The June 28 Supreme Court ruling that affirmed the constitutionality of the Patient Protection and Affordable Care Act (ACA) put LBM dealers on notice, if they weren’t already, that this massive legislation could be in their lives for years to come. The question now is how—and when—to respond.
The full brunt of this law doesn’t kick in until Jan. 1, 2014, by which time uninsured adults are required to purchase health care insurance, and companies with 50 or more fulltime workers must offer insurance or pay annual penalties up to $2,000 per employee, starting with worker No. 31. But nearly two dozen taxes embedded in this legislation go into effect next year. That might explain why many company owners are hoping Mitt Romney gets elected president. Romney favors killing ACA, though he noted last month that he would like to see some parts remain the law.
“Wait until November. Make no moves. Watch carefully,” recommends Gene Marks, a small business owner, writing in Inc. magazine. But even Marks warns firms to “[s]tay current on the health care reform issues as they impact your business. And get ready to take action” if president Obama is re-elected, and Obamacare, as the Act has come to be known by advocates and critics alike, lumbers forward.
Health care costs are lumbering forward as well. The average employer’s premium for providing health care coverage for a family of four rose 4% since last year, a survey of 2,200 small and large employers by the Kaiser Family Foundation revealed.
Some in housing already are devoting increased attention to health care. “We’re finding that most companies are consulting with us before they choose a plan,” says Fred Wilmsen, general partner with Atrius Partners, a health insurance agency based in Wisconsin that helped that state’s builders association launch an online portal through which their members can compare carriers’ health care plans and make purchases. Builder associations in Illinois have created similar portals.
Wilmsen observes, however, that many companies still aren’t prepared for health care reform because “they don’t have enough information to work with.” Larry Harrison of Harrison Insurance Agency in Las Vegas goes one step farther when he asserts that the ACA is “designed to confuse.”
Changed Playing Field
Employer-sponsored plans have few immediate worries to comply with the Act. One is that, by the end of this year, companies that process more than 250 W-2 forms must state the cost of their group health insurance on those forms.
Next year, ACA gets more complicated. Deductions for subsidies related to prescription drug benefits under Medicare Plan D go away. Pretax contributions to flexible spending accounts will be limited to $2,500 per person. New taxes on high-income earners and capital gains will be imposed to support Medicaid and Medicare. Employers must provide workers with written notices about Exchanges and the consequences of switching out of an employer-sponsored plan. However, beginning in 2013, tax deductions can be taken only after unreimbursed medical expenses hit 10% of an individual's annual gross income, compared to 7.5% previously.
In 2014, Exchanges must be up and running in every state. As for ongoing employer-sponsored plans, Erinn Springer, a health insurance expert for GoHealthInsurance.com, notes they must be “affordable,” meaning employees’ out-of-pocket premiums don’t exceed 9.5% of household incomes; and provide “minimum value,” meaning the plans pay at least 60% of the medical care covered.
Jonathan Mosse, a partner at the Lynnfield, Mass.-based consultancy Mosse & Mosse Associates, says pro dealers should already be keeping precise records of the hours their part-time and seasonal employees work so that those workers don’t fall within the parameters of mandatory coverage for full-timers. As with so much else at this stage of ACA’s rollout, the criteria determining these workers’ status “are grey areas,” he says.
Value vs. Cost
Companies also must decide what benefits, if any, they can afford to offer their employees.
The accounting firm Deloitte recently polled 560 companies in different industry sectors that have at least 50 fulltime employees and offer health care benefits. It found only 1 in 11 intend to drop coverage within the next three years.
Still, with the federal government offering insurance-purchasing subsidies to households with incomes up to 400% of the poverty level, some businesses may reasonably conclude “Obamacare is an opportunity to get out of health care at a discount,” predicts Mosse. He suggests that companies with, say, 60 employees that would pay $60,000 in penalties for not providing health insurance “are shouting Hallelujah” because the fine is substantially less than what they pay now to insure their workers.
Wilmsen cautions his clients to keep a close eye on how subsidies might impact their group plans. But he expects the majority of companies with fewer than 25 employees will let them buy insurance on their own, even though ACA provides small companies with a tax credit of 35% through next year and 50% thereafter if they buy insurance for their employees and pay at least half of the premiums.
Wilmsen also believes larger companies will continue to offer employees a group benefit, which could include a defined contribution toward their purchase of insurance through Exchanges. (Mosse, on the other hand, thinks companies are less likely to make defined contributions than to increase the pay for select associates.)
At the least, Wilmsen advises clients to use an online applications process in preparation for the probability they’ll switch insurance carriers frequently in the early stages of health care reform. Those transfers will be easier if companies have their associates’ electronic documents in place.
Editor's note: An earlier version of this article misstated changes in the allowable deduction for unreimbursed medical expenses under the Affordable Care Act. In 2013, tax deductions can be taken only after those expenses hit 10% of an individual's annual gross income, compared to 7.5% previously. We regret the error.