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1) Many Small Businesses Will Not Get to Keep their Plans
President Obama said last spring: “…for the 85% to 90% of Americans who already have health insurance…their only impact is that their insurance is stronger, better, more secure than it was before. Full stop. That’s it. They don’t have to worry about anything else.”
But that will not be the experience of many Americans, including the 150 million who have coverage through employers. Despite the president’s exhortation, federal agencies predicted in the June 2010 Federal Register that up to 80% of small business plans could be lost because they do not comply with the requirements of the Affordable Care Act (ACA).
Many businesses in 2014 will find that their new ACA-compliant coverage is more expensive and less attractive, with higher premiums and deductibles and narrower physician networks.
2) The Employer Mandate Delay Has Not Slowed the Negative Hiring Trend
In July, the Obama administration pushed back the effective date of the ACA’s employer mandate reporting requirements to January 1, 2015. But the look-back period for next year will begin soon for many companies, which means that the one-year delay of the employer mandate will not significantly change the adverse effects it is having on the hiring behavior of employers. At the most, the delay simply gives employers more time to figure out how to restructure their businesses and workforces to avoid the added costs of the health law.
According to a recent survey conducted by Public Opinion Strategies for the U.S. Chamber of Commerce and the International Franchise Association, more than half of businesses with 40 to 70 employees said they will make personnel decisions to stay below the 50 full-time threshold at which the health law requires them to provide health insurance to workers or pay a penalty.
The same survey found that 28% of businesses offering health coverage plan to drop it in 2015. Moreover, 64% of franchise owners and 53% of non-franchise businesses say the law already has had a negative effect on their businesses.
Employers have been providing health insurance for their workers voluntarily for more than 70 years. Most employers want to continue this long tradition, but not all of them can afford it and still keep their prices competitive. For companies that operate with very tight profit margins, the employer mandate will send their bottom line from black to red. For these firms, paying the penalty of $2,000 to $3,000 per employee for not providing ACA-compliant health insurance is a lesser financial burden. The Congressional Budget Office estimates that as many as 11 million workers could lose their health insurance from employers who pay the penalty rather than the cost of insurance. Other estimates, such as one from the American Action Forum, suggest that the number could be as high as 35 million.
3) The Exchange for Small Businesses is MIA.
In yet another blow to small businesses, the administration just before Thanksgiving announced that the Small Business Health Options Program (SHOP), which was created to provide businesses with more health plan choices, won’t be ready until November 2014 at the earliest. This affects businesses in the 36 states that are relying on the federal government’s exchanges.
4) Larger Businesses Are Also Feeling the Pain
The law is impacting larger companies and their employees. ACA provisions such as allowing adult children to stay on their parents’ policies up to age 26, no lifetime or annual limits on policy payouts, and “free” preventive care are costing companies tens of millions of dollars a year in added health costs. The added costs of these mandates and taxes are forcing many companies to curtail spousal coverage, raise deductibles, and increase the employees’ share of premiums.
Businesses also are beginning to restructure their coverage in anticipation of the “Cadillac tax” on benefit-rich health plans that starts in 2018. Insurance companies will pay a tax of 40% on the amount by which the total costs of health plans exceed $10,200 for individuals and $27,500 for families. The tax is set to take effect in 2018 and will, of course, be passed along in the form of higher premiums.
A International Foundation of Employee Benefits Plans survey released in August shows that nearly 17% of respondents had already begun to redesign their health plans to avoid the “Cadillac” tax, and another 40% are considering action. Sixty percent said the looming tax is already having a “moderate” or “significant” influence on benefits decisions for 2014 and 2015.
5) New Taxes Will Increase Costs in 2014
Starting this year, a new tax of $63 will be added to the cost of health insurance policies to finance a $25 billion fund designed to help cushion adverse risk among plans participating in the exchanges.
The ACA also imposes an annual “fee” on health insurance companies that is expected to raise $8 billion this year and up to $100 billion over the decade. The Congressional Budget Office and industry experts say that the health insurance tax (HIT) will largely be passed on to small businesses and consumers buying individual policies in the form of higher premiums. A report by Oliver Wyman consulting says that the tax will increase premiums by $150 per employee and $360 per family in 2014, and that the costs could rise to $360 per employee and $890 per family for small businesses. Self-insured companies are exempt from this tax.
6) Additional Taxes Aren’t the Only New Things for 2014
A number of mandates aimed at employers take effect in 2014, including:
- New federal rules on deductible maximums and out-of-pocket maximums
- 90-day maximum on eligibility waiting periods
- Elimination of lifetime and annual limits (including expiration of waivers that permitted certain “mini-med” plans and stand-alone Health Reimbursement Arrangements to stay in place through plan years beginning in 2013)
- New wellness plan rules
- Fair Labor Standards Act notice to employees informing them of the availability of the new health insurance exchanges
- Summary and benefit coverage notice that must meet rigid federal standards
- $2 fee to fund the Patient-Centered Outcomes Research Trust Fund
- Preventive care services with no cost sharing
Clearly, the implications and impact of the Affordable Care Act are widespread and are adversely affecting our economy and job creation. As the New Year gets underway, it is important that business owners let their elected representatives and administration officials know what impact the law is having and urge them to reverse the damage and move toward real health reform.
Grace-Marie Turner is president of the Galen Institute, a non-profit research organization she founded in 1995 to advance free-market ideas for health reform. Visit www.galen.org.