Health Care, Pension Reforms Near Approval
Health insurance and pension plans will become more easily available to millions of Americans and simpler to take with them when they switch jobs, thanks to a pair of complex bills nearing enactment by Congress.
The goal, Treasury Secretary Robert E. Rubin said Thursday, is to give Americans more security “as they move from job to job in a changing economy.”
The Health Insurance Portability Act, which cleared the House on Thursday and is expected to be approved by the Senate today, will be the first major health care reform bill in a decade. Although far less sweeping than the overhaul that President Clinton sought in 1993, it will have a substantial impact on millions of people.
The pension changes are part of legislation to increase the minimum wage by 90 cents an hour in two steps.
The health insurance bill, according to the General Accounting Office, could help 25 million Americans, particularly those who have trouble getting affordable coverage because of chronic health problems. Its provisions will take effect next July.
Those who switch jobs and those who lose jobs would be affected the most.
No matter what their health problems, workers who join companies that offer health insurance to their employees may not be required to wait for more than a year to get coverage for themselves. And that one-year waiting period can occur only once in a worker’s lifetime. Employers on future job changes must make insurance available immediately.
“If you want to switch jobs and a family member has a preexisting condition, there is no new exclusion period,” said Gail Shearer, health policy analyst for the Consumers Union. “That’s really important to people facing ‘job lock’ today. It gives them more freedom in the marketplace to move around.”
At present, workers with expensive ailments face the prospect of a new waiting period of indefinite length at each new job.
What’s more, the bill would prohibit companies from charging higher insurance rates to new workers with potentially expensive medical problems.
The bill’s impact also would be felt by those who lose their jobs. Under present regulations, individuals in this category have the right to remain in their company’s health plan for 18 months--if they are willing to pay the full premium. After that, there is no assured protection.
All unemployed persons would be assured access to health insurance at “affordable prices,” with each state responsible for determining the definition of “affordable.” This means that people who lose their jobs would be able to get insurance on their own regardless of their health status.
For the self-employed, the bill offers a tax break. They would be permitted a tax deduction for 80% of their health insurance premium costs, compared with 30% now.
Separately, the legislation would establish a large-scale trial of medical savings accounts, which allow individuals to save money on a tax-free basis to meet future medical bills.
The accounts would be available to the self-employed and those working for companies with 50 or fewer workers on a first-come, first-served basis.
The key issues in the pension reform measure, contained in the minimum-wage bill, have been largely overshadowed by the fierce partisan debate over boosting the minimum wage. They would take effect on Jan. 1.
The legislation should encourage companies to establish 401(k) plans, in which employers match a portion of employees’ contributions to tax-deferred retirement accounts.
Current law requires a mass of paperwork and complex calculations to assure that higher-paid workers do not get better benefits than the poorly paid.
The new legislation would allow any firm with fewer than 100 workers to create a 401(k) plan if the employer simply matches 100% of the workers’ contributions up to 3% of salary. Alternatively, companies would be permitted to contribute an amount equal to 2% of workers’ total pay, even if the workers do not contribute themselves.
A simplified program for larger companies--those with more than 100 workers--would require the company to match 100% of the first 3% from the worker and 50% of the next 2% of a worker’s contribution. As an alternative, a company could contribute 3% of total pay.
These formulas would replace the current system of intricate calculations that companies must perform to assure that they are not violating federal rules.
“Hopefully, these provisions will spare employers wasted costs and administrative burden and encourage the sponsorship of retirement plans for the benefit of workers and retirees,” said James A. Klein, president of the Assn. of Private Pension and Welfare Plans, which represents major corporations.
Upon leaving a company, workers would be permitted to roll their 401(k) funds into an individual retirement account or to place it with the new employer’s 401(k) plan. Under current rules, the latter course can be time-consuming because the addition of funds to the new employer’s 401(k) plan might throw that plan into violation of fairness standards.
Anyone who joins a company would be allowed to immediately enroll in the 401(k) program. Most companies now have a waiting period.
There are 9 million workers enrolled in industrywide pension funds operated by management and unions. They are commonly found in the construction and trucking industries.
It takes 10 years for vesting--the length of time enrolled before someone is guaranteed a pension. The bill would lower the vesting period to five years and a million workers would instantly have guaranteed pensions, Labor Secretary Robert B. Reich said Thursday. In addition to the pension changes, the minimum-wage bill contains other sweeteners to small business:
* The write-off in a single year (expensing) for equipment would be increased to $25,000 from the current limit of $17,000.
* Tax credits for hiring the poor would be extended.
The health and pension measures, when they are signed into law, will “make a real difference to millions and millions of Americans,” Clinton predicted Thursday.
