Mixed Small Business Reaction to Health Ruling
By Emily Maltby and Sarah E. Needleman
Source: wsj.com
If there’s one thing many small-business owners can take away from the Supreme Court’s decision to uphold the Affordable Care Act, it’s a little more certainty.
Consider Richard Balka, owner of The Home Rubber Company L.P. in Trenton, N.J., which offers health insurance to its 37 employees. He said Thursday that he was pleased that the Supreme Court upheld the provision that ensures people can get coverage despite having a pre-existing health condition.
“That freed my conscience in the event I have to stop offering health care to my employees,” he said. “If I had dropped it, anyone who either had a pre-existing condition or family member with a pre-existing condition would be in a horrible position.”
The Supreme Court voted 5-4 to uphold a provision requiring taxpayers to carry health insurance or pay a penalty. The majority opinion, by Chief Justice John Roberts, found that the penalty effectively functioned as a tax, by increasing the income taxes of those without qualifying insurance, and was therefore justified under Congress’ constitutional power to levy taxes and provide for the general welfare.
Of course, the decision still leaves small-business owners wondering how the law will impact the cost of health care.
Some expect the law to lead to lower health-care premiums, with the cost of health care spread among a larger pool of insured Americans. Others, though, predict that premiums will rise and worry that they’ll be forced to provide coverage that they can’t afford, starting in 2014, when many of the law’s key provisions take effect.
Even Mr. Balka said he is still concerned that health exchanges, expected to roll out at the state level come 2014, “may not go far enough” to curb the cost of providing insurance to employees.
Premiums at the rubber-manufacturing facility have increased between 8% and 20% each year in the last 15 years.
Makini Howell, owner of Plum Bistro, a group of four vegan restaurants in Seattle, had no reservations about Thursday’s ruling. “It’s a good thing it wasn’t shot down because we wouldn’t be able to offer coverage,” she said.
Plum Bistro began offering insurance to its eight full-time employees about three months ago. Ms. Howell credits a small-business tax break that rolled out as part of the law as one reason for her ability to offer insurance. She is also looking forward to the health exchanges, which, she believes, could “level the playing field for us.”
Some small-business owners say the law doesn’t affect them now, but voiced concern about how provisions of the law might impact their plans to add to their payroll as they grow.
Elie D. Ashery, president of Gold Lasso Inc., a 10-year-old Gaithersburg, Md., marketing firm, currently has 25 employees and is growing fast, he said. He thinks the law will only push premiums higher.
Though the firm offers health insurance, its premiums have been rising by 26% on average annually over the past four years, he added.
If the firm’s headcount rises above 50, then it might turn out to be less costly to pay a penalty than continue to provide health insurance. “It’s an option I’d have to consider,” he said.
Ruling Lifts Cloud of Uncertainty Over Health Industry
By Ron Winslow
Source: blogs.wsj.com
The Supreme Court’s decision largely upholding the Accountable Care Act lifts a huge cloud of uncertainty over the health-care industry and sets companies and hospitals back on a course to prepare for the bulk of the law’s implementation over the next two years.
As WSJ’s Anna Mathews reports: One-sixth of the U.S. economy just started breathing again.
Health insurers and hospitals were already embarked on a host of strategic changes to prepare for the law as well to respond to as growing pressure in the marketplace to contain costs and improve quality of care.
The decision affirms hospital initiatives that were launched even before the law was passed in 2010 to consolidate and make strategic investments in outpatient clinics and information technology, as WSJ’s Chris Weaver reports.
“We’ll have 32 million potential customers who will come in, get treatment and pay,” saysAlan Miller, the chief executive of Universal Health Services, a hospital operator. “Previously, they got good treatment, and said, ‘we can’t pay.’”
Meantime, the pharmaceutical industry is generally pleased with the decision as it supported the law and also stands to gain from tens of millions of new insured. But that will be offset by billions in fees and other concessions.
Investors reacted to the decision by bidding up hospital stocks while punishing health insurers’ shares in a broadly down market. Pharmaceutical, biotech and medical device stocks also generally fell.
To be sure, while the law’s constitutionality was upheld in today’s decision, the political debate is further inflamed ahead of the November election, which means additional uncertainty lies ahead.
Employer Penalties Under Healthcare Reform
By Joe Giangola
One of the most misunderstood areas of Healthcare Reform has been the mandating of coverage and the associated penalties for employers. There is a lot of confusion as to who the mandates will apply to, when they will begin and who must be covered. Fortunately the mandates do not begin until 2014, which should give employers ample time to prepare.
Company Size and Who is Affected?
Let's take a look at who will be affected by the law. The PPACA (Patient Protection & Affordable Care Act) mandates will apply to companies with 50 or more full time employees.
