Build Back Better Act heads to Senate with significant health and paid leave provisions
The social spending and climate bill passed by House Democrats Nov. 19 includes a host of provisions related to employer-sponsored health care plans, drug pricing reforms, and a new federal paid leave program. The Build Back Better Act (BBBA) (HR 5376), a top priority for President Biden, now heads to the Senate, which will likely make major changes and shrink the overall size of the bill. The bill’s paid leave proposal, for example, will likely be removed, but many of the health care provisions are likely to survive in any final legislation.
Whether Democrats can get a bill over the finish line is unclear, however, with senators still struggling to bridge some deep policy differences. Senator Joe Manchin, D-WV, a key centrist who opposes paid leave and is concerned about the House bill’s possible effects on the national debt and inflation, hasn’t said whether he would agree to start debate on a measure. Democrats need unanimity in the 50-50 Senate to pass a bill under the budget reconciliation process, which requires a simple majority instead of the usual 60 votes. The process also requires every provision to directly affect the federal budget, so the Senate parliamentarian could knock out some provisions. In addition, both chambers must pass identical legislation for the president’s signature, so negotiations over the package’s final size and scope could spill into 2022.
ACA affordability threshold lowered. Under the BBBA, the Affordable Care Act (ACA)’s employer shared-responsibility (‘play-or-pay’) benchmark for determining the affordability of employer-sponsored health care coverage would drop to 8.5% (from the current 9.83% in 2021) of employee household income (or an applicable affordability safe-harbor). As currently drafted, the new affordability threshold would be effective in 2022 and through 2025, though these dates could change if Congress doesn’t pass a bill until next year. In addition, the thresholds would not be indexed for inflation until 2027. These affordability percentages can affect individuals’ eligibility for federally subsidized ACA marketplace coverage, as well as employers’ potential liability for play-or-pay assessments.
For employers using the Federal Poverty Line (FPL) safe harbor, monthly contributions for self-only coverage can be no more than $103.15 in 2022. If the BBBA change is effective next year, the FPL safe harbor contribution would decrease to a little over $91, so employers may want revisit their strategies for setting affordable contributions, especially if considering financial incentives or premium surcharges to encourage vaccinations, as those amounts would figure into the affordability calculation. In addition, state minimum wage increases could complicate finding the right balance between pay and benefits, especially for employers in industries that rely on lower-paid, hourly workers.
Expanded ACA subsidies continued. The bill would extend through 2025 the American Rescue Plan’s (ARPA’s) two-year (2021 and 2022) expansion and increase of subsidies for ACA marketplace coverage. Specifically, marketplace coverage would continue to be fully subsidized for individuals earning up to 150% of the federal poverty level (FPL), and subsidies would continue to be available for individuals earning more than 400% of the FPL. In addition, those subsidies would be available (also through 2025) even to low-income individuals (and their family members) whose household income does not exceed 138% of the FPL and who reside in a state that has not expanded Medicaid, regardless of whether their employer offers affordable, minimum value coverage. Employer play-or-pay assessments for this newly group of subsidy-eligible individuals would not apply.
Paid leave. After scrapping an earlier, more expansive paid leave proposal to cut costs, House Democrats added back a revised plan to establish a new entitlement program guaranteeing paid family and medical leave for all workers. Starting in 2024, the program would guarantee up to four weeks (reduced from 12 weeks) of paid family and medical leave for all workers, which would be available through either a public program administered by the Social Security Administration, existing state paid leave programs, or employer programs.
Funding for these benefits would come from general federal revenues, and eligible employers could receive partial reimbursement from the government for paid leave benefits they provide to their workers instead of the benefits their workers could receive from the Treasury program, under certain conditions.
Notably, the BBBA’s new proposal retains a potential reimbursement for eligible employers of 90% of certain paid leave costs. The measure also keeps a “grandfathering” option for states with already-enacted laws that meet the federal standard and allows those programs to be reimbursed by the Treasury. The legislation does not preclude any new state and local paid leave laws, but such “non-legacy” states would be ineligible for federal reimbursement.
While large employer groups have expressed support for universal paid leave, the American Benefits Council and others have voiced concerns with the proposal and continue to urge Congress to provide a nationally uniform compliance standard for multistate employers now dealing with a patchwork of state and local requirements. The House leave proposal will likely be dropped by the Senate because of opposition by Sen. Manchin, who wants to explore a compromise on the issue with Republicans.
Drug cost reforms. Based on a more extensive House proposal, compromise language in the BBBA would allow Medicare to negotiate with manufacturers on a limited number of drugs in the Part B outpatient and Part D retail drug programs. The program would negotiate prices for 10 drugs beginning in 2023, with those prices taking effect during the 2025 plan year. That number would increase up to 20 drugs per year starting in 2028.
Unlike the earlier House proposal, the BBBA does not extend Medicare-negotiated prices to the commercial market. It would, however, require drugmakers to rebate to the government any profits made from increasing the price of their products beyond the level of inflation starting in 2022. Employers would not receive a rebate directly, but the prices they pay would be included in calculating the rebate, which could limit future price increases.
The bill also caps seniors' out-of-pocket costs at $2,000 annually and limits monthly out-of-pocket costs, including limiting patient cost-sharing for insulin at $35 per month. The cap on patients’ insulin costs would apply to employer plans, though this provision could be a casualty of budget reconciliation rules.
In addition, the bill sets a host of new pharmacy benefit manager (PBM) reporting requirements to employers regarding rebates and other aspects of PBM services to a plan, although these provisions may be forced out by the Senate parliamentarian.
Additional provisions. Other proposals in the BBBA would authorize civil monetary penalties against plan sponsors/insurers for mental health parity violations, reinstate and expand bicycle commuting benefits, and add a hearing benefit to Medicare. The Senate may decline the new Medicare benefit due to cost pressures.