What Healthcare Reform Means for Your Business
By Sean R. Lasky, Esq.
The Affordable Care Act (the "Act"), commonly known as the Healthcare Reform Law and colloquially known as "Obamacare," brings new requirements and benefits for businesses. Although the Act was signed into law in March 2010, there have been a number of challenges to it. In fact, as of this writing, the Supreme Court is deliberating whether the Act is unconstitutional.
Not Mandated for all Employers
The first analysis a business must make under the Act is whether it is small or large, because different rules apply for each. Generally, a small business is defined by the Act as employing less than 50 full-time employees, while a large business is one that employs 50 or more full-time employees. The Act does not require that an employer has to provide health insurance. However, starting in 2014, if a large company does not provide what the government deems to be "adequate" health insurance, and its employees receive tax credits to purchase their own insurance, then the business will have to pay an assessment. The cost of the assessment is steep: $2,000 per full-time employee, excluding the first 30 employees. Therefore, for a 50 person company, the assessment would be $40,000 (20 x $2,000).There are a variety of reasons why both State and Federal agencies are cracking down on the misclassification of workers. Among other things, the misclassification of employees results in lost revenue such as income taxes, workers' compensation and unemployment insurance. Indeed, one study showed that there was a $54 billion shortfall in unreported employment taxes.
For employees who are unable to afford employerbased insurance, the Act permits large employers to provide their employees with a voucher equal to the amount of the employer's premium contribution. This will apply to low-income workers who spend between 8% and 9.8% of their annual wages on health insurance premiums. The vouchers will give those employees the financial aid necessary to purchase insurance through the Health Exchanges, while the employer will not receive an assessment or incur additional costs. Thegovernment has stated that the productivity of these workers will increase because they will have better access to healthcare.
Since 2010, small businesses have already been eligible to receive tax credits for their contributions to their employees' health care plans. With regard to eligibility for tax credits, a small business is defined as having fewer than 25 "full-time equivalent" employees. A full-time equivalent employee can be a single full-time employee or two half-time employees. The business must pay wages averaging less than $50,000 per employee annually and contribute at least half of the insurance premiums for its employees at the single (employeeonly) coverage rate. Qualifying companies can receive a tax credit of up to 35% of the premiums paid. In 2014, the credit will increase to 50%.
Limitations on Coverage Denials & Premiums
The Act provides that small employers (less than 50 employees) cannot be refused coverage based upon the health status of their participating employees. Insurers are required to accept all members of a small employer's group, including those employees or family members with health conditions. In addition, insurance may not be canceled for a member or group because someone in the group becomes ill. Moreover, starting in 2014, health insurers will not be permitted to increase premiums based upon the health status of the group or gender. There will also be limitations on how much premiums can vary based on age. Health status, gender and age have been found to significantly increase a group's premiums.
Proponents of the Act claim that when fully implemented, the law will be a catalyst for a healthier, more productive work force, at minimal premium increases, all while addressing the inefficiencies and troubles in the healthcare system. Every business needs to have an understanding of the law and the coverage they may provide to their employees. Please contact our office with any questions regarding the law's impact on your business.
Sean Lasky, Esq., is an Associate in Vishnick McGovern Milizio's Litigation and Employment Law Departments. He can be reached at 516-437-4385, ext. 112 or via email at Slasky@vmmlegal.com.