How exactly is the company size determined? The employer must employ 50 or more full time employees for 120 or more days in the preceding calendar year. So your number of employees in 2013 will determine whether the law applies in 2014.
An employee is considered full time if they work an average of 30 or more hours per week. The law also takes into account part time employees as they are counted as full time equivalents. Part time employees are used to help determine who must comply with the law but are not used in the calculation of the penalties.
Who and what must be covered?
In 2014 an employer must offer minimum essential coverage to all of it's full time employees and their dependents. Failure to comply will subject the employer to a $2,000 per year penalty per employee over 30 employees. This can also result if any full time employee receives subsidized coverage through an Exchange.
What will be considered minimum essential coverage?
The Federal Government's office website, healthcare.gov , defines Minimum Essential Coverage as follows:
"The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage."
As you can see the law is not clear as to the level of coverage required, your current plan may exceed or fall short of the law's required level of benefits.
Will offering a plan make my company compliant with the PPACA?
First, your plan must meet the, to be determined, essential level of coverage. Second, your plan must be considered "affordable" and offer "minimum value".
Employees who are eligible for coverage through work are able to receive subsidized coverage through the Exchanges created by the PPACA. An employee may qualify for a subsidy if their income falls below 400% of the Federal Poverty Level, $88,200 per year for a family of four or $43,320 per year for an individual. The employer must pay 60% of the allowed costs of the coverage and the employees contribution may not exceed 9.5% of their household income. This number will be virtually impossible for employers to determine since spouses income will be unknown.
The penalty for non-compliance is $3,000 per employee over the first 30. The penalty cannot be greater than $2,000 per employee for failure to provide coverage. After 2014 the penalty can be indexed.
Many questions remain unanswered at this time leaving business owners helpless to prepare for the upcoming changes. Be sure to check back often as I will be keeping a close eye on the developing regulations from the Department of Health and Human Services and will help explain the pending clarifications as they are released.
SCOTUS upholds PPACA, industry ready to tackle ongoing health care issues
By Marli D. Riggs
June 28, 2012
Source: eba.benefitnews.com
The Court ruled 5-4 Thursday with Chief Justice John Roberts joining the liberal wing. Roberts in the opinion noted that the individual mandate — the core provision of reform that would pay for many of its initiatives — “is not a valid exercise of the Commerce Clause,” which covers congressional ability to regulate commerce. However, the Court added that Congress has the authority to implement the mandate under the taxing clauses of the Constitution.
Brokers reacted strongly to the ruling, but say while it will take time to fully understand the impact of it on their business and clients, the health care system in America remains broken, with continued rising costs.
“It will likely take several months to sort through the implications, political and otherwise,” says LouAnne Drenckhahn, human resources and compliance consultant at Edina, Minn.-based David Martin Agency. “The current state of our health care system is not a result of PPACA. We have seen the cost of health care rising too quickly and employers exiting the employer-based health care system for years. Our health care system as a whole has not been working as efficiently as it could.”
The Act does not fix the rising cost of health care in this county, adds Perry Braun, executive director of Benefit Advisors Network.
“Insurance market reform, reforming and regulating the distribution and marketing, as well as regulating the development of insurance premiums and how you reimburse and compensate providers are not the only aspect of the cost equation,” he says. “The Act does not address the demand side of the equation, which is where an equal amount of attention should be given.”
Adam Bruckman, president and CEO of Atlanta-based Digital Insurance, the nation’s largest employee benefits-only agency, echoed those statements, saying that the United States “still does not have measures in place to control a [health care] system that is on an unsustainable cost trajectory. If we are to effect meaningful change, we are obligated to devise methods to curb rising expenses.”
Bruckman says that the solution system is a system that produces “engaged” health care consumers that can be achieved through innovation, “not through mandates, regulation and government programs. Evolution must be led by the private sector and requires collaboration between benefits advisors, employers, insurance carriers, providers and consumers.”
Industry organizations were quick to offer their opinion as well about the Court’s decision and cite most specifically the costly compliance burden on employers in America.
“This ruling offers some clarity on the future of the health insurance industry and allows American individuals, families and businesses to adjust to the law,” says Janet Trautwein, CEO of the National Association of Health Underwriters. “While we still have concerns that PPACA does not address the true drivers of health insurance costs in this country, and the law is having a huge and costly compliance burden on American employers, it is our responsibility as industry leaders to move forward within the constraints of the law to help Americans access high-quality, affordable health care.”
Trautwein adds that there are still legislative actions that can be taken to fix parts of the health care law and though they support some of the efforts, NAHU’s focus is to help customers transition to the policies, procedures and regulations PPACA outlines.
“It is imperative that the administration and regulatory agencies provide information in a timely manner on the many aspects of PPACA that remain unclear,” Trautwein says.
