As House and Senate leaders struggle to find common ground onhealthcare reform legislation, employer groups are working toensure that retiree drug subsidies and federal safeguards under theEmployee Retirement Income Security Act (ERISA) do not get lost inthe shuffle.

While a conference committee usually reconciles differences inbills, the Congress is expected this time to act informally toforge a compromise health reform bill. As recently as Jan. 5, HouseSpeaker Nancy Pelosi (D-Calif.) said lawmakers were “very close” toresolving differences between the two measures and sending a finalversion to President Barack Obama.

The American Benefits Council has teamed with the AFL-CIO tofight a key proposal in both the House and Senate bills that wouldrepeal the business tax deduction for federal subsidies on mostretiree prescription drug plans.

For the last several years, employers with retiree health plansthat provide prescription drug coverage have enjoyed asubsidy–which can be excluded from the employer's income–equal to28% of the allowable costs. “This [subsidy] now would be taxed,”explains Jim Klein, president of the American Benefits Council inWashington.

“That total future tax liability would have to be immediatelyreflected on financial statements the minute health reform issigned into law,” Klein says. “These are employers who are tryingto do the right thing, but the financial statement impact couldcompel many of these companies to drop their coverageentirely.”

He predicts that many more retirees would seek prescriptioncoverage through the Medicare Part D program, resulting in highergovernment spending. “If as few as 24% of retirees with drugcoverage are moved from their employer plan into Medicare, this taxwill be a revenue loser for the government,” Klein says.

Meanwhile, the ERISA Industry Committee (ERIC)–another employergroup in Washington that focuses on plans sponsored by largeemployers–worries about how ERISA's preemption of state laws willfare in deliberations over what role the states will have inregulating healthcare plans.

“It is essential that new legislation not give statesjurisdiction over large companies with self-insured plans,” saysGretchen Young, ERIC's vice president of health policy. “If thebasic [ERISA] preemption is no longer protected, preventing largeremployers from having to follow 50 different state rules, employerswould have to re-evaluate whether they could offer health insuranceto their employees.”

Of course, there may now be penalties for failing to providehealth insurance to active workers. Klein observes that the Housebill would impose “pay or play” penalties, equal to 8% of payroll,on employers that did not provide health coverage.

He says the Senate approach is more complicated, but not assevere. “In essence, if an employer does not offer a plan at alland if at least one employee gets a federal subsidy [due to income]to obtain coverage in the insurance exchange, then the employerpays a penalty equal to $750 times the number of full-timeemployees,” Klein says.

A new “priority issues” document on the House and Senate healthreform measures, released by the American Benefits Council on Jan.5, is available at: http://www.americanbenefitscouncil.org/documents/hcr_priority-issues-conference010410.pdf

For more information about employers' views of thehealthcare reform measures, see Cutting Health Benefits to Avoid An Excise Tax.