How Health Care Reformm Will Affect U.S. Small, Medium and Large Businesses

Online, March 24, 2010 (Newswire.com) - ONTARIO, Calif.-With the passage of the Patient Protection and Affordable Care Act, a timeline of health insurance cost and accessibility changes has been set in motion, affecting employers in different ways depending on their size and composition, according to an analysis by Personnel Concepts, pacesetter and pioneer in the labor law poster compliance industry.

Leaving aside the question of how the bill affects health insurance companies (which stand to gain from the legislation with millions of new subscribers from the individual mandate), how does the passage of the act on March 21, 2010, affect the nation's employers?

Details may change as the reconciliation process attempts to merge the House and Senate bills more fully than the one President Obama signed on March 23, but the overall thrust and structure will not. Here's the basic answer:

Three salient points emerge. The first is that, technically speaking, there is no employer mandate to provide health insurance for one's employees. Second, the "play or pay" rule that substitutes for the employer mandate affects only businesses with an average of 50 or more full-time (30 hours a week) employees. The third and final point is that most of this doesn't even take effect until after Dec. 31, 2013.

On the small business front, the bill does provide subsidies, starting immediately, for firms to offer insurance to their employees. Here the details may change with reconciliation, but the subsidies will continue even after the full individual mandate and "play or pay" provisions take hold in 2014. Contingent on meeting certain qualifications, as things stand now there will be at least a 35 percent small business subsidy through the end of 2013, and a 50 percent subsidy after that (indexed to inflation).

Starting in 2014, an "applicable larger employer" (more than 50 full-timers) that does not offer coverage for all its full-time employees, or offers minimum essential coverage that is unaffordable, or offers a plan that pays less than 60 percent of the cost of benefits will be required to pay a penalty. The penalty kicks in once a single employee purchases a plan with a government subsidy. The penalty as it stands now is $2,000 for every employee above a 30-employee threshold. (Reconciliation may lower the penalty to $750 with the same threshold.)

Business groups have speculated that many firms will game the system by, for instance, reducing full-time staff from above 50 to below 50 (making some employees part-time, laying off others), or by dropping health insurance altogether and just paying the fine. This all remains to be seen, and the success and failure of the overall reform measure may well hang in the balance.

Of course, many other measures will kick in between now and 2014, but most affect insurance companies and insurance plans, which in turn, of course, affect businesses that offer health benefits. Here, for example, is the requirement that plans include coverage for dependents up to the age of 26 beginning in six months.

Personnel Concepts offers this information to business owners and executives to help them understand what's in store and to prepare accordingly, but you are urged to seek legal advice in making your decisions.

As the reconciliation process continues, please check back with Personnel Concepts' online Compliance Alerts section for detailed developments.