Posted: 07.05.2011
Health Care Reform

Voucher Legislation Repealed

With the passage of the Patient Protection and Affordable Care Act (PPACA), several provisions were put in place that affect employers who offer employer sponsored health care coverage to their employees. One of the provisions established the "voucher" program.

Beginning in 2014, this provision was designed to force employers to provide a premium voucher to employees who opt to purchase insurance through the forthcoming state exchanges rather than participating in the employer's plan. Vouchers would be required to be provided to employees with household incomes of up to 400% of the federal poverty level and whose premium contributions were between 8% and 9.8% of their household income. This voucher would be required to equal the amount that the employer would have otherwise contributed towards the employee's premium had they remained on the employer's plan. The employee could then use the voucher to purchase coverage through the exchange. If the employee purchased a plan with a lower annual cost than the voucher amount, the excess credit would be returned to the employee as taxable income.

While supporters of the program said that vouchers would give employees more options and increase competition in the marketplace, critics expressed several concerns regarding this voucher program.

First, it would significantly increase administrative complexity to employer groups due to the criteria surrounding who would and would not qualify for a voucher. Second, it would potentially reward voucher-eligible employees for purchasing a lower cost plan because excess funds would be returned to the employee rather than the employer. Third, and probably most significant in the long term, this voucher systemw ould have most likely increased claims costs and premiums for employers. If a healthy employee could purchase less expensive coverage with their voucher through the exchange, what would incentivize them to stay on the group plan? Younger, healthier employees would move away from the group plan because they could purchase coverage for less, leaving the employer plan with an older, unhealthier population. This adverse selection to the group plan would increase claims experience within the plan and thus, increase costs to the employer.

It was recently announced that this voucher program was eliminated as a part of the budget deal signed by President Obama in order to stop the government shutdown in early April. It is suspected that the group that drove the elimination of this program was the Business Round-table, made up of chief executives from the country's biggest companies. Last year alone, they spent more than $8.2 million lobbying on a range of health care and financial issues.

Lauren Radlick, CISR
Brown & Brown of Detroit

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