By Dave Adkisson
While presidential candidates and Congress debate the merits of the new federal health care law and its constitutionality is challenged in federal courts, businesses have little choice but to try to anticipate and manage the far-reaching changes that are contained in the new law.
Businesses have a big stake in how this law is implemented at the federal regulatory level and at the state level. It is important that the voice of the business community be heard to ensure decisions are not made that could have a negative impact on Kentucky’s businesses and economy
One of the most-debated provisions of the Affordable Care Act takes effect in 2014, requiring all Americans to obtain health insurance or pay a penalty of up to $695 a year, or 2.5 percent of their income.
Similarly in 2014, employers with more than 50 employees that do not offer coverage will be assessed $2,000 per employee. Employers with fewer than 50 employees are not subject to the assessment and are not required to offer coverage.
The law does contain several provisions designed to help people and businesses obtain health coverage:
- Pre-existing conditions - A new program (the Pre-existing Condition Insurance Program—PCIP) was established to offer coverage to people with pre-existing health conditions at lower rates than those available in the commercial insurance market.
- Tax credits for small employers and businesses - As of 2010, businesses with up to 25 employees that provide health insurance are eligible for federal tax credits up to 35 percent of the employer’s portion of the health premium. The maximum credit will increase to 50 percent by 2014. An estimated 50,000 small employers in Kentucky qualify for these tax credits.
- Denying coverage - Starting in 2014, health insurance companies will be prohibited from denying coverage to people with medical conditions or refusing to renew coverage, and they cannot charge such people higher rates. Premiums will vary only on the basis of age, place of residence, family size and tobacco use. Waiting periods for coverage will be limited to 90 days, and deductibles for small employer groups (50 or less) will be limited to $2,000 for individuals and $4,000 for families.
- New exchanges - Health insurance exchanges will go online in 2014 to function as insurance marketplaces through which individuals and businesses can buy coverage. Plans offered by private insurers through these exchanges will offer coverage at three levels (bronze, silver, and platinum) with varying levels of co-pays and deductibles.
- Tax credits for individuals - Also in 2014, subsidies will be provided in the form of income-based tax credits for consumers who buy health insurance through these new exchanges. Subsidies will range from $1,938 to $7,973 per year, depending on family size and income.
- Medicaid expansion - Finally, Kentucky’s Medicaid program will be expanded to cover people with incomes up to 133 percent of the federal poverty level, a change that will make more than 250,000 additional Kentuckians eligible for the program. The federal government will pick up 100 percent of the cost of this expansion until 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020 and beyond.
There are several important questions for businesses that do not yet have clear answers. These include:
- What size businesses can buy coverage through the new exchanges and qualify for tax credits? States have some leeway in determining the size of businesses it allows to participate in the exchanges.
- How will the cost and coverage levels of the plans offered in the new exchanges compare to what employers are now offering?
- Will policies in the exchanges cost more or less, and will coverage levels be as comprehensive as private plans?
- Will it be more cost-effective for large employers to pay the penalty instead of offering coverage?
- What will these new rules do to an employer’s bottom line?
Under the enacted law and starting in 2014, businesses (especially those with more than 50 employees) will have to decide whether or how they will provide health insurance to employees. Regardless of an individual’s opinion of the new law, it is in the business community’s best interest to take note of its requirements and start planning now to minimize its impact.