With all the debate surrounding the Affordable Care Act, one could easily get lost in the rhetoric and lose sight of the issue that’s important now: The law is here, whether you like it or not. Clearly, the new or expanded coverage slated for millions of additional people will bring more costs – whether in the form of a tax or penalty. No matter how you feel about that fact, it’s time to set aside politics and take an objective look at the implications of this new law for your business.
One of the most frustrating challenges that middle-market business owners will likely soon face is continued uncertainty. While some people say that the Affordable Healthcare Act will save a substantial amount of money over time and others say it will do just the opposite, nobody knows the ultimate implications because this law is still new. Even the threats ranging from slight modification to repeal of this law will probably remain unknown until after the November election and beyond.
Although it’s impossible to predict the future, we know at least one thing is certain: Because some provisions have already gone into effect and other provisions will be phased in during the next three years, companies will have to redesign their current plans and/or offer new plans to employees.
The time to begin studying this is now. If not managed properly, the issues associated with this law could hurt the bottom line for businesses. For example, automatic enrollment provisions for businesses with more than 200 employees make it critical for businesses to gauge how many of their employees are likely to opt out and to develop appropriate strategies.
Some key points to keep in mind:
• Many businesses that currently provide employee group coverage at reduced premiums may face higher costs. If this happens, some business owners might feel motivated to simply pay the penalties for not offering health insurance to their employees, which was not the intended effect of this law. On the other hand, some believe that insurers may end up competing for your business, bringing down premiums (although this seems highly unlikely).
• Businesses that provide the top-tier plans for certain employees may face higher costs with a 40 percent excise tax tagged onto those “Cadillac” plans if the values of those plans exceed $10,200 for individuals or $27,500 for family coverage. To help prevent this from happening, you should examine your current policies and determine if you will be subject to the new tax. If so, you might want to modify the benefits.
• Another issue facing the business community: the non-discrimination provision in the new law. Businesses will not be able to continue to offer top-tier “Cadillac” plans to some employees while offering others more basic coverage. Offering the same coverage to all employees can be a costly proposition for many business owners. Some small-business owners who cannot afford to offer the same high-quality coverage to all employees worry that this could motivate senior talent to look for jobs at bigger companies that offer better coverage. It is possible that supplemental coverage will be available.
• Owners of some smaller businesses may benefit from tax credits aimed at helping to reduce the costs of providing insurance. However, make sure to understand the fine print, as there will be certain restrictions based on income and other criteria. For example, businesses with 25 or fewer employees who pay average annual wages of less than $50,000 and provide health insurance may qualify for a small business tax credit of up to 35 percent (up to 25 percent for nonprofits) of the costs of their premiums. Starting in 2014, some small businesses could qualify for tax credits as high as 50 percent. This might sound good, but how many businesses will actually qualify?
• Businesses with employer-based health insurance plans that cover retirees between 55 and 64 years of age can now obtain financial help through the Early Retiree Reinsurance Program.
• It’s said that businesses with fewer than 100 employees may be able to shop for insurance in an Affordable Insurance Exchange, a new “marketplace” where individuals and small businesses may look for affordable health benefit plans. Employers with fewer than 50 employees are said to be exempt from new employer responsibility policies and don’t have to pay an assessment if their employees get tax credits through an Affordable Insurance Exchange. There are still unanswered questions, however, about if and how these exchanges will be established.
Some additional key points relevant to coverage:
The new law makes it easier to obtain insurance for children and adults with pre-existing conditions, many of whom have historically been unable to afford or obtain coverage. It also requires insurance companies to cover certain types of preventive care, including things like screenings and immunizations, without requiring you to make co-payments or co-insurance or meet your deductibles. Starting Jan. 1, 2014, the new law will do away with the dollar limits on benefits that had been previously imposed by many health plans, meaning that health plans can no longer cap their yearly or lifetime spending for your covered benefits.
Again, it’s difficult to know with any certainty either how the new law will affect middle-market business owners or how middle-market business owners will respond. For example, this new law could motivate some businesses owners to do more outsourcing or use temporary labor through third-party providers. Companies in medical and biotech industries, for example, could benefit from provisions in the law that allow for intellectual property protection.
The bill is highly complex and exceeds 2,000 pages. The bottom line: every business has unique needs, and it’s important to consult with qualified insurance professionals who can provide a detailed analysis of all the implications of this law to your business and help you consider all your options. Making the right choices now could go a long way toward protecting your bottom line later.
James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com