As business owners try to get a handle on how federal healthcare reform is going to affect their operations, they're finding a few answers and a lot of questions.
The Covington-Newton County Chamber of Commerce hosted a Tuesday webinar on the Affordable Care Act for small businesses led by Katie Mahoney, executive director of health policy at the U.S. chamber, who addressed what she saw as the three main issues affecting business: the employer mandate, the expansion of Medicaid and healthcare insurance exchanges.
Law still unclear
"We still do not know what's in it... There are very vague, general provisions that are throughout the law with regard to really every element that the law touches on," said Mahoney, who said new regulations are coming out all the time that provide clarity - and more confusion in some cases - about how the law will be carried out.
The U.S. chamber has commented on 47 regulations to date, and seven new regulations were released in the last two weeks, Mahoney said, and anyone wanting to know the eventual effects of the law needs to continue to track these regulations.
Local insurance agent Gary Massey, who attended the webinar, echoed those thoughts afterward, noting that he follows notes from several sources, including the IRS and major insurance companies. While implementation of some aspects of the law have been delayed, Massey said people need to realize there are firm deadlines in place for aspects of the law and be ready to comply with those.
Mahoney said the purpose of the healthcare law was to address the critical flaws in the U.S. healthcare system, particularly when it came to the small group health insurance market (where many small businesses buy insurance) and the individual health insurance market, including double digit premium increases per year, excluding customers based on preexisting conditions and pricing issues.
She said one theme of the healthcare reform law is the idea of shared responsibility which plays out by asking businesses, health insurers, medical device companies and pharmaceutical companies to pay extra to improve coverage for those not receiving adequate coverage now.
The employer mandate has been one of the most widely-discussed aspects of the law and it forces companies who have 50 or more full-time equivalent (which includes part-time hours in its calculation) to offer healthcare insurance to its full-time employees through the company or potentially pay extra in taxes.
A full-time equivalent employee is equal to 120 hours of work, so for every 120 hours of part-time work, a business is considered to have an additional full-time employee. (Even though part-time hours count toward determining whether a company has to provide coverage under the law, part-time employees don't have to be offered insurance.)
Under the law, Mahoney said companies are required to provide affordable coverage to all employees and dependents; affordable coverage has been defined as insurance premium costs that don't exceed 9.5 percent of an individual employee's household income if that income falls within 100-400 percent of the federal poverty level.
Mahoney said the clear issue with that calculation is that business neither know nor want to know the total household income of their employees. The government recognized that flaw, Mahoney said, and told businesses they would be safe if they made sure insurance premiums did not exceed 9.5 percent of an employee's W-2 stated income. While that's very clear, Mahoney said the W-2 income could be much less than household income, which means businesses would have to pay more toward employee's premiums to make sure they're low enough.
The U.S. chamber has also raised questions about how to treat employees who may accrue part-time hours some months and full-time hours the next month. Neither companies nor employees want insurance coverage on a rotating monthly basis, Mahoney said.
The government has given companies the flexibility to measure employees' workloads across any time frame from three to 12 months. If during that time, the employee has worked an average of more than 30 hours per week, then he will be considered a full-time employee. He must then be offered insurance for at least six months.
However, some outstanding questions are whether businesses have to declare the period of time they're measuring an employee's workload. Employees theoretically could measure an employee for three months, and if that employee would be considered full time, the company could then extend its measurement period longer.
Another question is whether the insurance premium payment for dependents has to also meet that 9.5 percent affordable standard.
In addition, there are questions about seasonal employees, who over a 12-month measurement period could very easily fall under part-time status.
One issue not raised by Mahoney, but raised by some attendees was what the healthcare law would do to temporary staffing firms. If these firms are required to offer insurance to all the temporary employees they provide to outside companies that would have significant costs both in the actual insurance and in tracking employees in such a high-turnover business.
The Affordable Care Act was designed to see a large expansion of people eligible for Medicaid across the U.S.
Mahoney said the law is designed to expand Medicaid coverage to every American under the age of 65 who has an income of 133 percent of less of the federal poverty level. Previously, states could set the percentage of federal poverty level they were going to offer Medicaid too.
However, in its June 28, 2012 ruling, the U.S. Supreme Court said individual states do not have to participate in the federal government's Medicaid expansion.
The U.S. Dept. of Health and Human Services said this week that states cannot partially participate in the federal expansion of Medicaid. States either have to accept the full expansion or opt out completely.
Georgia Republican Gov. Nathan Deal has already said he will not expand Medicaid in his state.
The potential effect on businesses is that they will now have to cover a larger portion of employees who otherwise would have been covered under the expanded Medicaid.
Under the healthcare law, businesses are not required to offer "affordable" insurance to people who would be covered by Medicaid, but without a Medicaid expansion business will likely have to cover more people.
Mahoney emphasized several times that many questions remain to be answered and that the full effect of the healthcare reform act won't be determined for years to come.
Mahoney also talked about the healthcare insurance exchanges that are going to be set up in every state and compared the exchanges to an Expedia or Travelocity, only for health insurance instead of airline and hotel rates.
States have three options when it comes to exchanges; they can set up and run these exchanges themselves, partner with the federal government to set up and run them or let the federal government completely handle the operation of exchanges in that particular state.
Mahoney said some states with Republican leadership, including Georgia, have decided not to set up state exchanges because they feel the states don't have any real flexibility or say-so over how the exchanges are run and, as a result, they don't want any of the accountability.
If a business with more than 50 full-time equivalent employees decides it's not going to offer health insurance it could face penalties.
However, Mahoney said the penalties only get enacted if some of that business's employees who are not eligible for Medicaid seek insurance from the exchange. At that point, the employees become eligible for a tax credit to help pay for the cost of insurance and the employer penalty gets triggered, she said.
If this happens, the annual penalty is $2,000 per full-time employee over and above the first 30 full-time employees.
One issue with this is, because of the wording of the law, is the question of whether federal exchanges will actually be able to offer tax credits. If the federal government couldn't give tax credits then businesses couldn't be penalized. However, Mahoney said she believes the federal government will be able to offer tax credits, despite the uncertain wording in the law, which only clearly gives states the ability to offer tax credits.
One last issue is the health exchange for small businesses, called the small business health options program (SHOP). Mahoney said small business will likely be hurt in this case if a state opts to let the federal government run the exchange.
Under the small business exchange, businesses are supposed to be able to shop for insurance plans for their employees.
However, the law specifies that if the federal government runs the exchange or even partners in the operation of the exchange then it's actually the employee, not the employer, who will have the power. The employee can go and pick whatever plan they want within a certain value level.
"We believe that's not the best option for employers...Are small businesses going to have the control to pick the plans they want their employees to choose from?" Mahoney said. "We believe that it should be the employer who ultimately says these are the plans as far as options for my employees."