Sorting Out Health Care Options

SEMA News—September 2012 

FROM THE HILL
By Dan Sadowski

Sorting Out Health Care Options

Supreme Court Upholds Affordable Care Act; Employers Face Important Decisions

Supreme Court Upholds Affordable Care Act; Employers Face Important DecisionsAfter months of speculation and uncertainty, the U.S. Supreme Court ruled that the Patient Protection and Affordable Care Act (ACA) was constitutional, including the mandate that requires individuals to obtain minimum coverage by 2012 or face a penalty tax. The Court’s decision now sets in motion full implementation of the law. This article focuses on upcoming decisions to be considered by SEMA-member companies.

Employer Mandate

The law treats employers differently based on size. For small companies (fewer than 50 employees) there is no mandate to provide coverage. For larger companies (50 or more full-time equivalent workers), employers are essentially required to provide coverage, since they will face a penalty as soon as any full-time employee files for a government subsidy to help secure individual coverage. While the compliance requirements do not begin until 2014, business owners should begin preparing for the future.

If the penalty is triggered, the government will impose a fee of $2,000 for each full-time employee (30 or more hours per week), excluding the first 30 employees. Therefore, a company with 51 employees would be assessed a fine of $42,000 annually for non-compliance with the ACA.

Of course, there are no penalties if the company provides coverage. Rather, a primary concern is whether insurance will be affordable and whether there is an incentive to stop providing insurance and simply pay the penalty. In the coming years, we will see if there is a trend away from employer-based insurance or whether most companies will continue to offer health insurance as a benefit to retain
their workforces.

Exchanges

In terms of managing costs, the law establishes SEMA-supported “Health Benefit Exchanges,” through which small businesses and individuals will be able to compare all of the available health plans in their state. Consumers will be provided with a standardized method for comparing policies (covered benefits, deductibles, premium costs, etc.) posted on a website.

   
 

In terms of managing costs, the law establishes SEMA-supported “Health Benefit Exchanges,” through which small businesses and individuals will be able to compare all of the available health plans in their state.

   
The plans will be divided into four types based on the level of benefits: bronze, silver, gold and platinum. The premiums will be different depending on the amount of coverage included per plan and geographic location. However, insurers will be prohibited from raising premiums based on gender or health condition.

States are required to establish these exchanges by 2014, and many have already begun organizing the framework for their programs. The states may also work collectively to establish regional plans, and the federal government will establish a plan when a state fails to do so. The federal government will also offer at least two multi-state plans in each state exchange. The federal government has already started a website (www.healthcare.gov) that is gradually being expanded with new information.

Initially, exchanges will be available to employers with 100 or fewer workers and individuals purchasing their coverage who do not have access to employer coverage. In 2017, states will have the option of allowing larger companies to participate.

Most states plan to include an option for businesses and individuals to enroll in an exchange-based coverage plan through a certified, licensed independent agent or broker. With the option to comparison shop, the exchanges should increase competition in an open market of private insurance plans. A larger pool of potential consumers should also help control prices.

Tax Credits for Very Small Companies

The law provides a tax credit designed to encourage smaller companies (25 full-time workers or fewer) to maintain health insurance coverage or offer it for the first time. The credit varies according to size, wages and the amount of employer contribution for the premium (minimum 50% contribution). The maximum credit is 35% of premiums paid in 2010–2013. In 2014, this maximum credit increases to 50% for no more than two consecutive taxable years.

The tax credit is targeted to help small businesses that primarily employ low- and moderate-income workers (averaging less than $50,000 per employee per year). A company may be eligible for the tax credit even if it employs more than 25 individual workers, since the formula is based on the number of fulltime workers. The employer cannot claim the credit on its income tax return until the end of the tax year.

For workers seeking coverage through individual plans, the law offers tax credits and cost-sharing subsidies based on income.

Summary

While the law includes provisions designed to spur competition and expand health care coverage, it has not yet tackled the soaring health care costs faced by SEMA-member companies. SEMA remains committed to working with lawmakers and the business community to pursue meaningful reforms.

For more information, please contact SEMA Director of Congressional Affairs Dan Sadowski at dans@SEMA.org.