Health Insurance

Health Care Reform

Lori Wheat, AAF, is a planner. She maps out her marketing months in advance and can likely tell you how many statement stuffers are in the supply closet without looking. But when it comes to knowing exactly how the new health care law will affect Lafayette Florist Gift Shop and Garden Center, Wheat is in unfamiliar territory. She knows that because her business has fewer than 50 employees, some mandates in the Patient Protection and Affordable Care Act won’t directly apply to her. family business in Lafayette, Colo. But, the impact on suppliers, customers and the overall business community has her concerned. Will larger vendors face higher health care costs and have to raise prices? Will health care costs actually go down?

Her questions – and frustration – sound familiar to wholesaler Len Collins. Motivated to reform health care, the president of Georgia State Floral Distributors wrote to his senator before President Obama signed the bill last week. Collins explained because he pays 100 percent of his employees’ premiums or offers the equivalent in wages, the skyrocketing premiums make pay raises difficult. The questions voiced to his legislator remain, Collins said. “Will we be subsidizing the health care of illegal immigrants? Does the bill build incentives for folks to make better lifestyle choices?” he said. “My fear is that this will become another entitlement (tax) thrown on the back of producers to the benefit of non-producers.”

To answer some of those questions and help to allay what fears we can, SAF details the provisions most likely to impact small businesses — and when those changes will start to occur.

Employer Requirements
Effective: Jan. 1, 2014
In the strictest sense, the law does not force employers to offer health insurance. It does, however, assess a fee on certain employers of 50 or more employees under certain conditions.

Employers with fewer than 50 employees are exempt from the penalties described below.

Employers of 50 or more employees who do not offer health insurance that have at least one full-time employee who gets subsidized health insurance through the exchange, will have to pay a fee of $2,000 per employee, excluding the first 30 employees.

Employers of 50 or more who offer health insurance that have at least one full-time employee who gets subsidized health insurance through the exchange will be required to pay the lesser of $3,000 for each employee receiving a tax credit or $2,000 for each full-time employee.

Employers with more than 200 employees are required to automatically enroll employees into health insurance plans offered. Employees may opt out of the coverage.

Tax Credits for Employers
Phase I: (taxable years 2010, 2011, 2012 and 2013)
If employers of no more than 25 full-time equivalent employees want to offer health insurance or already do — and if their employees have annual full-time equivalent wages that average no more than $50,000 — they are eligible for a tax credit. The tax credit is up to 35 percent of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost. The full credit is available to employers with 10 or fewer full-time equivalent employees and average annual full-time equivalent wages of less than $25,000. The credit phases out as firm size and average wages increase.

Phase II:(taxable years 2014 and beyond)
If small employers purchase coverage through a state exchange, a tax credit is available for up to 50 percent of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost. The credit is available for two consecutive taxable years. The full credit is available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000. The credit phases out as firm size and average wages increase.

Tax-exempt small businesses meeting the requirements outlined above are eligible for tax credits of up to 35 percent of the employer’s contributions toward the employee’s health insurance premium.

Wellness/Reward Programs
Effective: Jan. 1, 2014
The law provides grants for up to five years to small employers that establish wellness programs. Funds will be appropriated beginning in fiscal year 2011.

The law also permits employers to offer employee rewards — such as premium discounts and waivers of cost-sharing requirements among others – of up to 30 percent of coverage for participating in a wellness program and meeting certain health-related standards.

Health Insurance Exchanges
Effective: Jan. 1, 2014
The law creates the state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) exchanges, marketplaces where individuals and small businesses with up to 100 employees can purchase coverage. The law restricts access to coverage through the exchanges to U.S. citizens and legal immigrants who are not incarcerated.

The law creates four benefit categories of plans plus a separate catastrophic plan. Health insurance plans participating in the exchange must meet certain requirements in marketing, customer service, provider networks and transparency. States have option to create a basic health plan for uninsured individuals with incomes between 133 and 200 percent of the federal poverty level. (The federal poverty level for individuals in 2009 is $10,830, and for a family of three is $18,310.) Businesses with more than 100 employees can begin purchasing coverage in the SHOP exchange in 2017.

Other Provisions
Individual Mandate
The law requires U.S. citizens and legal residents to have health insurance or pay a penalty. Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants and incarcerated individuals.

The penalties for not having insurance will be phased-in according to the following schedule. The penalties are the greater of:

$95 or 1 percent of taxable income in 2014
$325 or 2 percent of taxable income in 2015
$695 or 2.5 percent of taxable income in 2016
After 2016 the penalty will be increased annually by the cost-of-living adjustment

Tax Changes
There are a variety of tax increases to pay for the new regulations. It is best to see your tax attorney or health insurance expert for details, but those dealing with Medicare and health insurance plans may of specific interest to you.

The law increases the Medicare Part A tax rate on wages by 0.9 percent (from 1.45 percent to 2.35 percent) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and imposes a 3.8 percent tax on unearned (investment) income for higher income taxpayers. The effective date is Jan. 1, 2013.

High cost insurance plans.. The tax is on insurers of employer-sponsored health plans that cost more than $10,200 for individual coverage and $27,500 for family coverage. These costs will be indexed to the consumer price index beginning in 2020. The tax is equal to 40 percent of the cost of the plan that exceeds the threshold amounts. The tax is imposed on the issuer of the health insurance policy. In the case of a self-insured plan this is the plan administrator or in some cases the employer. The effective date is Jan., 2018.

Several changes relate directly to health insurers, including the following:

Effective September of this year, uninsured dependent children can be covered under a parents’ health insurance plan.
Effective now, Insurance companies cannot set lifetime limits on the dollar value of heath care coverage.
Insurance companies can no longer deny coverage for pre-existing conditions. The effective date is September 2010 for children and 2014 for adults.

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