What Health Care Reform Means for Your Business
The healthcare reform bill the House of Representatives approved last night will bring drastic changes to the way small businesses buy and supply health insurance.
Nothing is changing fast, though – most of the provisions of the $940 billion legislation won't kick in until 2014.
Obama is expected to sign the main piece of the package (the underlying Senate bill) into law this week, possibly as early as Tuesday. The other piece – a fix-it bill that of amendments that would make several changes to the new law – goes back to the Senate. Debate could start Tuesday, and conclude before Congress's two-week recess begins Friday night. Republicans likely will offer lots of additional amendments to the reconciliation bill, but any changes – even ones Democrats might like – would send the bill back to the House rather than to Obama for signing, so Democrats are expected to oppose them all. (Yet another way the rules could change: Republicans already are vowing to repeal the laws if they win back majorities in November's midterm elections.)
The complicated two-step process was made necessary when Republican Scott Brown unexpectedly won the late Ted Kennedy's seat in a January special election. The reconciliation bill will be considered under fast-track Senate rules that require only a simple majority.
Here's what's coming:
By 2014, states must set up Small Business Health Options Programs – aka "SHOP Exchanges" – essentially purchasing pools where small businesses can club together to buy insurance. What's defined as a "small business"? Those with no more than 100 employees, though states can limit the pools to companies with 50 or fewer employees through 2016. Companies that outgrow the size limit will be grandfathered in.
The pools will probably only slightly shrink your insurance costs: The nonpartisan Congressional Budget Office predicts small-group premiums will fall by 1 to 4 percent thanks to the exchanges. (Unfortunately, the premiums may rise considerably before they fall. Health care insurance consultant Robert Laszewski told the Wall Street Journal that plans will want to make as much money as possible before the wide-sweeping reforms take effect in 2014.)
Companies with fewer than 50 workers won't face penalties if they don't offer insurance. If you have 25 or fewer employees and a work force with an average pay of up to $40,000, you can get tax credits to help buy insurance: up to 35 percent of the cost of the premiums this year, rising to 50 percent in 2014. (You'll have to pay at least half of the total premium cost or 50 percent of a benchmark premium to qualify.) Full credits will be available for the smallest firms with the lowest-paid workers (10 or fewer employees and average yearly wages of less than $25,000); the subsidies shrink as companies' size and average pay rise. The tax breaks – estimated to affect about 12 percent of employees covered by small-group insurance -- will last for the first two years a company buys insurance through its state exchange. The breaks should lower the cost of insuring affected employees by 8 to 11 percent, estimates the Congressional Budget Office.
If you provide health insurance coverage to retirees age 55 to 64 who aren't eligible for Medicare, the legislation includes what's being called a "temporary reinsurance program" that begins no later than 90 days from the moment Obama signs the bill and expires Jan. 1, 2014. The program will reimburse employers or insurers for 80 percent of retiree claims between $15,000 and $90,000.
Companies with more than 50 employees that don't offer coverage would be fined up to $750 per worker if any employees rely on government subsidies to buy coverage. The compromise bill the Senate will consider this week will hike the fine to $2,000 per full-time employee. The first 30 workers are excluded, but two part-time employees will count as one full-time one for purposes of penalty calculation.
The new legislation also will require more transparency from health insurance companies – they'll have to report the proportion of premium payments they fork over (as opposed to marketing and administration costs). Insurers will also be forced to reveal the rationale behind premium increases, and states will be able to bar them from the exchanges if they're found to be upping premiums without good reason.
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.