By Dr. Brad Beauvais, PhD, MBA, MA, FACHE
The United States’ healthcare industry is in turmoil…
The truth is that both the cost and the quality of care provided within the health sector have been a matter of contentious debate for decades. On one hand the United States (U.S.) health care marketplace is the most dynamic and inventive in the world owing largely to the industry’s strong private sector alignment. This involvement has undoubtedly improved the health of millions of Americans and international patients for many years. On the other hand, according to the World Bank, the United States spends more on health care per capita ($8,608), and more on health care as percentage of its GDP (17.9% and rising), than any other nation in the world. In some instances the United States is ranked last in the quality of health care among similar countries particularly because 45 million Americans lack adequate health insurance.
The Affordable Care Act (ACA) was crafted to assuage a series of problems plaguing the healthcare industry. On March 23, 2010, the Democrat-controlled Congress and President Obama signed the Act into law, initiating the most significant government expansion and regulatory intervention into the U.S. healthcare system since the passage of Medicaid and Medicare in 1965. Some have gone so far as to argue the Act is a complete takeover of one sixth of the US economy. However it is perceived, the Act is ostensibly focused on improving access to and the affordability of health insurance as well as containing the skyrocketing cost of health care delivery. It relies on a number of factors including tax credits, subsidies and mandates to achieve its objectives.
However you personally perceive the Act, what is in question today is what the new law means to the numerous small businesses and independent operators that form the primary demographic of the equine industry. Among the numerous changes within the nearly 2,700-page legislation with over 13,000 pages of regulation, the Act contains several potentially important, albeit controversial, health system changes. Due to space constraints we will not attempt to explain the entire act here. What we will endeavor to do is distill the essential roles, responsibilities and resources available to effectively abide by the law – as well as define the penalties and implications to both businesses and individuals for failure to meet the Act’s requirements.
What Is the Law Intended to Accomplish?
The Affordable Care Act was presumably designed to provide Americans with access to quality, affordable health insurance. To achieve this goal, the law is structured to ensure all health plans offer a core package of items and services, known as “essential health benefits.” These benefits must include items and services within at least the following 10 categories:
1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorder services, including behavioral health treatment
6. Prescription drugs
7. Rehabilitative and rehabilitative services and devices
8. Laboratory services
9. Preventive and wellness services and chronic disease management
10. Pediatric services, including oral and vision care
Beyond this set of essential health benefits, the Centers for Medicare & Medicaid Services (CMS) published some key requirements to protect consumers in the health insurance marketplace, these include:
1. Guaranteed Availability of Coverage: Health insurance issuers generally are prohibited from denying coverage to people because of a pre-existing condition.
2. Fair Health Insurance Premiums: Health insurance issuers in the individual and small group markets would only be allowed to vary premiums based on age, tobacco use, family size, and geography. All other factors – such as pre-existing conditions, health status, claims history, duration of coverage, gender, occupation, and small employer size and industry – can no longer be used by insurance companies to increase the premiums for those seeking insurance.
3. Single Risk Pool: Health insurance issuers are required to maintain a single statewide risk pool for each of their individual and small employer markets, unless a state chooses to merge the individual and small group pools into one pool. Premiums and annual rate changes would be based on the health risk of the entire pool. This provision prevents insurers from using separate insurance pools within markets to get around the market reforms and to charge people with greater health problems higher premiums by increasing their premiums at higher rates than other, healthier risk pools.
4. Guaranteed Renewability of Coverage: The current rules protect individuals and employers with respect to coverage renewal; prohibiting issuers from refusing to renew coverage because an individual or employee becomes sick or has a pre-existing condition.
5. Catastrophic Plans: The current law includes provisions for enrollment in catastrophic plans. Catastrophic plans have lower premiums, protect against high out-of-pocket costs, and cover recommended preventive services without cost sharing—providing affordable individual coverage options for young adults and people for whom coverage would otherwise be unaffordable.
What is required of you?
Most individuals must have health coverage – often termed the ‘individual mandate’ in 2014 or pay a fee otherwise known as a ‘shared responsibility payment’. If you don’t have coverage in 2014, you’ll have to pay a penalty of $95 per adult, $47.50 per child, or 1% of your income (whichever is higher). The fee increases dramatically in future years – rising to $325 or 2 percent of income in 2015, and $695 or 2.5 percent of income in 2016—whichever is greater. If you enroll by March 31, 2014, you won’t have to pay the fee for any month before your coverage began. Marketplace open enrollment for 2014 ends March 31, 2014. Open enrollment for 2015 is from November 15, 2014 to January 15, 2015. To buy insurance outside open enrollment, you must qualify for a special enrollment period due to a qualifying life event such as marriage, divorce, birth or adoption of a child, or loss of a job.
