Benefits Law Update

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Expanded Form 1099 Reporting Repealed, Free Choice Vouchers Likely Next

Late yesterday President Obama signed into law legislation to repeal the expanded Form 1099 reporting requirements passed under health care reform. This new legislation, supported by the President, marks Congress' first successful rollback of health care reform.

As discussed in an earlier post, the new legislation repeals a provision of the Affordable Care Act requiring businesses to issue a Form 1099 for payments to vendors for goods and services in excess of $600 per year. The legislation also repeals an application of similar rules to landlords, enacted under an unrelated small business law.

The now-repealed provisions were revenue-raisers designed to help pay for health care reform, but they have been widely criticized as a time-consuming and burdensome requirement for businesses. The $24.7 billion revenue loss associated with the repeal is offset by requiring certain individuals and families who receive tax credits to help them purchase health insurance but then earn too much income that year to qualify for the credits to repay the money. This change applies to households with incomes of at least 400 percent of the federal poverty level.

Other pending legislation, part of a compromise fiscal 2011 spending bill, would repeal another provision of health care reform – Free Choice Vouchers. Scheduled to take effect in 2013, the Free Choice Voucher system requires employers to provide Free Choice Vouchers to employees whose household income is less than 400 percent of the poverty line and whose premium contributions to the employer-sponsored health plan are between 8 and 9.8 percent of household income. The Vouchers can be used by these employees to purchase health insurance though a state exchange as an alternative to the employer-sponsored plan.

Both the Senate and House have passed the bill and the Administration has expressed measured support for the legislation, explaining that it "would not have agreed to many of these cuts under better fiscal circumstances." In the same statement, however, the Administration said that it "strongly opposes any attempts to include language in the underlying bill that would…prohibit funding to implement the Affordable Care Act that is making health care more affordable and accessible for all Americans." Nevertheless, the bill is expected to be signed into law sometime today, before the current stopgap budget resolution expires at midnight.

Administration officials have acknowledged that the Voucher system as currently designed could be improved. For example, Phyllis Borzi, assistant secretary of the Department of Labor's (DOL's) Employee Benefits Security Administration (EBSA), has noted that the provision "as drafted leaves a lot to be desired." Still, an outright elimination of Free Choice Vouchers represents a significant scaling back of the shared responsibility component of the Affordable Care Act. It is likely that we will see more of this kind of erosion through legislation in the coming months.

Topics: Health and Welfare Plans, Plan Administration