Impact on Employers
April 6, 2010
With the passing of Health Care Reform legislation, the resulting overhaul of our country’s health care financing system is the single most important piece of Federal social legislation our generation has ever seen. There has been a broad consensus to expand affordable health coverage, reduce systemic waste and inefficiencies, and increase quality. With these goals we will ultimately achieve lower health care. This legislation outlines broad changes to the current system with significant enhancements to help support these goals. Most of the impact will take effect in 2014 while some changes will occur sooner.
After reading the 2,500 page legislation, attending webinars, and consulting with other colleagues, I have prepared a detailed review of the legislation that impacts employers and our nation as a whole. Outlined below is a summary that could also be used as a hand out for employees. If you would like to discuss the legislation further, or would like the more detailed review, please contact me at cwatkin@ipswichfinancial.com.
Tax Credit. Starting with 2010 taxes, small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit up to 35% of your premiums (50% after 2014 if you purchase insurance through an exchange). How much of a credit you'll get depends on the number of employees you have and their average wage.
Exchanges. Starting in 2014, the biggest potential benefit may kick in with the establishment of Small Business Health Options Programs – or SHOP exchanges. These will enable small companies (up to 100 employees) to pool together to have greater buying power. Theoretically, this should result in lower premium costs.
Subsidies. Starting in 2014, many self-employed individuals will qualify for a federal subsidy to help them afford the cost of purchasing health care. Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four (at today's poverty level).
Medicaid. Starting in 2014, more lower-income individuals and childless adults would be covered by Medicaid, the federal health insurance plan for the poor. This can be a big help, especially for those just starting a business, without much income.
Mandatory employer-provided coverage. Small businesses – with fewer than 50 employees – are exempt from mandatory requirements. Businesses with more than 50 employees will be required to provide coverage as of 2014 or pay a fine. This is designed to help reduce occurrences of those going to the emergency room for care with no insurance.
Mandatory personal coverage. Also as of 2014, as an individual you will be required to have health insurance or pay a fine. If you have to pay more than 8% of your income for the cheapest plan, you're not penalized.
Pre-existing conditions. Starting in June 2010, individuals who have not been able to get insurance because of pre-existing conditions can join a high risk insurance pool. As of 2014, insurance companies cannot deny insurance to adults based on pre-existing conditions.
Adult children. Starting in September 2010, dependent children up to age 26 can be covered on their parent's policy. This is the same as what we have currently in MA.
Lifetime limits. Starting in September 2010, there can be no lifetime maximum limits on policies. Also, companies cannot rescind policies except for fraud.
Preventive care. Starting in September 2010, coverage must include basic preventive care. Many of the plans currently offered include preventive care.
Taxes. Starting in January 2013, if you make over $200,000 (individual) or $250,000 (family), your Medicare tax rate will increase from 1.45% to 2.35%. A bigger potential tax bite may hit small business owners who receive capital gains, dividend, or interest income with an additional 3.8% tax on that income.
"Cadillac" plans. Starting in 2018, employers who provide insurance costing more than $10,200 for individuals or $27,500 per family must pay a 40% tax on the excess cost of the premium. This could be a big burden on small businesses, as premiums are already nearing that level.