National Association of Insurance Commissioners President and Florida Insurance Commissioner Kevin M. McCarty said that they “will continue to work to give regulators the tools they need to ensure a stable health insurance marketplace in the states. Where the ACA provides states with latitude, regulators will continue to work with insurers, consumer groups and the public to provide the best regulatory framework going forward.”
The ruling leaves intact new health care programs in various stages of implementation, including substantial expansion of community care centers in medically underserved regions, accountable care organizations with coordinated population health management programs, coverage for persons with pre-existing medical conditions, coverage on parental policies for adult children up to age 26, and lower prescription drug costs for many persons, particularly those on Medicare.
Robert Miller, president of the National Association of Insurance and Financial Advisors, says that the organizations “primary health care reform goal is to ensure access to affordable health services in a sustainable, competitive insurance market without jeopardizing the high quality of care and service expected by consumers.”
NAIFA believes Congressional modification is needed and will ask the following of Congress:
• Remove agent commissions from the medical loss ratio (MLR)
• Repeal the CLASS Act
• Raise or remove the contribution cap for flexible spending arrangements (FSAs)
• Reverse the 3.8% tax on unearned income (including annuities)
• Enhance HSA and FSA use
• Build on the employer-based system
• Reduce consumer costs
Be sure to tune into EBA’s exclusive web seminar that will be held this afternoon at 2 p.m. EST and will give a detailed review of the ruling and impact analysis for health benefit plan sponsors and advisers. The web seminar will feature a Q&A session with the speakers to provide an opportunity for you to get answers to your most urgent questions.
Check out our new slideshow as employee benefit brokers and consultants across the country react and share their plans for moving forward.
Listen as Diane Boyle, VP of Federal Government Relations at the National Association of Insurance and Financial Advisors, shares the organization’s top priority in this exclusive podcast.
The House will vote on a full repeal of Barack Obama's health care law during the week of July 9, Majority Leader Eric Cantor (R-Va.) said Thursday.
What The Health Care Decision Means for Your Small Business
The Supreme Court decision Thursday upholds the Affordable Care Act. But as a small-business owner, you may wonder what that means for you.
Most of the law's key provisions are set to take effect roughly two years from now, on January 1, 2014.
Based on the ruling, all individuals -- including small-business owners -- must have health insurance starting in 2014, or pay a penalty.
Certainly, the cost of health insurance has become a significant issue for small firms over the past decade.
Overall, about 71% of firms with 10 to 24 employees offered health insurance in 2011, compared with 77% in 2001, according to a 2011 Kaiser Family Foundation survey. Of firms with three to nine workers, just 48% offered insurance in 2011, compared with 58% in 2001.
The high-profile decision is a blow to the National Federation of Independent Business, a Washington, D.C., lobbying group that joined 26 states in fighting the mandate. The NFIB argued that small businesses would suffer if the owners of those entities had to pay for their own health insurance. The NFIB spent more than $1.2 million on the lawsuit in 2010 alone, according to disclosures.
Here's a look at how you might be affected:
Q. What if I am a one-person business?
A. The impact for sole-proprietors and others with no employees will be much like the impact on individuals.
For people in this group, the crux of the 2014 roll-out is the individual mandate, which requires all U.S. citizens and legal residents to have health coverage or pay a penalty.
You, as a one-person business, would buy insurance through your state's benefits exchange that will roll out in 2014.
There are some exemptions, however, such as those from certain religious backgrounds and those who are eligible for the so-called "hardship exemption" if the cost of the annual premium exceeds 8% of household income.
There are penalties intended to ensure compliance. The top penalty for individuals, once fully phased in, for not having insurance is $695 or 2.5% of income -- whichever is greater.
Q. I have employees or may be hiring. What provisions impact me?
A. If you have employees, the health-care provisions are a bit more complicated.
Since 2010, firms with fewer than 25 full-time equivalent employees have been eligible for a tax break if you cover at least half the cost of health insurance. (Full-time equivalent is the number of employees on full-time schedules plus the number of employees on part-time schedules, converted to a full-time basis.)
But only if you have fewer than 10 full-time equivalent employees and average salaries of $25,000 or less is your firm eligible for the full credit. Today, that full credit is 35% of your contribution toward an employee's insurance premium. As your firm size and average wage amount goes up, the tax credit goes down. And once your business hits 25 full-time equivalent employees or $50,000 in average salaries, the credit is completely phased out.
Q. What happens to the tax credits going forward?
A. In 2014, the state-based Small Business Health Options Program Exchanges will be open to small firms. And getting insurance through those exchanges could bump the maximum tax credit to 50% of your contribution, up from the current 35%.
But the tax credits won't last. The credit is only available for a maximum of five years and only two years once the exchanges are up and running.
Q. Will I have to provide health insurance to my employees in 2014?
A. No firm is mandated to provide insurance, but in 2014, only the smallest businesses will be exempt from penalties if they don't.
