After much discussion and debate, the Patient Protection and Affordable Care Act (PPACA) was passed by Congress and was signed by President Obama on March 23, 2010. The goals of the Act are to improve health care quality, reduce costs and expand coverage to as many as 32 million uninsured Americans.
With changes effective this year and continuing through 2014 and beyond, the Act will give individuals, families, seniors and businesses better access to quality, affordable health care. And with 1,051 “the Secretary shall” directives in the PPACA that involve studies, implementation, legislative actions and the creation of 105 new agencies, programs and oversight bodies, it is safe to say the winds of change are upon us.
“While many of the details and mandates of the new law are still being analyzed, we do know these changes will impact how large and small businesses evaluate and purchase insurance coverage,” says Marty Hauser, president of SummaCare, Inc.
The new law will also change the way the health insurance market operates, offering guaranteed availability of health insurance to everyone, regardless of preexisting conditions and health status. Another critical development involves insurers providing coverage and eliminating certain co-pays or deductibles for prevention and wellness services.
Smart Business spoke to Hauser about the PPACA and the impact it will have.
What impact will the PPACA have on large employers?
Large employers (those with 50 or more full-time equivalents), will see changes resulting from the new legislation in 2014. Mandates will be established to encourage employers to offer coverage to employees. Fees will be imposed upon employers if they do not offer health insurance to their employees and have employees who receive health insurance tax credits, or if they offer health insurance that is deemed unaffordable and have employees who receive health insurance tax credits. Mandates will also affect large employers by prohibiting waiting periods more than 90 days.
What impact will the PPACA have on small employers?
New provisions will help small businesses and small tax-exempt organizations provide health insurance to their employees. Small businesses with less than 25 employees may see cost relief as early as this year if they are eligible for employee coverage subsidies. Starting in 2010 and through 2013, subsidies can be up to 35 percent of premiums. In 2014, this rate will increase to 50 percent. Small tax-exempt organizations are eligible for a 25 percent tax credit in 2010, with this rate increasing to 35 percent in 2014. In all cases, the employer must contribute at least 50 percent of the total premium cost or 50 percent of a benchmark premium.
Small businesses with 10 or fewer employees and up to $25,000 in average annual wages will see relief in the way of a 50 percent health insurance tax credit. The credit, which is available on a rolling basis for the first two years that an employer offers coverage, phases out gradually for employers with average wages between $25,000 and $50,000 and for employers with the equivalent of between 10 and 25 full-time workers. These credits apply to health insurance, dental, vision and other limited-scope health insurance coverages.
In a few years, small business employers and individuals will also be able to purchase insurance at the state level through insurance exchanges. This is a significant change because small businesses currently have little bargaining power and face high administrative costs when it comes to providing health insurance to their employees. Premiums for these employers are typically 18 percent higher than what large employers pay, and they also often face administrative costs three to four times more than the same plans in the large group market. Insurance exchanges are intended to help resolve these issues by providing small business employees who have up to 100 employees with more choices, lower prices and greater bargaining power.
