Affordable Care Act (ACA), Obamacare, Health Care Reform – What the Heck is All the Chatter About?
All politics aside, I’ll focus on the positives of the ACA. Here’s a brief look at how we ended up in 2012 with the ACA. Back in the early 90’s President Clinton proposed a health care reform bill as did Republican Senator John Chafee – both plans failed. Fast forward about 10 years — in 2006 Massachusetts instituted the first state health insurance mandate. Jonathan Gruber, a key designer of the MA plan, served as the consultant to the Obama administration and helped draft the ACA.
The primary goals of the ACA are to increase quality & affordability of health care, lower the number of uninsured Americans and reduce health care costs. According to the US Census Bureau, as of 2011 there are 48.6 million people without health insurance in the US –nearly 16% of the population. The ACA is estimated to reduce the number of uninsured by nearly 50%.
The group of uninsured includes: illegal immigrants, those not enrolled in Medicaid even though they are eligible, those who will opt out of coverage and pay the penalty and those who would have to pay more than 8% of their income for coverage and are exempt from penalties.
Provisions Taking Effect
There are numerous provisions to the ACA that will take effect dating back to 2010 and the last ones by 2020. Some of the important provisions that go into effect January 2014 include:
- Guaranteed Issue – this means insurers cannot deny
insurance due to pre-existing conditions - Minimum standards for policies – policies must cover preventive care and screenings under the normal premium and not charge co-pays, deductibles or co-insurance. Some examples: preventive care, vaccines, mammograms, wellness visits, diabetes screening, contraceptive methods, HPV screening
- Essential Health Benefits – all plans must all cover services in these 10 categories:
- Ambulatory patient care, emergency services, hospitalization, maternity & newborn care, mental health/substance abuse treatment, prescription drugs, rehabilitation & habilitation services and devices, lab services, preventive/wellness services, children’s services (including dental/vision)
- Individual mandate – this requires every individual to have coverage (unless covered thru their employer, Medicaid, Medicare or other public insurance); starting with 2014 income taxes, individuals may face a fee of 1% of yearly income or $95 per person, whichever is greater.
- Health insurance exchanges – these are online marketplaces to compare polices and purchase insurance. States may have their own or default to the federally run exchange. As of May 2013 – 16 states opted to run their own, 7 are doing a partnership with the Feds and 27 are relying fully on the Federal exchange.
- Federal Subsides available for low-income families or individuals whose income is between 100%-400% of the federal poverty level — the subsides are based on a sliding scale and in 2013 this means incomes up to $45,960 for individuals or up to $94,200 for a family of four may be eligible. Small businesses may also be eligible for subsidies.
- Medicaid eligibility will be expanded & changes to the Medicare payment system.
- Employer mandate affects large businesses with 50 or more full time employees.
How the ACA Impacts HR and HR Decisions
In the HR world, the employer mandate has been a hot topic since the beginning of 2013. The mandate has been delayed until 2015 & states that large employers (those with 50 or more full time {FT} or full time equivalent employees {FTE}) must offer “affordable” health coverage that provides minimum value to employees or face fines.
What defines “affordable”? Good question – affordable is defined as the employees’ contributions being less than 9.5% of the employee’s household income. “Household income” raised all sorts of red flags & privacy issues for employers, so 3 safe harbors were created to determine the affordability:
1. 9.5% of an Employee’s W2 Wages
2. 9.5% of an Employee’s monthly wages
3. 9.5% of the Federal poverty level for single individual
Minimum value means that the plan pays 60% or more of the cost of covered services.
What fines will the employer face?
- If no coverage is offered: $2000 per FTE (minus the first 30)
- If affordability or minimum value is not met: lesser of $3000 per FTE receiving subsidy or $2000 per FTE (minus first 30)
The employer mandate was included as encouragement to businesses to keep offering employer sponsored health plans, as this is one part of our health system that does work! Only time will tell if this will work. However, some believe that because small businesses are not facing a penalty, many will drop coverage and force employees to the exchanges, start employing more part-time workers or reduce full time workers to part time.
Affordable or not – the ACA is here and in effect. The benefits and outcomes are yet to be determined. We’ll look back a year from now to see what has actually changed: do more or less people have health coverage? How are small businesses reacting? How are large businesses reacting?
So I said I was leaving politics out of this – but I have to throw in one fun fact about the term Obamacare. The term was created by Obama’s opponents in 2009 (and used extensively by Mitt Romney) as to lambaste Obama’s proposal for expanding health coverage to the uninsured. Obama embraced the nickname during his 2012 campaign saying “I have no problem with people saying Obama cares, I do care”, the term also became one of his campaign slogans.
Informational Webinar
DSD Business Systems in collaboration with Barney & Barney is hosting an informational webinar about ACA and provisions that will be effective on January 1st as they relate to large businesses. The webinar will be October 30th at 10 am PST. Email info@dsdinc.com for further information or to register for the webinar.
Written by Melissa Secody, Accounting Manager at DSD Business Systems
