Cover Story: Obamacare: This Might Hurt a Little
An examination of what the Affordable Care Act means to your business
The questions don’t end there. Bigger changes may surface as different parties—some within Congress, others on the state level—attempt to repeal, replace or amend the law. These efforts include:
▶ Repeal: In Congress, a Republican majority continues its attempts to repeal or derail Obamacare. March 5, 2014, marked the 50th time the GOP passed a bill doing just that. Previous attempts have failed, though Republicans have vowed to make Obamacare a centerpiece of the midterm elections. A full repeal may seem unlikely, but could a Republican landslide in 2014 change the discourse?
▶ Replace: Republicans are also looking to put forward a more conservative-friendly alternative to the ACA. House Speaker John Boehner hinted at the importance of a Republican plan for health care during a January House GOP retreat, and the House Ways and Means committee had initiated an effort at press time.
▶ State Battles: When the Supreme Court ruled in favor of the ACA, it also ruled that states could opt out of the Medicaid expansion part of the law. Many red-leaning states have done just that (though a number of states who once refused Medicaid expansion have reconsidered, thanks to the hearty federal funds to support the expansion). Other states have passed strict laws about health exchanges, making it exceedingly difficult for individuals to sign up. It’s a situation that varies from state to state and will undoubtedly continue to evolve.
Inevitably, each individual result could affect local retailers. “I tell everyone: Hope for the best, plan for the worst,” says Tate.
The much-publicized, bottom-line requirement of the law is that employers with 50 or more full-time workers will have to pay for health insurance or drop their coverage and pay a fine of up to $2,000 per worker per year to the federal government.
What’s probably less known are the many standards to which these employer plans must comply to be sanctioned by the government. Tate has outlined a few of what he considers “strict” criteria:
▶ Minimum Actuarial Value: Company insurance plans must have a minimal “actuarial” value of 60%. This means 60% of an employee’s medical expenses must be covered under the insurance policy offered. So of all the dollars going to an insurer, that insurance company will have to cover at least 60 cents of every dollar of a person’s medical expenses as part of holding those policies.
▶ Deductible Limits: For individual and small-group plans, the law limits deductibles to $2,000 for an individual and $4,000 for a family.
▶ Affordability: Premiums can’t be higher than 9.5% of the worker’s total gross income (i.e., not household income, as the law originally stated).
If plans don’t meet these criteria, employers face a $3,000 penalty (higher than the $2,000 per worker if the company offers no plan at all) for every worker who buys insurance from an Affordable Insurance Exchange and gets a federal subsidy.
Some stipulations come in the form of added taxes, basically addressing perceived inequities in how companies cover certain employees. Here are a few of those cases:
▶ Companies offering expensive “Cadillac” health plans will pay new taxes on them, starting in 2018. Under the law, an employer offering a plan with a premium that costs more than $10,200 for an individual ($27,500 for a family) will pay a 40% excise tax on the amount exceeding the threshold.
▶ High-wage earners will face increases in Medicare taxes and net investment income. Under the new law, the Medicare Part A (hospital insurance) tax rate rises by 0.9% (from 1.45% to 2.35%) on wages of more than $200,000 for individuals and $250,000 for married couples filing jointly. Obamacare also imposed a new 3.8% tax on net investment income (exempting home sales for a primary residence) as of Jan. 1, 2013.
▶ Tax-free flexible spending accounts offered by many companies will face new restrictions, including a $2,500 cap per calendar year. Those with health savings accounts will also pay higher penalties for using that money for non-medical emergency expenses, making them less desirable (with the tax penalty rising from 10% to 20%). Health-care deductions will also take a hit. Taxpayers will have to document out-of-pocket medical expenses that are at least 10% of their income to itemize those expenditures on their taxes. Folks who exceed the new ACA limits on capital-gains taxes will also pay more in taxes.
Other mandates cover dependents of workers, seniors and young people under 26 who can find alternative coverage, fi nes for companies that “cushion” their plans to account for workers with preconditions and even a tax on companies that purchase “fully insured products.”
Up Next: Is Opting Out an Option?