Last night (March 21, 2010), the House of Representatives passed HR 3590, the Patient Protection and Affordable Care Act of 2010 following the Senate’s similar action late last December.  The President is expected to sign this bill into law later this week.  In the meantime, the House also passed its version of a “fix-it” bill, HR 4872, the Reconciliation Act of 2010 which now goes to the Senate for debate.

There will be many changes for both employers and their employees from this Act, some beginning within six months of enactment and others stretching out through 2014 and 2018.  Short-term, small employers will be eligible to receive tax credits with which to purchase health coverage for its employees.  Dependent children will be able to remain on their parent’s health plans until age 26.  Pre-existing condition limitations on plans will be banned as it affects all children.

Later, by 2014, large employers (those with more than 50 employees) will either have to provide health coverage for all of their employees or pay a penalty tax if any employee who is eligible for a federal premium subsidy doesn’t receive coverage through the employer and then purchases coverage individually, utilizing that subsidy.  By 2018, high cost health plans will subject insurers (and ultimately employers and employees via pass-throughs) to a “Cadillac” coverage tax.

Individuals will also be subject by 2014 to a federal mandate to obtain health coverage by any means (via an employer or through an individual plan) or pay a tax penalty.  Federal subsidies will be available for low and low-middle income taxpayers to purchase such coverage.  State-run insurance exchanges will be available for small employers and individuals to purchase health coverage.

These health care reforms will have broad implications for employers and employees.  Will employers choose to continue to offer health benefits to its employees or pay a tax instead (lesser in the early years).  The use of targeted prevention and wellness should increase dramatically as cost cutting and health improving measures.  We expect that consumer-directed health plans (CDHPs) utilizing HRAs and HSAs will continue to grow.  In all, employers will be re-examining their overall total rewards strategies as it pertains to talent acquisition and talent management.

Stay tuned–much, much more to come.