Feb 21, 201309:29 AMOpen for Business
with Jody Glynn Patrick
The Affordable Care Act: Quick answers from IB
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Your next issue of IB will feature a test tube of blood on it, signifying that we convened a health care roundtable panel, though the tube also could be likened to our separating out how much blood the new Affordable Care Act is going to cost employers and employees alike. The advice our experts gave, which I won’t repeat here in total, started with the suggestion to stop denying that this is happening or that it will affect you; both are true.
Toward the goal of better understanding the mandates and timetable, here’s a quick synopsis of what will happen in 2014, when the act takes effect:
- In 2014, every man, woman, and child will be required to have health insurance. All taxpayers will be required to show proof of health insurance when paying their taxes or pay a penalty. The penalty is $95 or 1% of taxable income (whichever is greater) in 2014, $325 or 2% of taxable income in 2015, and $695 or 2.5% of taxable income in 2016 and beyond. Experts are predicting that young, healthy employees will opt for the penalty or wait until they get sick to sign up for insurance – and given that there will no longer be exclusions for pre-existing conditions, that should be possible. However, without their $$ in the pool, the cost of premiums will skyrocket as the sickest among us buy insurance that they perhaps were, before 2014, denied.
- All employers with more than 50 employees will be required to provide health insurance or pay a penalty if at least one employee joins an exchange and receives a subsidy (and remember, everyone is required to have health insurance, so they will join the exchanges). The penalty is $2,000 per full-time employee minus 30. So if you had 100 employees, you’d pay the penalty on 70, times $2,000 each. Is that cheaper than providing the premium? That question may very well be answered in a courtroom; do you want to be the defendant in such a suit? Our experts advise keeping your current policy in the short term.
- Employees will have the choice of purchasing health insurance at work, with whatever contributions the employer chooses to make – or buying it on an exchange. Gov. Scott Walker decided not to establish a state exchange, so workers here would be buying it on the federal exchange, and in that event, there would be federal subsidies (versus employer contributions) to offset some of the cost of premiums.
Experts in health care are discussing the fallout to the larger pool if business owners decide to pay the penalty until forced to comply (until the pain outweighs the gain), but I think business owners will be having another, perhaps more important conversation with key managers. You know those job numbers the governor promised? The economic recovery the president promised – the one that relies heavily on job creation? What is the incentive now to create that 51st job? I think you’ll see companies split off divisions, which will become separate LLCs once they hit a certain number of employees. (Continued)