Tuesday, April 5, 2011

Menendez Amendment (#284) to H.R. 4 on 1099 Repeal

Senator Menendez has offered an amendment to the 1099 mandate repeal bill (H.R. 4) regarding the impact of the repeal.  A formal score is not available, but JCT has provided background information on the amendment, which is discussed in more detail below.

Summary:  The Menendez amendment requires the Department of Health and Human Services to study whether H.R. 4 “will result in an increase in health insurance premiums within the Exchanges” or “will result in an increase in the number of individuals who do not have health insurance coverage, a disproportionate share of which are employees and owners of small businesses.”  If the Secretary determines such an effect, the increase in subsidy recapture amounts included in the bill will not apply.

Background:  The underlying bill modifies the repayment levels for insurance subsidies provided under PPACA.  Under the health law, new health insurance subsidies are based on an individual’s (or family’s) most recent tax return – so that subsidy levels beginning in January 2014 will be based on reported income for 2012.  However, a family’s circumstances can change significantly during this time lag for a variety of reasons – a change in job, significant raise, divorce, birth, or death, to name just a few.  The “doc fix” enacted in December 2010 (P.L. 111-309) modified these levels to pay for a one-year adjustment to Medicare physician payment rates; H.R. 4 would modify those levels still further.

While some Democrats in the House expressed concern about the higher repayment requirements in H.R. 4, December’s increase in subsidy repayments passed the Senate by voice vote, and passed the House by the overwhelming margin of 409-2, with 243 House Democrats supporting what they have now criticized as a “tax increase.”  Moreover, the provisions of H.R. 4 requiring full subsidy repayment for all individuals and families with incomes above 400% FPL merely echoes a provision in PPACA itself – meaning Democrats would now oppose this provision in the bill after having supported it during the health care debate last year.

Score:  A formal budgetary score is not available.  However, staff from the Joint Committee on Taxation have provided an informal analysis of the Menendez amendment.  JCT concluded that it “do[es] not project an increase in health insurance premiums…as a result of H.R. 4,” meaning the first criteria in the Menendez amendment for nullifying the higher repayment amounts will not be met.  With respect to the second criteria, JCT concluded that “a larger share of small business employees will be affected than of large business employees.”  JCT declined to score the budgetary impact of this provision because of uncertainty about “how the Secretary will interpret the terms ‘disproportionate share’ and ‘small business.’”  However, JCT admitted that, should the Secretary certify that H.R. 4 will have a disproportionate impact on small businesses – as seems likely, given the JCT estimates and the Democrat sponsor of the amendment – the amendment would result in H.R. 4 increasing the deficit by $24.9 billion.


  • Last year, Democrats had an opportunity to vote on an amendment to the reconciliation bill containing very similar language to the Menendez amendment – provisions that would have prevented implementation of the health care law unless the Secretary of Health and Human Services certified the measure would not raise premiums.  Every Senate Democrat now serving voted against this amendment to keep premiums low.
  • Politico has reported that “Senate Dems look to have it both ways on 1099 repeal” by offering the Menendez amendment, noting that the provision “could kill the proposal down the road.”
  • Enacting the Menendez amendment would necessitate that H.R. 4 return to the House, further delaying the repeal of a 1099 mandate scheduled to take effect in January (and which small businesses are already having to prepare for).
  • Enacting the Menendez amendment would give the Administration the discretion to increase the deficit by $24.9 billion, by nullifying the means by which the 1099 repeal is paid for.