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April 2011: Health Reform Update

Health Reform Update: Free Choice Voucher Provision Repealed

The employee free choice voucher provision that was found in Section 10108 of the Patient Protection and Affordable Care Act was repealed in the “Department of Defense and Full-Year Continuing Appropriations Act, 2011,” HR 1473, which was signed by President Obama on April 15, 2011. This represents a major change in the employer provisions of health care reform.

The provision would have taken effect in 2014. “Offering employers” would have been required to provide certain “qualified employees” a voucher to be used in state exchanges when purchasing health coverage. For definitions of these terms, please see below. The amount of the voucher would have been determined by whichever health plan offered by the employer resulted in the largest employer premium contribution. If the exchange coverage cost less than the voucher amount provided by the employer, the employee would have kept the excess contribution. Any excess amounts would have been tax-deductible for employers but taxable to the employee.

Employers would not have been penalized under the employer mandate (effective in 2014 and also known as the pay or play penalty) for any employee who was provided with a voucher. It is important to note that the employer mandate, requiring employers to pay a penalty for not offering coverage or offering coverage deemed to be unaffordable, was not repealed as part of HR 1473.

Definitions:

Offering employer is any employer that offers minimum essential coverage to its employees through an “eligible employer-sponsored plan,” including grandfathered plans, and pays any portion of the costs of the plan.

Qualified employee is an employee who does not participate in a health plan offered by the offering employer, whose household income for the tax year is not greater than 400 percent of the poverty line for a family of the size involved, and whose required contribution for minimum essential coverage through an eligible employer-sponsored plan:

1. Exceeds 8 percent (indexed) of the employee’s household income for the tax year ending within the plan year; and

2. Does not exceed 9.8 percent (indexed) of the employee’s household income for the tax year.

Additional Resources: 

HR 1473

White House Signed Legislation