The Affordable Care Act withstood many trials on its way toward becoming reality, from epic congressional battles, to a pivotal Supreme Court ruling, to--finally--yesterday’s Presidential election.
Obama’s reelection means his health care reform act has dodged its last bullet, and the age of universal mandates, penalty taxes and tax credits will almost certainly go into effect, although probably not exactly as scheduled on January 1, 2014. What do you need to do to get your business ready?
Inc. put the question to healthcare policy expert Henry J. Aaron, a senior fellow at Washington think tank Brookings Institution. Aaron offered three key ideas for entrepreneurs facing the enormous changes scheduled for healthcare during Obama’s second term.
Weigh the Costs
The key decision you will face is whether to sponsor a healthcare plan, if you don't already have one, or to drop a policy you may have and leave employees to buy insurance on the exchanges themselves. The pros and cons of either route will depend on the size of your payroll, both in people and dollars. Do you have 50 or fewer employees? Then you aren’t subject to penalties for not providing an employee plan. On the flip side, helping employees pay for insurance affords tax advantages. If you have fewer than 25 full-timers on your payroll and their average pay is less than $50,000, the law affords you a tax credit of up to 35% for providing insurance today, rising to 50% in 2014.
“There’s a calculation to be done,” says Aaron, if your employees are below the threshold (which tops out at 400% of the poverty line) for getting a federal subsidy to buy insurance on their own. In such a case, it might make sense to drop insurance and add the savings to your employee's cash compensation. The question you should ask, Aaron says, is, “If my employees are going to be eligible for subsidies, why should I leave that money on the table?”
If you have more than over 50 on staff, it’s a different story. If just one employee qualifies for insurance subsidies, and you don't provide insurance, that means tax penalties.
Check Your State’s Approach
In theory, you should be able to buy insurance for your employees on the new health-insurance exchanges. However, states differ in how they plan to administer the exchanges. “If you’re running a small business, what prospects you face depend sensitively on where you’re doing business,” says Aaron. Some states, like Vermont, will take an active role, making sure that a broad range of insurance plans will be available on the exchange. Many others leave it to the federal government to run the exchange for individuals and will leave employer-sponsored plans alone.
The complexities are likely to create a mini-boom in the services of insurance brokers. Aaron suggest that you are likely to find them even more necessary than they are now in navigating the explosion in new options and rules.
Take Your Time
Enrollment in the new healthcare exchanges won’t begin until October 2013 at the earliest. Legal requirements--and the accompanying fees for disobeying them--won’t take effect until January 2014. Washington red tape probably could push those dates out even further into the future. “It’s a complicated bill, and it’s not drafted in a way to facilitate implementation,” says Aaron. “Delays could become inevitable and necessary.” That might suit many business owners just fine.