Healthcare Reform and the implications for small business owners

By Maureen DeJongh


Important:  This article is designed to provide a general overview.  It does not cover all the law’s provisions and should not be construed as legal advice.  HHS (Health and Human Services) can provide additional information and clarifications on this Bill.

Working Definition: Small business – one with less than 50 employees.

Small business owners have certainly been hit hard by this recession, and now they have to deal with Healthcare Reform! While there is definitely going to be an impact, not all of it is bad.  In fact, this may be a great opportunity for you to start a benefits program, or improve on the existing one.

It is important to note that you will not be penalized for not offering health insurance to your employees, but there are some significant benefits now for doing so, and as individual requirements and penalties are introduced, your employees will turn to you, their employer, for assistance in this area. 

As always the key reason to offering benefits is to be in a position to hire top caliber employees, reduce turnover, and improve employee job satisfaction.  As the economy improves, more opportunities will become available and a good benefits package, along with competitive wages and a positive work environment, will reduce the risk of your employees leaving for better opportunities.

As the provisions of this piece of legislation are implemented, as individuals and as business owners, you will be playing by a very different set of rules. With so many changes on the horizon, it will be critical for you to have a strong general overview of the legislation to serve as a roadmap for the decisions and adjustments you will need to make. The information that follows will also give you a good starting point to frame the many questions you will certainly be asking as you restructure your company's strategies for dealing with healthcare in the months and years to come.

A Summary of Important Features of the new healthcare legislation:

October 2010

·        Dependent children under age 26 can remain on your group plan provided they are not eligible for coverage under their own employer plan.

·        No pre-existing condition limits for dependents under age 19.

·        No lifetime maximums.

January 2011

·        Health Savings Accounts can no longer be used to purchase OTC drugs.  In addition there will be an increase in the penalty for non-qualified withdrawals from 10% to 20%.

·        W2’s will need to show employer contributions towards health insurance premiums (talk to me about the impact of this).

·        Employers may choose to offer the voluntary government-run Long Term Care Program to employees, for their expense (CLASS Act).

·        Small businesses with less than 25 employees, and average wages of less than $50,000, receive a 35% tax credit for contributions towards employee health premiums, provided they pay at least 50% of the premium.  Increases continue through 2016. (Huge opportunities here).

·        Non-profit organizations meeting the same criteria receive a 25% tax credit.

January 2013

·        FSA contributions limited to $2,500 per year.

January 2014

·        No pre-existing condition limits for anyone.

·        Guaranteed issue for everyone.

·        All insurance to cover essential benefits that include emergency services, hospitalization, maternity, mental health, rehabilitative services & devices, preventative & wellness plus more.

·        Exchanges will become available that will allow individuals to purchase pre-designed plans across state lines.

·        Individuals will be required to carry health insurance.  Penalties imposed for not doing so start initially at the greater of $95 or 1% of income with further increases in 2016.

·        Small business and Non-Profit Organization tax credits increase to 50% and 35% respectively.

·        Rating restrictions.  Premiums cannot be based upon health status, claims experience or gender.  Premiums can only vary by age, geography, family size and tobacco usage.

January 2016

·        Penalties increase for not carrying insurance to the greater of $695 or 2.5% of income. Family cap of $2,085.

January 2018

·        “Cadillac Tax” imposed.  A 40% tax on the aggregate value of employer-sponsored coverage that exceeds $10,500 for individuals and $27,500 for families, indexed to inflation.  Includes premiums for FSA, HRA and HSA but excludes vision, dental, accident, disability and long-term care premiums.

This legislation is now the law. As the chief decision maker, very quickly you will need to become well acquainted with those portions of the law that specifically apply to your company. Early on, you may want to bring in an experienced Benefits Consultant to guide you as your company makes this transition in the employee benefits you offer. Doing so can substantially improve your learning curve as you rethink your strategies in providing healthcare benefits, in the most cost-effective manner. Especially in this case, drawing on the expertise of a well qualified consultant can prove to be a very cost-effective management decision.

Effective immediately, healthcare in the United States is a radically new ballgame. For owners of small businesses, now is the time to think outside the box in adjusting to the new realities of healthcare benefits for your employees. With all the changes of the new health legislation, the challenge that confronts you is how to effectively do this in such a way that you are in compliance with the law and you are effectively managing costs for your company.

Please feel free to contact, Maureen de Jongh if you have any questions about how this legislation will impact your company or how to create the best and most cost-effective healthcare packages for your employees. 

Maureen de Jongh, PHR

Blue Chip Benefits Group

281-496-9096

Maureen@BlueChipBG.com

www.bluechipbg.com