Understanding the Impacts of the Patient Protection and Affordable Care Act
While many of the key provisions and requirements of "Obamacare" (otherwise known as the Patient Protection and Affordable Care Act ("ACA")) do not go into effect until 2014, there is much that can be done in 2013 to understand, plan, and prepare for the coming changes. This is particularly true for small business owners and their families.
Beginning in 2014 the most talked-about requirements of the ACA will kick in, including the requirement that most Americans above a minimum income level purchase health insurance. Those who choose not to purchase health insurance will be required to pay a penalty that is currently estimated to range from $695 to $2,085, and that will be phased in over time. Other well-publicized changes include the new restriction, starting in 2014, that will make it illegal for any health insurance plan to use pre-existing conditions to exclude or limit coverage. Studies indicate that millions of Americans previously have been denied coverage specifically because of their medical conditions. In addition, the new law will extend health insurance coverage for millions of young Americans. Specifically, the ACA will require insurers to cover the children of those they insure up to age 26. Finally, another significant change has already taken place that affects everyone with private health insurance: a more readable summary of benefits and coverage. Starting in 2013 insurance companies are required to use simpler and more standardized paperwork, with the goal of helping consumers make apples-to-apples comparisons between the prices and benefits of different plans.
While these new requirements have generated plenty of media and political attention, the vast majority of individuals who currently obtain insurance from their employer or through Medicare or Medicaid will not likely notice much of a change in their health insurance coverage. In contrast, several provisions of the ACA will have significant impacts and effects on small businesses. In particular, starting in 2014 the ACA will require that most companies with 50 or more full-time employees provide health insurance for their workers. Companies that do not provide this coverage will have to pay a $2,000 penalty for each full-time employee on their payroll.
October 1, 2013, is a key date for small businesses to mark on their calendars, as it is the date when open enrollment for individual and small business health insurance exchanges begins. Beginning on October 1, 2013, consumers and small businesses can start signing up for their 2014 health insurance coverage through the new health exchanges, or "marketplaces," that the federal government and some states (not Michigan) are creating. The idea behind the exchanges is to increase competition among insurers and let consumers and small businesses compare and shop for coverage. In concept, the exchanges will give small businesses the same purchasing power as much larger businesses (although small businesses will still be able to purchase insurance plans outside of the exchange). In addition to the implementation of the new health exchanges, small businesses should be aware of available tax credits to assist in the cost of providing health insurance. Currently, small businesses with fewer than 25 full-time employees who pay average annual wages of less than $50,000 and who provide health insurance may be eligible for a small business tax credit of up to 35% to offset the cost of insurance. Starting in 2014 this small business tax credit will increase to 50%.
Thus, while many of the most significant changes and requirements of the ACA do not take effect until 2014, there is no time like the present when it comes to planning for the new requirements, particularly for small business owners.