No matter where you turn, everyone is talking about health care reform. But what will the recently passed health care legislation mean for your business?
“The reforms that will have the greatest effect on business owners revolve around access to health care coverage,” says Kim Horn, CEO of Priority Health. “From there, the changes can be divided into two main areas: immediate changes that will take effect this year and more substantial changes that will occur in 2014 and beyond.”
Smart Business spoke with Horn about the effects of health care reform and what businesses can expect as a result.
Why do business owners need to educate themselves about the recent health care reforms?
The Patient Protection and Affordability Act, signed into law by President Barack Obama on March 23, creates national guidelines for the delivery and financing of health care. It also creates new tax mechanisms that will have an impact on individuals, businesses and insurers.
Some of the impact will be immediate, as some of the vast reforms spelled out in the act go into effect as soon as June 23. Other impacts are further out and don’t take effect until as late as 2018.
How will the health care reforms affect businesses over the long term?
This year there are two provisions to help businesses afford health care coverage for their employees. Small businesses, those with fewer than 50 employees, may be eligible for a tax credit. Also, a reinsurance mechanism is available for businesses that provide health coverage for retirees prior to age 65.
In 2014, businesses with 50 or more employees must offer health insurance to their employees or pay a penalty. Businesses with 49 or fewer employees are not required to do so.
In addition, for businesses with fewer than 100 employees, the creation of health insurance exchanges will provide another avenue to purchase health coverage. By 2014, the legislation calls for the establishment of American Health Benefit Exchanges in each state, which includes the Small Business Health Options Program.
Once these exchanges are established, however, businesses with 50 or more employees could be subject to a penalty if their employees receive premium tax credits in the insurance exchange.
Each business’s situation is different, so business owners should consult with their health insurance company or their independent insurance agent to avoid any potential penalties.
How will the reforms impact health care coverage in the short term?
The reforms will impact coverage in several ways. The following changes to health care coverage will go into effect as groups renew on or after Sept. 23, 2010:
- The new law extends coverage to dependent children up to age 26. Previous to this law, most health insurers allowed employers to offer coverage for full-time students as dependents until age 24.
- All health plans (with the exception of certain grandfathered plans) must include preventive services such as immunizations and cancer screenings without any cost sharing. This can help employers ensure that their employees remain healthy.
- Beginning this year, employers with 25 or fewer employees with an average salary of $50,000 or less per year may be eligible for tax credits to encourage them to choose to provide health insurance for their employees.
- The reinsurance program provides financial assistance to employers who provide health insurance coverage to retirees from age 55 to 64 who would not otherwise be eligible for Medicare.
In addition, the law prohibits pre-existing condition exclusions for enrollees under age 19, placing lifetime and annual limits on essential benefits and canceling coverage except in the case of fraud.
What can businesses do to ensure they are ready for the new legislation?
Many large businesses already offer some form of health insurance to their employees. These businesses may see fewer changes in the status quo as they comply with the reforms. However, both large and small businesses are going to have to make adjustments.
Business owners should consult with their health insurance company or their independent insurance agent to learn more about how the changes might impact them. If you are a small business owner interested in learning more about offering coverage to your employees now, an independent agent can help you find solutions that fit your company.
Small business owners may want to talk with a tax advisor quickly because they may be eligible for tax credits beginning with the 2010 tax year.
How will health insurers be able to benefit businesses once the reforms are in place?
Health insurers are a good resource to help businesses understand how changes in legislation will affect their companies. Because they are part of a regulated industry, health plans have experience in responding to legislative changes.
In recent years, changes to the laws governing Health Savings Accounts, Medicare Advantage and mental health parity have been addressed by plans on behalf of business customers.
Kim Horn is president and CEO of Priority Health. Reach her at (616) 464-8304 or firstname.lastname@example.org.