Healthcare reform
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Overview
While the United States has some of the most advanced and effective healthcare in the world, the way in which most people pay for access the country's healthcare system has created a system in which the cost of health insurance has become too expensive for a growing percentage of Americans. For decades, political and legislative efforts to overhaul the healthcare payment system failed due to the the extreme differences in points of view of what the correct set of solutions should be.
As the payment system is based, largely, on healthcare insurance coverage provided as a tax-free benefit by employers, the issue of healthcare reform was, in many ways, an small business-focused issue.
The Patient Protection and Affordable Care Act
On March 23, 2010, President Obama signed into law[1] the Patient Protection and Affordable Care Act[2], dramatically changing the way healthcare insurance (coverage) is provided to U.S. citizens.
(As of March 23, the President has endorsed additional House-passed legislation that has not yet been approved by the Senate. If, as expected, the Senate approves this additional legislation, "The Health Care and Education Affordability Reconciliation Act of 2010," the combination of the two-bills (one passed and signed into law, and the other, awaiting Senate approval), will comprise the framework of what the new healthcare insurance coverage system will be.)
The legislation was opposed by small business advocacy groups like the U.S. Chamber of Commerce, who said after its passage, the bill "is not health care reform. It fails to fix what is broken and risks breaking what already works. It will drive up health care costs and make coverage less affordable for businesses and families."[3]
Among the provisions of The Patient Protection and Affordable Care Act and The Health Care and Education Affordability Reconciliation Act of 2010 are these provisions specifically affecting small businesses[4]:
- SHOP Exchanges: By no later than 2014, states will have to set up Small Business Health Options Programs, or "SHOP Exchanges," where small businesses (states can limit these to companies with either 50 or fewer, or 100 or fewer) will be able buy insurance via "purchasing pools."
- Temporary tax credits: Until SHOP Exchanges are set up, businesses with 10 or fewer full-time-equivalent employees earning less than $25,000 a year (average) will be eligible for a tax credit of 35% of health insurance costs. (Companies with between 11 and 25 workers with an average wage of up to $50,000 are eligible for partial credits.) After SHOP exchanges are set up by a state, the tax credit will remain in place, increasing to 50% of costs, for the first two years a company buys insurance through its state exchange.
- An end to pre-exisiting conditions clauses: Insurers will no longer be able to set rates or exclude coverage based on pre-existing conditions. However, they can vary premiums by geographic location, age, and tobacco use.
- No lifetime limits on coverage: Insurers will not be able to cap "lifetime limits" on coverage and will no longer be able to practice "rescission" (canceling policies already issued) except in cases of fraud.
- Mandated coverage (50 or more employees): Starting in 2014, businesses with more than 50 employees will be required to either offer healthcare coverage or pay a penalty of $750 a year per full-time worker (however, the House raised this tax to $2,000 in accompanying "reconciliation" legislation - see below). The coverage offered will also have to meet minimum benefits -- covering both a specific set of services and 60% of employee health costs overall -- or else employers will face additional penalties. (In the accompanying "reconciliation legislation," part-time employees would be counted toward the 50-employee minimum on pro-rated basis based on hours worked, bringing more small businesses into the group required to provide coverage.)
- Tax on plans high-cost plans: The first $10,000 of company-paid individual health coverage ($27,500 for families), not counting dental and vision plans, is provided tax-free. Plans that cost above those limits will be subject to a 40% tax on the portion of the cost that exceeding the limit. The tax, however, is paid by the insurance company and, most likely, will be embedded in the premium. (In the accompanying "reconciliation legislation," the tax is delayed until 2018 and applys only to the most expensive plans.
- Investment income tax: As part of the reconciliation legislation, a 3.8% tax on investment income will be imposed on individuals earning more than $200,000 a year, or couples earning $250,000 or more.
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