Obamacare and Small Business

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P R O V I D E D B Y S I G N S . C O M






WHAT IS THE PATIENT PROTECTION & AFFORDABLE CARE ACT

We work with small businesses (SMBs) every day. We are one as well. We know SMB’s have a lot of questions regard-ing the Affordable Care Act (Obamacare) and how it will impact small businesses. To help the businesses that drive our economy, we’ve put together a comprehensive guide on Obamacare. We’ve attempted to do so in an apolitical way so that small business owners can get the facts they need to plan for the implementation of the law regardless of political leanings. So if you’re a small business owner looking for information on Obamacare including its facts, pros and cons, summary or text, calculator, penalties, history, resources and more, you’ve come to the right place! Last updated August 2013

WANT TO LEARN MORE ABOUT OBAMACARE?





While it’s widely talked about and endlessly debated by politicians and talking heads, many people, including small business owners, aren’t entirely sure what Obamacare or the ACA is and what it exactly entails. So in layman’s terms, here’s a quick definition and some of the basics of Obamacare:

The Patient Protection and Affordable Care Act (PPACA), more popularly known as Obamacare or the Affordable Care Act, is President Obama’s signature policy achievement to date. It was signed into law on March 23, 2010. It is the most significant change to the U.S. healthcare system since Medicare and Medicaid passed almost 50 years ago.

Its stated primary purpose is to extend health coverage to uninsured Americans and reduce the future health insurance cost curve. To achieve this purpose, the ACA has built in subsidies, tax credits, penalties, and mandates. The bill itself has ardent critics and supporters on both sides of the political spectrum. One of the most debated provisions is the “individual mandate” that specifies that everyone must be covered by health insurance or pay a tax with only a couple of exceptions.




Individuals and some SMBs meeting specific requirements will be able to get subsidies if they purchase insurance coverage in government-run health insurance exchanges that have yet to be rolled out. These exchanges may be run in each state; however, if any state refuses to enact an exchange, the Federal Government will force that state to be enrolled in a federal exchange. An exchange is a marketplace where individuals and SMBs (known for SMBs as “Small Business Health Options Program” – SHOP) can compare and buy policies. Like everything else, the cost and funding aspects of Obamacare are vehemently debated but in theory, it is funded by a variety of taxes and cost savings.

Taxes for funding the bill include everything from the Medicare tax rate, health insurance providers, medical devices, premium tax increases and even taxes from such services as tanning. Spending offsets include projected savings in the Medicare program and home health care payments.



IMPACT

• SMB Owners will have to offer “affordable” health insurance regardless of pre-existing conditions and gender to all “benefit eligible” employees. This applies to SMBs who employ more than 50 full-time or full-time equivalent (known as FTEs or employees who work more than 30 hours a week) employees. Employers under the 50 FTE threshold are not required to offer benefits.

Perhaps the most important potential effect of the passage and continued implementation of Obamacare is that on small businesses. Small businesses undoubtedly are a key cog in the U.S. economy and there is no doubt small business behavior will be changed due to key provisions within the healthcare law, such as:

IMPACT OF OBAMACAREON SMALLBUSINESS

• Firms with more than 50 employees or FTEs not offering health insurance will be penalized after January 1, 2015.





While this impact, and whether it will be positive or negative for the U.S. economy as a whole, is still widely debated, there is little doubt that it will directly change small business behavior in several ways. Most notably the impact could play out in various areas of a small business such as hiring and staffing, benefit packages, and even financial projections as employers grapple with uncertain costs based on the requirements of the law. These changes, scenarios, and cost considerations for small businesses are covered more in depth in the Obamacare and Small Business section.

Perhaps the most difficult part of understanding Affordable Care Act is wading through the partisan arguments for and against the law. Both sides having talked endlessly about the pros and cons of the law, not to mention the fact that individuals, businesses, and every other party with a vested interest have spoken up to detail what they believe will be the benefits or drawbacks of Obamacare. At the end of the day it leaves individuals and small business owners alike asking the question: How will Obamacare affect me? To make it as clear as possible, we’ve briefly summarized the primary pros and cons (in some cases theoretical since they’re still debated both ways) as put forth by both sides.

OBAMACAREPROS AND CONS - LEFT VS. RIGHT:






Establish better consumer protections by providing protection against previous factors that affected prices including: family size, age, geographic location, and tobacco usage.

