Early Monday morning, the Senate voted 60-40 to end debate on Senate Majority Leader Harry Reid’s (D-Nev.) complete set of amendments, known as the “manager’s amendment”, (pdf) to the latest version of the Senate healthcare bill, the Patient Protection and Affordable Care Act (H.R. 3590) (pdf). The party-line vote paves the way for Senate passage of the healthcare bill on Christmas Eve. This version of the healthcare overhaul bill includes an employer penalty for failing to offer coverage, tax credits for small employers that do, and a number of plan restrictions on the health insurance industry.

According to a report (pdf) issued by the Congressional Budget Office (CBO) on Saturday, the manager’s amendment would change the Senate bill from the version unveiled in November by, among other things, expanding employer eligibility for a small business tax credit; replacing the public insurance option that would be run by the Department of Health and Human Services (HHS) with “multi-state” plans that would be offered under contract with the Office of Personnel Management (OPM); and increasing the payroll tax on higher-income individuals and families. The bill would still require most legal U.S. residents to obtain health insurance or pay a penalty; establish insurance exchanges through which certain individuals would be eligible to receive federal subsidies to reduce the cost of purchasing health coverage; impose an excise tax on insurance plans with relatively high premiums (often referred to as “Cadillac” plans); and make various other changes to the federal tax code, Medicare, Medicaid, and other programs.

With respect to employer-provided health coverage, firms with more than 50 workers that do not offer coverage would have to pay a penalty of $750 (an amount that would be indexed) for each full-time worker if any of their workers obtained subsidized coverage through the insurance exchanges. Generally, full-time workers that are offered coverage from their employer would not be eligible to obtain subsidies via the exchanges. However, employers would be required to allow certain employees to opt-out of employer sponsored coverage based on income and premium costs. These employees would receive “free choice vouchers” equal to the value of the benefits of the employer-sponsored plan that could be used to join an exchange plan. Furthermore, employers would be penalized if employees were required to pay more than a specified percentage of their annual income (9.8 percent in 2014, then indexed over time). Smaller employers that opt to offer coverage would be eligible for certain tax credits to offset premiums beginning in 2010 for firms with 25 or fewer workers and average wages of less than $50,000.

As for the “Cadillac” plans, beginning in 2013, insurance policies with relatively high total premiums would be subject to a 40 percent excise tax on the amount the premiums exceed a specified threshold ($8,500 for single policies and $23,000 for family policies, with certain exceptions).

The CBO estimates that as a result of the bill, by 2019, the number of people obtaining health coverage through their employers would be about 4 million fewer than would have been covered absent the legislation.

Regarding the coverage itself, insurers would not be allowed to deny coverage to children on the basis of a preexisting condition. By 2014, insurers would be completely banned from implementing preexisting condition exclusions, as well as annual and lifetime coverage limits.

If the Senate passes this measure, it will then need to be reconciled with the healthcare legislation approved by the House last month to produce a final, unified bill. This process could extend well into January.

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