obama on March 30 signed a second reconciliation bill with “fixes” to the health care measure that include the elimination of an onerous provision targeting the construction industry.
NAHB worked closely with lawmakers to ensure that one of the changes incorporated in the second “corrections” measure (H.R. 4872) would strike a provision in the original health care bill (H.R. 3590) offered by Sen. Jeff Merkley (D-Ore.) requiring construction firms to provide health coverage if they employ five or more workers.
Small businesses in every other industry are exempt from providing mandatory health insurance if they employ 50 workers or less. As a result of NAHB’s efforts, the 50-worker threshold will now apply to all construction industry workers as well.
The vast majority of NAHB’s members are small businesses that employ fewer than 10 people. Approximately 60% of NAHB’s members build fewer than 25 homes per year and 80% have less than $5 million in annual receipts.
“NAHB led the charge to ensure that the Merkley language that unfairly singles out the construction industry and threatens the viability of countless home building firms across the nation was stripped out of the final health care legislative package,” said NAHB Chairman Bob Jones. “If this punitive provision had not been removed from the final bill, many small builders across the nation would have seen their businesses face a difficult financial burden.”
Setting up the chain of events leading up to the current health care reform provisions, the House late in the evening on March 21 in a rare Sunday session narrowly approved H.R. 3590 with no Republican support. Immediately after that, the House approved H.R. 4872, which contained a series of revisions to the legislation, including the elimination of the Merkley provision.
In the days and weeks before the vote, NAHB aggressively targeted key House Democrats to urge them to oppose H.R. 3590 and coordinated a coalition of construction organizations and supplier groups to oppose the language and insist that it be stripped from the legislation.
In addition to opening a booth on the show floor at the International Builders' Show where industry members could contact Congress in opposition to this provision, the association also sent out an alert urging all its grassroots members to call their representatives and insist that they oppose H.R. 3590 because of the unfair Merkley language.
On the day of the actual vote, NAHB sent a letter to every member of Congress designating a vote in opposition to H.R. 3590 as a key vote "given the detrimental impact H.R. 3590 would have on the home building industry."
Although the original bill did pass with the Merkley language intact and was signed into law two days later, the Senate immediately began consideration of H.R. 4872 and its package of amendments to overhaul the final health care legislation.
H.R. 4872 was debated by the Senate under special reconciliation rules that require only a simple majority to pass, and the bill prevailed on a 56-to-43 vote.
The measure was sent back to the House for one final vote after two minor provisions were removed due to a technical challenge by Senate Republicans. On March 25 the House approved the revised Senate package, which strikes the onerous Merkley requirement for small builders, and the measure was signed into law on March 30.
Though NAHB successfully led the effort in preventing enactment of an unfair, expensive measure that could have been devastating for the majority of its members, there are still other aspects of the massive health care overhaul that remain controversial. The legislation is extremely complex, and many of the provisions will have to be phased in over the coming years.
Below is a timeline analysis of the new law’s impact on NAHB members:
Small Business Tax Credit
A temporary small business tax credit will be made available for some firms that provide qualified health coverage. Only firms with 10 or fewer employees will receive the full credit. For a firm with 11 to 25 employees, the credit is reduced per employee. Firms with more than 25 employees get no credit. Additionally, only firms who pay their employees an average of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage increases, stopping when wages reach $50,000. Only firms covering 50% or more of insurance costs will be eligible for the credit, which will be available for a maximum of six years.
Children can stay on their parents’ insurance policy until age 26.
Employers will be required to report employees’ health benefits on W-2s.
HSA and FSA Limits
Consumers are prohibited from using Health Savings Accounts and Flexible Spending Accounts to purchase non-prescribed items, including over-the-counter medication (except insulin). The penalty for using HSA’s for non-qualified purchases increases to 20%.
Federally Subsidized Long-Term Care
Employers may voluntarily participate in the Community Living Assistance Services and Supports (CLASS) long-term care program. Participating firms’ employees will be automatically enrolled and subject to payroll deductions unless they choose to opt out.
Cafeteria Plans (Safe Harbor)
Employers will have to meet minimum contribution requirements to receive protection from nondiscrimination requirements under cafeteria plans.
Businesses will have to send Form 1099s for every business-to-business transaction of $600 or more.
Deductible Medical Expenses
New limits are placed on the deductibility of medical expenses on individual income tax returns. This provision raises the 7.5% floor on medical expenses to 10% of Adjusted Gross Income. The AGI floor for those 65 and older remains at 7.5% through 2016.
Broadened Medicare Hospital Insurance Tax Base
An additional surtax of 0.9% is placed on earned income in excess of $200,000 for individuals and $250,000 for couples. The surtax is not indexed to inflation. There will also be a 3.8% surtax on investment income for taxpayers with AGIs in excess of $200,000 for individuals and $250,000 for couples. The surtax is not indexed to inflation.
Cafeteria plan FSAs will be limited to a maximum of $2,500 (inflation-adjusted after 2013).
Health Insurance Exchanges
Exchanges are open to individuals and small businesses with up to 50 employees (individual states may opt to increase that number to 100).
The government begins subsidizing individuals up to 400% of the federal poverty line — $88,000 for a family of four. These credits will subsidize individuals purchasing insurance in exchanges (but not those with traditional employer-sponsored plans).
Medicaid Eligibility Expansion
The income level of Medicaid eligibility rises.
All U.S. citizens and legal residents must have qualifying health coverage or pay penalties. For an individual, the penalty begins in 2014 at the greater of $95 or 1.0% of household income. In 2015, it grows to $325 or 2.0%. In 2016, it reaches $695 or 2.5%. After 2016, the amount will rise by a cost of living adjustment.
The law contains a somewhat complex employer mandate requiring some firms to provide insurance, pay penalties, or both. For employers with 50 or fewer employees, there is no mandate or penalty. Employers with 200 employees or more will be required to automatically enroll employees in the employer’s health plans (employee may opt out). Otherwise:
- If there are more than 50 full-time employees, the employer does not offer insurance and one or more of the employees receives government premium subsidies, then the employer must pay $2,000 per subsidized employee, minus the first 30 employees.
- If there are more than 50 full-time employees, the employer offers insurance and one or more of the employees receives premium subsidies, then the penalty is the lesser of $3,000 per subsidized employee or $2,000 per full-time employee, minus the first 30 employees.
If an employee’s household income is below 400% of the federal poverty line and his or her insurance premium falls between 8% and 9.8% of household income, the employer must offer the employee a voucher to purchase insurance in the exchange. The voucher must be equal to the amount the employer contributes toward an employee’s premium. An employee with these characteristics will not trigger the employer penalties.
There are penalties for firms who have a waiting period of more than 90 days before employees are eligible for insurance.
Interstate Health Choice Compacts
Qualified health plans can be offered in all participating states, but insurers will be subject to the consumer protection laws of the purchaser’s state.
Large Employer Participation in Exchanges
States may allow large employers to offer coverage to their employees through the exchanges.
The government will collect a 40% excise tax on health coverage in excess of $10,200 annually for an individual or $27,500 annually per family.
To read legislation, click here and enter the bill number in the box at the upper center of the page.
For more information, e-mail Carlos Gutierrez at NAHB, or call him at 800-368-5242 x8242.