5 Ways Health Care Reform Impacts Your Business Now
Wednesday, August 24, 2011 at 10:44AM Health care reform has been wildly debated in the news media during the past two years. Opinions of the bill range from “I think it's great. It's about time the government stepped in to fix this problem.” to “The government needs to stay out of my health care, and stay out of my business.”
When the Patient Protection and Affordable Care Act (PPACA) passed, the bill was over 1000 pages. By their own admission, most members of Congress had not even read the bill when they voted Yea or Nay. And now that the bill has passed, the provisions of the new law are being interpreted and implemented by the Department of Health and Human Services (HHS) in a piece-meal fashion, with rules being enforced, tabled, and dropped altogether.
The most common question we receive from our clients is, “What does all this reform mean for me and my employees.” Well, in a nutshell:
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Preventive Care - Unless your plan is “grandfathered” (meaning your employer has chosen to opt out of certain provisions of PPACA), then most preventive services are covered at 100%. This means that if an insured goes in to the doctor for a routine physical or wellness checkup, he or she pays $0 at the time of service. This includes services ranging from cholesterol checks, diabetes screenings, Pap and pelvic exams, PSA screenings, mammograms, colo-rectal cancer screenings, immunizations, etc. Click here for a full list of preventive services covered under PPACA.
- Tax Credit - Small businesses are eligible to receive a tax credit of 35% of premiums paid on behalf of non-owner employees. For example, if a business owes $10,000 to the IRS at the end of the year, and assuming they contributed $100 per month toward each of their 10 employees' medical premiums, then that business would be eligible for a $4,200 tax credit, which reduces their tax liability to $5,800. This credit runs through 2013. In 2014, the tax credit jumps to 50% of premiums paid; however, the law states that in 2014, in order to be eligible to receive the credit, your health plan must be purchased through your state-based health insurance exchange (which we will discuss further in a later blog post). For more information on the small employer tax credit, please click here.
- Unlimited Benefits - All health insurance plans in America now have unlimited lifetime benefits. Most all plans previously had a cap of some kind, whether it be $2 Milllion, $5 Million, etc. No longer.
- Dependent coverage to age 26 - Adult children can now be covered under their parents health insurance through age 26. The child does not have to be a full-time student. The child can even be married. Also, the child does not have to be claimed as a dependent for tax purposes. However, if the child has access to employer-sponsored coverage of their own, then they are not eligible to be covered under their parents' plan.
- No pre-existing condition exlcusions for children - Children under 19 years of age will be covered for any and all pre-existing conditions upon joining a new health insurance plan, regardless of prior coverage. This does not apply to adult dependent children age 19 and over who are covered under a parents' health plan. You can find more details here.
These are just a few of the most meaningful provisions of PPACA that will impact small businesses. Please keep in mind that this is simply the first wave of provisions to be implemented, and that other changes will come about between now and 2014. This first wave will become effective for each group at its first annual renewal/open enrollment following September 23, 2010.
Our assessment of this first round of reforms is that we are seeing very large rate increases, some in upwards of 50% in one year! What we have is a situation where the law is dictating that all of the above features be added to health insurance plans nationwide, with no relief in terms of cost-cutting mechanisms to offset the higher costs of adding these reforms. As a result, we are seeing an initial shock to the system and very large rates increases in the small business marketplace.
We are hopeful that as the bill is implemented over the next 3-4 years we will be a stabilization of rates for the small business market segment. However, please stay tuned as we will be updating this blog with information and our reaction to the reforms as new rules are interpreted and implemented.