Health care coverage extended to adults 18 years and older with preexisting conditions and regardless of sex as of January 2014.

Children can remain on their parents’ plan until the age of 26 regardless of being enrolled in higher education or marital status.

Individual mandate means that more people are covered by health insurance – including employers offering insurance to all of their employees.

Health care law will lead to expanded Medicaid coverage.

Subsidies will be provided to help low-income people buy insurance. Provide more cosumer options.





Reduces freedoms and employers’ flexibility and benefit designs.

The individual mandate that requires that citizens buy insurance is unconstitutional. Those on the right view it as a form of socialism where the wealthy and/or healthy are required to subsidize health care costs of others against their will.

Enforcement mechanisms of the individual mandate won’t work; e.g., citizens will simply pay a penalty rather than buy insurance and drive up costs or simply find new loopholes in the law.

Government regulation in health care will lead to higher costs as a whole, since government regulation is argued to ruin a free-market system.

Higher taxes on health insurers will be passed onto individuals and companies buying in the “fully insured” market. This will lead to higher costs and kill small businesses. It will hurt the economy through lower

job creation due to increased hiring costs as a result of uncertainty.

Increases spending and costs when the government is already significantly in debt.




of Small Employers (less than 50 employ-ees) understand the employer mandate.

of small business owners said they were not familiar with health insurance exchanges and how they could impact their business.

either incorrectly believed or were not sure whether they would be required to pay a tax for not providing health insurance in 2014.

of small employers are most concerned about the cost and budgetary implications of health care reform.

said understanding the impact on their businesses was their biggest concern.

SNOWSHACK



AFFORDABLE CARE ACT OBAMACARE TIMELINE

The Affordable Care Act has already lived a full life in its short existence. Democrats and those who support the bill have pushed hard to get it signed into law, while Republicans and those who reject it having

fought it every step of the way to repeal Obamacare by fighting it as an unconstitutional law. The timeline of Obamacare below shows a brief history of some of the most significant events and important dates of the law

known as the Affordable Care Act.

President Barrack Obama signs into law the Patient Protection and Affordable Care Act (PPACA). Implementation of the law begins with some grandfather clause exemptions for some policies, but in many cases provisions of the law begin to affect current policies. The law begins to roll out over the next four years, with most of the actual changes to the healthcare system beginning in 2014.

After legal challenges and lots of rhetoric from a broad range of groups and states, the Supreme Court rules that the ACA is constitutional in the case National Federation of Independent Business vs. Sebelius.

2010 - 2015





Employers are required to provide print notification of employees’ ability to shop for a plan in state-run exchanges. This was deadline was originally March 2013 but it has been pushed back to October 1, 2013 for current employees. After this date, employers are required to provide notice within fourteen days of hiring. The Department of Labor has yet to give an example notice.

Open Enrollment Begins for individuals and small businesses to buy health plans in the insurance marketplace. Federal and State Health Exchanges scheduled to open. These markets will feature the “individual health insurance market” and “small group market” to cater to individuals and small employers, respectively. A large group market for employers with more than 100 employees won’t be available until 2017.

Many aspects of the law become effective starting January 2014. These include government subsidization of individuals up to 400% of the federal poverty line, the individual mandate, health insurance tax (HIT) to be levied on insurers, prohibition of annual limits on group health plans, etc.

Employers with greater than 50 FTE employees must offer insurance or face penalty.

JANUARY 2015

JANUARY 2014






Perhaps the group most interested in the impact of Obamacare being implemented is small business owners and employers. This is because small businesses traditionally not only help drive the U.S. economy, but also operate on small budgets. As a result, they need to control costs and thrive in stable environments that keep cash flow stable. Now that the question, “When does Obamacare start?” has been answered, listed below are the requirements you need to know if you’re a small business owner.

OBAMACARE AND SMALL BUSINESS





Impact of Obamacare on Small Businesses

50/30 RULE”


Employers with greater than 50 full-time or full-time equivalent employees must provide insurance or face a penalty. This is known as shared responsibility.

Employers with greater than 50 full time or full-time equivalent employees must provide insurance or face a penalty. This is known as shared responsibility.