Qualifying health insurance coverage can come in many forms. You’re considered covered if you have Medicare, Medicaid, CHIP, any job-based plan, any plan you bought yourself, COBRA, retiree coverage, TRICARE, VA health coverage, or some other kinds of health coverage. If you’re insured through an employer already, nothing new is required of you – providing your employer maintains employer sponsored insurance – which is an emergent dynamic to keep a close eye on in the coming months. What you will likely witness is the addition of the essential health benefits previously discussed with no copayment requirements. This change alone may force some employers to drop coverage as the costs for such additions will be passed along to the insured organizations.
If not covered by an employer, you now have the requirement to buy your insurance either through a “marketplace” run by your home state or the federal government. In many places, there will still be some health insurance plans that will continue to sell directly to individuals as they have done previously. The most notorious path to locate plans in your state is through the federal exchange located at https://www.healthcare.gov/marketplace. An alternative site that requires slightly less personal information for states that don’t offer an exchange is http://www.thehealthsherpa.com. Through all of this, it’s important to note that some may qualify for an exemption to the fees involved or in certain cases the requirement to maintain insurance at all. A number of exemptions exist, from religious, to insurance loss hardship to financial and are worthy of review. A full list of exemptions can be found at: https://www.healthcare.gov/exemptions/. The CBO estimates that by 2016, after the major provisions of health care reform are implemented, 24 million people will be exempted from the individual mandate.
Numerous individuals under age 65, who are not eligible for coverage through their employer, Medicaid, or Medicare, can apply for tax credit subsidies available through state-based exchanges. Additionally, states have the option to expand their Medicaid programs to cover all people making up to 138% of the federal poverty level (which is about $33,000 for a family of four). In states that opt out of expanding Medicaid, some people making below this amount will still be eligible for Medicaid, some will be eligible for subsidized coverage through marketplaces, and others will not be eligible for subsidies. The Kaiser Family Foundation offers a calculator (http://kff.org/interactive/subsidy-calculator/) through which you can enter different income levels, ages, and family sizes to get an estimate of your eligibility for subsidies and how much you could spend on health insurance.
What is required of small business owners?
Most small employers—those with 50 or fewer full-time employees and most commonly found within the equine industry —are not required to offer health insurance coverage under the Affordable Care Act. Even businesses with more than 50 full-time employees have gotten a one-year reprieve from penalties if they don’t offer insurance. But all companies, regardless of size, are required to notify their employees about the Affordable Care Act marketplaces. The notification requirement applies to any business regulated under the Fair Labor Standards Act, which covers all companies with at least one employee and $500,000 in annual revenue. There are no exceptions for small employers, which means nearly everybody has to get out this notice to their employees. The U.S. Department of Labor has posted information about the notification requirement on its website at http://www.dol.gov/ebsa/newsroom/tr13-02.html and has provided model notices that can be used both by employers who offer insurance (http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf) and by those who do not offer insurance (http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf). There is currently no set penalty for failing to provide notice to employees, according to Diana Petterson, regional director of the Office of Public Affairs for the U.S. Department of Labor.
Requirements and penalties associated with the Affordable Care Act will only affect those businesses with more than 50 full-time employees. The term full time is defined by the law as an employee who works 30 or more hours per week, and the hours worked by multiple part-time employees can be combined to constitute one full-time employee. For example, if two part-time employees work 20 hours per week each, their hours will then be pooled together to equal one full-time employee. Health care mandated by the Employer Shared Responsibility provision of the Affordable Care Act only applies to full-time employees. Under those conditions, HHS estimates about 96 percent of all U.S. businesses will not actually be impacted by the new regulations. Self-employed individuals may qualify for individual tax credits and subsidies through the marketplaces.
For those employers that choose to offer health insurance, the Affordable Care Act will also soon establish the Small Business Health Options Program (SHOP), a part of each States Health Insurance Marketplace, where small businesses with under 50 full-time equivalent employees can shop for group health plans. The opening of the SHOP has been pushed back to November 1st, 2014. However, small businesses can still buy a SHOP plan through an agent now and claim tax breaks up to 50% of their share of employee premiums as of January 1st, 2014. Small businesses with fewer than 25 full-time equivalent employees with average annual wages below $50,000 can get tax credits (as adjusted for inflation beginning in 2014) to help pay for employee premiums. The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a SHOP Marketplace. The credit will be available to eligible employers for two consecutive taxable years.
What Comes Next?
Despite the Affordable Care Act being termed ‘the law of the land’ with regards to healthcare, it’s unlikely that the Act will retain its present form for a long period of time beyond the end of the Obama presidency. While the requirements and impact to the largely independent and small business owner/operators within the equine industry are fairly clear at this point, the impact to the health care industry (e.g., hospitals, physicians, insurers, medical device companies, etc) is only now beginning to be understood. As changes in the physician market and access to care issues develop, there may be substantial impact on the cost of health care delivery, access to care and insurance premiums. As circumstances change I will pass along the good (and sometimes not so good) information and do my best to translate that into meaningful information off of which you can make prudent business and health decisions for you, your family and your employees. Feel free to pass along any questions that you may have and I’ll do my best to answer them – but you should seek professional legal and/or tax advice as necessary.
Best wishes for a healthy and successful 2014!
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