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Health Care Reform Repeal of Free Choice Voucher Provision

What You Need to Know Now About: Repeal of Free Choice Voucher Provision

Beginning in 2014, The Patient Protection and Affordable Care Act of 2010 (“PPACA”) required employers sponsoring a group health plan to provide employees with Free Choice Vouchers to be used, at the employee’s discretion, to purchase health care coverage in a state exchange. 
 
The employer would be required to provide a voucher for the amount equal to what the employer would have paid to the employee (or family) under the employer’s plan and the employee would need to meet all of the following requirements:
  • Income less than 400% of the federal poverty level;
  • Employee’s share of the premium is between 8% and 9.8% of their household income; and
  • Does not participate in the employer’s plan.

If the value of the voucher exceeds the premium of the state exchange plan selected by the employee, then the employee is paid the excess value of the voucher and it is excluded from gross income.
 
On April 15, 2011, President Obama signed into law the Department of Defense and Full-Year Continuing Appropriations Act which included a provision repealing the Free Choice Voucher requirement of PPACA. As critics had argued, the voucher system would result in adverse selection against employer plans as healthier employees would, presumably, use the vouchers to purchase less costly and comprehensive coverage from a state exchange and pocket the savings.
 
The Free Choice Voucher requirement is the second PPACA provision (expanded 1099 Form Reporting Requirement, the first) to be repealed, to date.
 
If you have any questions on this health care reform provision, please discuss with a member of your Banyan Consulting team.