By a 220-215 vote, the House Nov. 7 passed a Democratic plan that contains a number of provisions that would affect the workplace, including a mandate for employers to either provide their workers with health insurance or contribute to health care benefit funds on their behalf.

The vote came after a presidential visit for support and a long day of contentious debate, not just between Democrats and Republicans, but also within the House Democratic Caucus. Thirty-nine Democrats crossed party lines to vote against the legislation, while only one Republican, Joseph Cao (R-La.), voted in favor.

Democratic supporters said their plan would expand access to health insurance and lower costs, while Republicans said the $720 billion in tax increases would further hurt an ailing economy and raise health care premiums.

With action on the Affordable Health Care for America Act (H.R. 3962) completed at this stage in the House, the debate now turns to the Senate, where leaders are trying to merge two bills (S. 1679, S. 1796 ) approved, respectively, by the Health, Education, Labor, and Pensions Committee and the Finance Committee.

President Obama welcomed the news of House passage and said he looks forward to seeing the Senate do its part.

“Thanks to the hard work of the House, we are just two steps away from achieving health insurance reform in America. Now the United States Senate must follow suit and pass its version of the legislation. I am absolutely confident it will, and I look forward to signing comprehensive health insurance reform into law by the end of the year,” Obama said in a statement.

Critics Say Bill Harmful to Business, Workers.

Business groups critical of the House bill said they are looking to the Senate to clean up provisions they say would be unworkable and harmful to both businesses and employees.

“[N]ews that unemployment has reached double digits for the first time in 26 years should have been a wake-up call for those considering job-stifling tax increases and employer mandates included in the House health care bill,” Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce, said in a posting on the group's website.

“Unfortunately,” he added, “in addition to the massive new tax burdens on individuals and small business owners, the health care reform bill just passed by the House of Representatives fails the crucial test of reducing the soaring cost of health coverage for businesses or individuals.”

The National Association of Manufacturers said the bill's tax increases would make it even harder for manufacturers to emerge from the recession.

“Ninety-seven percent of NAM members voluntarily provide employees with quality health benefits. We advocate reforms that will reduce costs, improve efficiency and raise quality of health care,” NAM Executive Vice President Jay Timmons said. But creating a public option would shift “even more costs” to private plans, he said.

The American Benefits Council said the bill's pay-or-play provisions are likely to destabilize employer-sponsored health coverage.

“As we have stated repeatedly over the past several months, the House bill's regulatory framework will, unintentionally, compel many employers to cease offering health coverage and simply 'pay' a penalty rather than 'play' through sponsoring a plan--thereby losing all the innovation that employers bring through promoting wellness programs and insisting on good quality outcomes,” James A. Klein, president of the American Benefits Council, said.

AFL-CIO President Richard Trumka, on the other hand, cheered the bill's passage. “We applaud Speaker Pelosi, the other members of the leadership and the majority in the House of Representatives for bringing us closer than ever to our long-held goal” of “realizing fair, quality, affordable health care,” he said.

Andy Stern, president of Service Employees International Union, also praised the House for passing the bill. “[The legislation ] proves we can assure every American the access to quality comprehensive healthcare reform--and not add a single dime to our country's deficit,” Stern said.

FSAs, Health Savings Account Changes.

To raise $460.5 billion over the course of the 2011-19 period, Democrats included a 5.4 percent surtax on modified adjusted gross income in excess of $1 million for married taxpayers filing a joint return, or $500,000 for single filers. The surtax is not indexed for inflation.

The measure includes an option for employers to offer health coverage instead of being subject to a payroll tax. The Congressional Budget Office said the tax would raise $135 billion over 10 years.

Small businesses with an annual payroll of less than $500,000 would be exempt, and the payroll tax would phase-in for employers with an annual payroll of $500,000 to $750,000, with the full 8 percent kicking in after $750,000.

The legislation includes a tax credit equal to 50 percent of the amount a small employer pays for employee health coverage. It also includes a 2.5 percent tax on the modified AGI of an individual who does not obtain “acceptable” health coverage, which CBO said would generate $33 billion in revenue.

Also under the measure, beginning in 2011, health flexible savings arrangements, health reimbursement arrangements, and health savings accounts would reimburse only for prescription drugs and insulin, a change that would raise $5 billion over 10 years.

To raise another $13.3 billion, beginning in 2013, the legislation would place a $2,500 cap on employee contributions to health care FSAs. The limitation amount would be indexed to the consumer price index.

The bill also would increase the penalty for withdrawing money from HSAs for nonmedical expenses from 10 percent to 20 percent, which would raise $1.3 billion over 10 years. The legislation also would eliminate the tax deduction for employers that receive a government subsidy for providing retiree prescription drug coverage under Medicare Part D, a change that would raise $3 billion over 10 years.

The legislation contains one tax provision that would cost money over the budget window. Businesses that provide health coverage to domestic partners would gain the ability to deduct the value of those benefits from their taxes, just as the tax code allows them to do for employees and their dependents. The Joint Committee on Taxation says the provision will cost the federal government an additional $4 billion over 10 years.

Copyright 2009, The Bureau of National Affairs, Inc.