Q. What are the penalties and under what circumstances would I be exempt?
A. Once your firm reaches 50 full-time equivalent employees, a penalty will kick in if you fail to provide coverage for employees who average 30 or more hours a week in a given month. The penalty is $2,000 for each full-time employee in excess of 30 full-time employees. There are no penalties if part-time employees are not offered coverage.
A key factor in calculating the penalty is that the equation isn't based on full-time equivalents, but rather on actual full-time employees. That means some businesses that are subject to the penalty may end up owing nothing.
Here's a basic example: Say your firm has 25 full-time employees and 50 half-time employees that, combined, equal 25 full-time equivalents. Your firm, in effect, has 50 full-time equivalents and would be subject to the penalty if you don't provide health-care coverage. However, your penalty cost likely would be zero because the $2,000 tally starts at the 31st full-time employee and you only have 25 full-time employees.
Q. What should I know about getting insurance for my employees?
A. You can't just buy any old insurance to avoid the penalty. You have to provide so-called "minimum essential" and "affordable" coverage. Minimum essential coverage means covering 60% of the actuarial value of the cost of the benefits. And affordable means the premium for the coverage of the individual employee cannot exceed 9.5% of the employee's household income.
If the coverage you offer is unaffordable, qualifying employees can get subsidized coverage through the tax credit on the state exchanges. In such a case, you will have to pay the lesser of $3,000 per subsidized full-time employee, or the $2,000-per-employee penalty after the first 30 full-time employees.
Employers Confident Affordable Care Act Will Continue
JUNE 14, 2012
85 Percent of Employers Surveyed Are Continuing with Compliance Plans, Including SBC Deadline, Confident ACA Regs for the Most Part Will Continue.
BOSTON--(BUSINESS WIRE)--As the Supreme Court decides the fate of the Affordable Care Act, employers surveyed by HighRoads, the industry leader in employer health care compliance and benefits management, appear confident ACA will continue, and some 85 percent are moving forward to meet compliance deadlines, including the September 23, 2012, deadline for enactment of the new Summary of Benefits Coverage (SBC) regulation. The exception is the mandate for individual coverage—slightly more than half of the respondents said the ACA will be upheld but the individual mandate is likely to be struck down when the Supreme Court rules in late June.
“They will most certainly want to know the rationale behind any changes to their benefits, especially since so many of the ACA’s changes to date have been perceived by employees as positive, including extending coverage to adult children, 100 percent coverage of preventive care and the elimination of lifetime limits.”
In other findings, 32 percent of respondents think the law will stand as is, and the remaining 14 percent felt the Court would strike down the entire law. Respondents ranged in size from fewer than 5,000 employees to more than 100,000 employees. The majority of respondents have more than 5,000 employees.
“Employers know there is no time to play catch up in order to meet SBC requirements for September. They are strategically planning and executing on compliance regulations, realizing the complexity of meeting ACA regulations, if the law remains partially, or even entirely intact,” said Kim Buckey, Principal, HighRoads Compliance Communications Practice.
While the vast majority is moving forward with their planning and compliance initiatives, five percent of respondents reported that they were waiting to make a decision about how to handle SBCs until after the Supreme Court has ruled. Not surprisingly, these respondents tended to have fewer employees—and fewer plan options—than the rest of the responding organizations. The remaining ten percent were evenly split between postponing finalization of their plan designs for 2013 and postponing their pay or play analysis (which would have more impact in 2014—but would certainly require laying the groundwork with employees over the course of the next 12-18 months).
“It’s prudent for employers to plan for continued enactment of the ACA since it is likely that at least some of the key provisions of the law will be upheld. Planning will ensure that employers remain in compliance with the regulations that are already in effect during 2012, and lay a more solid groundwork for any regulations that will come into effect, in full force, by 2014,” said Thomas Barker, partner in the Foley Hoag law firm.
Distressingly, 55 percent of respondents had no plans to communicate anything to employees about the company’s position on the ACA, or the company’s plans if the ACA is overturned. Thirty nine percent had not yet communicated but did plan to do so, and 6 percent had already communicated to employees.
“We would encourage employers to take another look at their ACA communication plans and where it fits within their overall HR and benefits communication strategy. The ACA remains a rather large question mark in employees’ minds, and they will naturally look to their employers—who provide their benefits—for information about how the Act and any changes to it, will affect them. As we look ahead to the fall open enrollment season providing employees a status check on where the company stands in relation to the ACA will give employees a better foundation from which to choose or revise their individual plans,” said Buckey. “They will most certainly want to know the rationale behind any changes to their benefits, especially since so many of the ACA’s changes to date have been perceived by employees as positive, including extending coverage to adult children, 100 percent coverage of preventive care and the elimination of lifetime limits.”