Health care to impact business
After a prolonged and often bitter debate in Congress, the health care bill passed and the president signed it into law. Whether you, the Montana small business operator, were for or against it, whether you thought it went too far or didn't go far enough, the bill is, nevertheless, now the law of the land.
What happens next? Some congressional representatives are already pledging to attempt repeal the new law. On April 7, Tea Partiers demonstrated on the capitol grounds in Helena, demanding that Montana Atty. Gen. Steve Bullock join attorneys general in more than a dozen other states in challenging the bill's constitutionality, a demand that Bullock declined to accept. Opponents pledge it will be a campaign issue this fall.
Montana Sen. Max Baucus, as Chairman of the Senate Finance Committee, was a key player in the process and while he's not up for reelection, he's publicly heralding the benefits of the bill and his role in crafting and passing it.
While good crystal balls are hard to find, most analysts believe the healthcare bill will survive the threats and challenges, so small business owners are wondering what happens next.
Based on a survey of news reports, including Reuters, CBS News, USA Today, plus U.S. Department of Health and Human Services, here are key points of the final healthcare bill.
Insurance Market Reform
The legislation requires substantial market reforms that would bar insurers from excluding people for pre-existing medical conditions and prevent them from arbitrarily dropping policyholders.
Insurance exchanges will be created in which small businesses and individuals without employer-sponsored coverage would be able to shop for coverage. Plans offered on the exchange will have to meet minimum benefit requirements.
Dependent children could remain on their parents' health insurance policies until age 26.
The bill requires insurers to spend at least 85 cents of every premium dollar on medical care in small group markets and 80 cents in large group markets. The law requires Medicare Advantage insurers to spend at least 85 percent of revenues on medical care.
Coverage Mandates
Individuals will be required to obtain health insurance, since no one with a pre-existing condition can be denied. (Otherwise, it is argued, folks will just wait until they are sick or injured to get insurance.) Those who fail to obtain coverage would face fines of up to 2.5 percent of income by 2016.
Firms with more than 50 workers who do not offer medical coverage could face fines of $2,000 per full-time employee. This provision is effective beginning 2014.
Federal subsidies will be provided to help people with incomes up to 400 percent of the poverty level purchase coverage on the exchange.
Overall, the bill is expected to expand health insurance coverage to 32 million Americans who are currently uninsured.
Financing
Starting in 2013, the Medicare payroll tax will be expanded to include unearned income. That will be a 3.8 percent tax on investment income for families making more than $250,000 per year, or $200,000 for individuals.
Beginning in 2018, insurance companies will pay a 40 percent excise tax on so-called Cadillac insurance plans worth over $27,500 for families or $10,200 for individuals. Dental and vision plans are exempt and will not be counted in the total cost of a family's plan.
There will be a 10 percent excise tax on indoor tanning services.
Medicare
The law closes the Medicare prescription drug "doughnut hole" by 2020. Seniors who hit the doughnut hole in 2010 will receive a $250 rebate. Beginning in 2011, seniors in the gap will receive a 50 percent discount on brand name drugs.
The bill also includes $500 billion in Medicare cuts over the next decade.
Insurance Reform
Six months after enactment, insurance companies can no longer deny children coverage based on a preexisting condition.
Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions.
As mentioned previously, insurance companies must allow children to stay on their parent's insurance plans until age 26.
Small Business Provision
A new Small Business Healthcare Tax Credit begins in 2010. This provision provides a tax credit of up to 35 percent of the premiums a small business pays to cover its workers. The rate will increase to 50 percent in 2014.
The new law's provision for health insurance exchanges, beginning in 2014, will, according to the White House, at least, provide more choice, lower prices and greater bargaining power for businesses with up to 100 employees.
Currently, businesses with just one sick worker can face significantly higher premium rates. Beginning in 2014, “community rating” rules will prohibit insurers from charging more to cover small businesses with sicker workers or raising rates when someone gets sick.
The bill's advocates also say that the bill should promote job mobility and entrepreneurship as people working for large employers with a health insurance plan should no longer be in a "job lock" because they have a family needing insurance, or because of preexisting conditions.