“THE





Employers with greater than 50 full time or full-time equivalent employees must provide insurance or face a penalty. This is known as shared responsibility.

hours per week is considered full time


THIS MEANS that 50 employees working 30 hours is the same as 100 employees working 15 hours. This applies to owners who own multiple businesses, as employees’ hours aggregate across businesses.




Penalties will be faced when at least one of your employees receives a federal subsidy to buy insurance on a state health exchange. Employers who do not offer health benefits are exempt for the first 30 employees and face a $2000-a-head penalty for the rest. Penalties are not tax deductible.


Further, if the offered plan costs more than 9.5% of the employees’ income and the employee chooses a subsidy in exchange, then the penalty is $3000 per employee.





Employers with less than 50 employees will be able to shop for insurance in the government exchanges and are not required to provide insurance.

Employers with less than 25 employees will have opportunities for tax credits depending partially on the average salary of the employees and if the employerprovides health insurance. This is noted as average annual wages of less than $50,000. Employers must also pay at least half of employee health insurance premiums. This credit may be worth up to 35% of what the employer contributes towards the premiums of the employee. This increases to 50% in 2014, but is eventually phased out.

In states participating in the Medicaid expansion state employers are not required to provide

coverage to low-wage employees who qualify for coverage from Medicaid. Non-Medicaid

expansion state employers may still have to provide coverage to these employees.

Employers must provide a Notice of Summary of Benefits and Coverage. This notice clearly explains to employees their options regarding benefits and coverage.






Employees are not allowed to contribute more than $2500 to pretax health flexible spending accounts. This will be adjusted for inflation in future years.

Businesses must supply employees with a summary of benefits coverage, as well as report on workers’ W-2 forms the cost of company-sponsored health

coverage for the previous year. This is required of employers producing 250 or more W-2s.

New plans offered as of 2014 must include a set of “essential health benefits” that are sometimes excluded from current coverage. Examples of these “essential benefits” include emergency services, hospitalstays, mental health and abuse services, prescription drugs, preventative care, and maternity and newborn care.

Employers must provide written notice of the availability of the

government-run health exchanges. This must be done by October 1, 2013.

Open enrollment opens October 1, 2013.





GENERAL RESOURCES:

OBAMACARE / AFFORDABLE CARE ACT SUMMARY, PDF AND TEXT

• Patient Protection and Affordable Care Act – An extremely comprehensive resource for all aspects of the law from Wikipedia.

• Official Patient Protection and Affordable Care Act – AKA Obamacare - Text and PDF

• Summary of Affordable Care Act / Obamacare: Quick Summary of Obamacare (CBS), Obamacarefacts.com, About.com, Kaiser Family Foundation – PDF, Senate.gov PDF

OBAMACARE / AFFORDABLE CARE ACT TIMELINE

• Interactive Timeline of Changes and –Full Timeline of Key Features – Health reform timelines from Healthcare.gov

• Timeline – U.S. Chamber of Commerce

WEBSITES DEDICATED TO HEALTH REFORM LAW / OBAMACARE

• Kaiser Family Foundation Health Reform - excellent resource for Obamacare information that includes timeline, calculator and much more.

• Obamacare – Independent site full of information.

OFFICIAL OBAMACARE HEALTH REFORM WEBSITES

• Small Business Section and Small Business Obamacare FAQ – Healthcare.gov

• Department of Labor Health Reform for Small Businesses – Official documents and resources for small businesses for the Affordable Care Act.

• U.S. Chamber of Commerce Health Reform Law 101 For Businesses –

This section includes an Added Costs Table, List of Taxes,

Eliminations of Deductions and New Fees, FAQ and much more.

OBAMACARE / AFFORDABLE CARE ACT TOOLS – CALCULATOR, FLOW CHARTS, TAX CHARTS

• Tax Penalty Chart For Small Businesses from the National Federation of Independent Business.• Small Business Health Care Tax Credit for Small Employers – For employers under 25 employees and meeting the other requirements.• Coverage and/or Penalty? -- Great flow chart by U.S. Chamber of Commerce to help ascertain whether small businesses need to offer coverage or pay a penalty.• Employer Penalty Calculator – Penalty calculator from U.S. Chamber of Commerce.




SNOWSHACK

Disclaimer: We’re not legal experts nor healthcare policy

wonks. We’ve done our best to provide accurate and unbiased information but will not be held

liable for any misinformation.



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