Chamber director discusses Affordable Care Act
According to a recent U.S. Chamber of Commerce study, health care continues to be a top impediment to small business growth. And following the Court’s decision to uphold the President’s health care law, only 3 percent of small business owners report they are more likely to hire new employees.
With that said, what is the Affordable Care Act and what are the impacts to local businesses now and to 2014?
To start, it is important to understand that the Supreme Court ruled in June that health care reform is constitutional and upheld the Patient Protection Affordable Care Act (PPAC) in its entirety. As a result, health care reform will continue to be implemented as planned and provisions that are already in effect will continue.
“The mandate requiring individuals to purchase health insurance, or pay a penalty, is the major component of the law,” said Jessica Galardini, Chief Operating Officer for the Pennsylvania ChamberChoice program, to which the Waynesburg Area Chamber of Commerce is a partner. “Because the court upheld that mandate, it did not need to decide whether other provisions of the law are constitutional.”
In the same U.S. Chamber of Commerce study, many small business owners reported the likelihood of canceling insurance coverage for employees because paying the penalty would be less expensive for their company. Galardini pointed out that within the ramifications of health care reform, the law impacting employers in this regard is applicable to those with 50 or more employees.
The ruling also means that all aspects of the law already implemented will remain in effect. These include consumer-popular components of the law such as the ability for adult children to remain on their parents’ coverage until age 26, no exclusions for children with pre-existing conditions, and certain preventive services without cost sharing for non-grandfathered plans.
Galardini explained that other provisions of the law not yet in effect will now be implemented as planned, due to the ruling. For example, insurance companies will issue rebates to employers with fully insured health plans who qualify due to medical loss ratio (MLR) rules.
“The MLR rules require insurance companies to spend a certain percentage of premium dollars on medical care and health care quality improvement, rather than on administrative costs,” said Galardini.
Another example effective Sept. 23 of this year, is that insurers must provide a summary of benefits and coverage (SBC) to participants and beneficiaries. The SBC is a document that provides information about the health benefits in a simple and easy to understand format. The SBC will be distributed to employees during open enrollment, with any material modifications to the plan throughout the year being communicated at least 60 days in advance.
For employers that issue 250 or more W-2 Forms, the aggregate cost of employer-sponsored group health insurance must be reported on employees’ 2012 W-2 Forms, which are due in January 2013.
Another change scheduled for 2013 is the limiting of pre-tax contributions toward flexible spending accounts (FSAs) to $2,500, where there was no government limit before. This limit will be indexed for cost-of-living adjustments for 2014 and later years.
Employers will also be required to provide all employees with written notice about health insurance exchanges and the consequences if an employee decides to forego employer-sponsored coverage and purchase a qualified health plan through an exchange.
“Perhaps the most noise being made lately is about the financial consequences for people who decline to get coverage and for businesses that don’t offer a health plan,” noted Galardini.
According to Congressional Budget Office estimates, some 4 million individuals without insurance are expected to pay about $55 billion in tax penalties over eight years. And employers could be dinged an estimated $106 billion for failing to meet the mandate starting in 2014. And the biggest chunk of new taxes is on the nation’s top 2 percent of earners.
Galardini explained that “employers will be required to withhold an additional 0.9 percent Medicare tax on an employee’s wages in excess of $200,000, or $250,000 for married couples filing jointly.” It is estimated this will generate some $318 billion over a decade.
By all accounts, 2014 will be the most significant year of change. Annual dollar limits for health services will be eliminated, as will medical underwriting and exclusions for pre-existing conditions. Additionally, insurance exchanges will be enacted for individuals and small employers with fewer than 50 employees. Galardini reminded that the exchanges are a key component of health care reform law because of the individual mandate that requires everyone to have health insurance, or pay a tax for not having it.
Businesses with 50 or more full-time employees must provide health insurance for employees or pay a tax for not doing so. And for states that choose not to set up their own exchanges, the federal government will do it for them. To date, Pennsylvania has not passed legislation authorizing its own exchange.
Although the Supreme Court upheld the health care reform law, the future remains somewhat uncertain. Opponents will continue to challenge the law and debate its constitutionality through the November 2012 elections; the strength of the economy and the response of private insurance companies with innovative products and funding solutions will also impact private and public options for individuals and employers.
In conclusion, Galardini indicated that what is certain for all employers, employees and individuals is the purchase, funding and delivery of health care benefits is changing. Employer and employee decisions are far more complex and require educated consideration. She recommended seeking professional guidance to remain compliant with the law. Galardini explained that the Waynesburg Area Chamber of Commerce is part of a statewide coalition of nearly 100 Chambers of Commerce, working in aggregated fashion to develop solutions to meet the needs of all businesses, their employees and individuals as health care reform evolves.
Melody R. Longstreth
Executive director, Waynesburg Area Chamber of Commerce