Obamacare and small business
Many people have a lot of questions when it comes to the new healthcare reform law. First off Obamacare is formally called the Patient Protection and Affordable Care Act. The Patient Protection and Affordable Care Act is the healthcare reform law that was signed in 2010 and now many states have opened their health insurance marketplace exchanges as of October 1, 2013. This new healthcare reform law aims to increase the number of Americans that are covered by health insurance and also to decrease the cost of health care.
Under this new law everyone in America will have to get health insurance of some form. Insurance companies can no longer deny people coverage because of a preexisting condition nor can than charge a higher premium if one has a pre-existing condition (Hamblin, 2013). Obamacare will also allow for young adults to remain on their parent’s policy until the age of 26. This will allow for many young adults to remain insured while they try to obtain a job that will provide adequate health coverage.
Throughout this paper I will discuss the new health care reform law and how it affects small business. The Patient Protection and Affordable Care Act was signed in 2010 but it does not feel as if much has changed, that is because the law will roll out changes in a ten year span. In 2014 a mandate will require all individuals to have “minimal essential health insurance coverage” (Hamblin, 2013). This has upset many people because many cannot simply afford healthcare due to the economy that we are currently in.
Individuals may purchase health care coverage through federal or state exchanges that are being set up. To help people obtain health insurance those with moderate to low income are eligible to receive tax credits to help pay for the new health insurance. Many states are also expanding their state Medicaid programs. A chart that demonstrates each states decision on whether to move forward with the health insurance exchanges is provided below.
The Pros of the Patient Protection and Affordable Care Act include that individual health care premiums will be reduced and the more than 33 to 44 million people who are uninsured or underinsured will gain coverage through the new state exchanges, Medicare or the newly expanded Medicaid in some states. For those who cannot afford to pay the health insurance premium could be eligible to use federal tax credits and subsidies to help save up to 60% of the current cost of health insurance premiums.
This will make health insurance coverage affordable for up to 23 million Americans (Obamacare, 2013). Under the new health care reform law over 47 million women will have access to women’s services with no out of pocket costs for preventative and wellness services (Obamacare, 2013). The low-income individuals will have the opportunity of getting health insurance coverage through the state exchange, Medicare, or Medicaid; however some states have opted out of the Medicaid expansion in which some low-income individuals will not be eligible.
Seniors and other individuals eligible for Medicare will see expanding benefits and coverage options; however there will be decreases in home health payments and hospital coverage as well. Obamacare will require businesses with over 50 full-time employees to provide affordable health insurance coverage to its employees however small businesses with 25 employees or less will receive federal tax credits to help offset the costs that a small business will face to encourage these businesses to provide health coverage to its employees (Obamacare, 2013).
Under the Patient Protection and Affordable Care Act businesses that have 50 or more full-time employees who work at least 30 hours per week, must provide its’ employees with healthcare coverage or they will face a penalty of $2,000 per employee. This will not only impact the business itself but will also impact the workers of small businesses because many businesses will decrease employee hours to have them remain under the 30 hours a week limit and they may also be hesitant in hiring additional employees in order to stay under the 50 full time employee limit (Davidson, 2013).
The delay of the enactment of the Patient Protection and Affordable Care Act will allow for small businesses to increase employee hours as well as hire additional employees until 2015 when the Patient Protection and Affordable Care Act will take affect for businesses. The Patient Protection and Affordable Care Act may negatively impact some employees; if an employee has coverage through its employer the insurance premium must be less than 9. 5% of their income. For example if the employee premium is $3600 a year and the 20% share of the premium is $720 and the employee makes $45,000 a year; $45,000 x 9.5%= $4275 which is greater than $720.
Therefore this coverage would be deemed affordable. However if this particular employee has a family of four the premium for the family would be an additional $7500 a year. In this case this individual would be eligible for tax credits to help afford the health insurance coverage if their employer did not provide health coverage (Lee, 2013). The delay of the enactment of the Patient Protection and Affordable Care Act will help and hurt people at the same time.
The delay of the healthcare reform law does not change the January 2014 deadline that mandates all individuals to get health insurance coverage or tax credits to help pay for it. The delay pushes back the deadline that mandates small businesses that have more than 50 full-time employees to provide adequate health insurance coverage to its employees or face a penalty. The new deadline is now pushed back to January 2015. The delay of the law may affect some workers who were depending on this new mandate to get health coverage before the January 2014 deadline (Cass, Alonso-Zaldivar, 2013).
An individual who is already insured whether that be through their employer, Medicare, Medicaid or a private insurer will not be affected by the delay. Those low-income individuals who would be eligible to receive Medicaid under the new expanded program will however have to wait an extra year (Cass,Alonso-Zaldivar, 2013). A chart that demonstrates which states have decided to expand their Medicaid program is provided below. In my opinion the new Patient Protection and Affordable Care Act has many aspects that can be very concerning and overwhelming for a small business.
The Patient Protection and Affordable Care Act will at first have a big impact on small business financials because a business that has 50 plus full-time employees must provide health care coverage to its employees and this could be very costly for a business who may not have as many financial resources as a large company may have. This mandate may cause small businesses to decrease employee hours to less than 30 hours per week and also hinder the business from hiring additional employees as to not fall into the over 50 full-time employees category.
A study that was done by Kaiser Family Foundation found that 16 percent of small businesses plan on terminating their healthcare plan after reform has been fully implemented whereas only 6 percent of larger companies plan on canceling their plans once the exchanges go online and individual mandates and employer penalties become effective (Klein, 2012). I think many companies have decided to cancel their existing plans because it would be more cost effective for them in the long run, now the cost of health insurance is completely on the employees shoulders.
In some circumstances this could be more cost effective for the employee as I demonstrated earlier. At first I believe that the Patient Protection and Affordable Care Act will be harmful to small business because it will require them to put out money that they may not have available to them in order to pay for employee health care coverage under this new mandate. However over time when everyone begins to adjust to the new healthcare reform law I think that healthcare costs will decrease and will ultimately save businesses money in the long run.
However I believe that many small businesses that are on the verge of being over the 50 full-time employee will decrease employee hours and will hesitate before hiring any additional employees. This will not only affect the business but will also affect workers of those small businesses because if their hours are cut they will have to purchase health insurance through the exchange or see if they qualify for their state Medicaid program. Small businesses that have less than 25 employees will qualify for federal tax credits that will help with the cost of providing employees with healthcare coverage.
The tax credits are meant to encourage small business that are not required to provided their employees with healthcare coverage to offer their employees healthcare coverage. If I were a small business owner I would fully corporate with the new Patient Protection and Affordable Care Act because if I employed over 50 people and did not provide healthcare coverage to my employees I would face a penalty of $2,000 per each worker. This would put me at $100,000 in penalties. To me it is worth paying the premium for each worker than facing the penalty, which may cost me more in the long run than paying the premium.
I believe that the Patient Protection and Affordable Care Act will initially hurt small businesses because they have to pay upfront the costs that are associated with providing healthcare coverage to its employees. However over time after everyone adjusts to the new mandates small businesses will save money in the long run and will benefit from the new healthcare reform law. I also believe that many workers as well as other individuals will benefit from the new law as well. Many will benefit from the expansion of Medicare and Medicaid as well as the new tax credits that will help people afford their healthcare premiums.