Cost of Doing Nothing
A question posed to Steve Strauss of USA Today, a lawyer and columnist on small business issues, asks, “What do you think of this health care bill? I think it stinks.”
In response, Strauss points to some statistics:
Only 49 percent of businesses with three to nine employees offered any type of health insurance in 2008, down from 58 percent less than a decade ago.
Twenty-nine percent of employees at businesses with 25 employees or less were uninsured in 2007 and the number may be higher today.
Strauss asserts, “Small businesses being able to get more affordable health insurance is no small thing. Indeed, it is a big thing.”
According to HHS (<www.healthreform.gov>), in Montana, small businesses make up 84 percent of Montana's businesses, but only 29 percent of them offered health coverage benefits in 2008. 159,000 Montana residents do not currently have health insurance coverage, and 79,000 residents have non-group coverage, population segments which are meant to be able to obtain more affordable coverage through insurance exchanges.
Montana health care providers currently write off $110 million annually, a bill likely picked up in part by the state, plus in higher rates for everybody who has insurance – what some refer to as the "hidden tax." As more people obtain health insurance coverage, the advocates say the costs of uncompensated care will drop.
Health Reform Timetable
2010
Adults who can't get coverage because of a preexisting medical condition can join a high-risk insurance pool (this is an interim step prior to the 2014 formation of health insurance marketplaces).
Insurance companies will have to offer coverage for children with preexisting conditions. They will not be allowed to revoke existing policies if people get sick. Lifetime limits will be banned in new coverage and annual limits will be restricted. Preventive services will be fully covered, with no co-pays or deductibles. Coverage will be available for dependent children until they turn 26.
People in the Medicare prescription drug program will receive a $250 rebate as the first step in closing the “doughnut hole.”
Certain small businesses will start getting tax credits to offset up to 35 percent of the cost of insuring their employees. This will rise to 50 percent in 2014.
The first tax increase, a 10 percent tax on indoor tanning services, kicks in.
2011
Medicare changes will include free annual wellness visits; little to no cost-sharing for preventive care such as immunizations and cancer screenings; bonuses to primary care doctors and general surgeons. People in the prescription doughnut hole will receive discounts on prescriptions.
2012
There will be new money for primary care services and new incentives to encourage doctors to join together in "accountable care" organizations.
2013
Higher taxes will begin for households with income above $250,000 and individuals above $200,000. The Medicare payroll tax on earnings above those amounts will rise from 1.45 percent to 2.35 percent. Unearned income above those amounts, such as dividends, will now be subject to a 3.8 percent tax.
Maximum contributions to pre-tax Flexible Savings Account contributions will be limited to $2,500 a year, down from the current $3,050.
There will be a new 2.9 percent excise tax on medical devices.
2014
More consumer protections begin. Insurance companies will not be able to deny policies to anyone based on their health status or to refuse coverage of a treatment based on preexisting health conditions. Their ability to charge higher rates to people based on age, geography, family size or tobacco use will be limited. Annual limits on coverage will be abolished.
Each state will open a health insurance exchange or marketplace for individuals and small businesses without coverage. People will be able to comparison shop for standardized health packages.
There will be a multistate private plan available nationwide, supervised by the U. S. Office of Personnel Management.
Tax credits will be available intended to make insurance and care affordable for people who make too much to qualify for Medicaid, but have incomes below 400 percent of poverty.
Most people will be required to buy insurance coverage or pay penalties that start at $95 in 2014 and rise to $695 or 2.5 percent of income in 2016. Employers with 50 or more employees who do not offer coverage will have to pay annual fees.
2015
A new Independent Payment Advisory Board will be formed to come up with ways to lower Medicare costs and promote better care.
2018
This is when the most controversial new tax begins, a 40 percent excise tax on insurance companies and plan administrators for any family plan that costs more than $27,500. The tax applies to the cost above that threshold. There are higher thresholds for retirees over 55 and plans that cover workers in high-risk jobs.
2019
The new system will have reduced the number of uninsured people by 32 million, according to the Congressional Budget Office. That will leave an estimated 23 million uninsured, one-third of them illegal immigrants. Coverage of legal residents too young for Medicare will be 94 percent, up from 83 percent now.