Published in Business in Savannah
In March 2010, the 111th Congress initiated sweeping health care system changes when it passed the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (both referred to as “PPACA”), which were swiftly signed into law by President Obama. Some changes already apply and additional changes to the health care system will be systematically applied, pending constitutional challenges, over the next few years.
This new legislation increases access to health insurance coverage, expands federal private health insurance market requirements, and requires the creation of health insurance exchanges to provide individuals and small employers with access to insurance. The implementation of PPACA creates a number of significant changes that involve all major health care providers, health care stakeholders (including federal and state governments), health insurance providers, and employers. The costs for expanding access to health insurance and other provisions are projected to be offset by increased taxes and revenues and reduced Medicare and Medicaid spending.
Following the enactment of PPACA, opponents of the law initiated lawsuits challenging the constitutionality of several provisions of the legislation, with the primary focus on the “individual mandate.” The “individual mandate” requires everyone to maintain “minimum essential coverage” beginning in 2014, or pay a tax penalty. Starting in 2014, the fine for not having insurance will be either $95 or 1 percent of a person’s income, whichever is greater. In 2015, the fine will be either $325 or 2 percent of income. In 2016, the fine will be $695 or 2.5 percent of income. After 2016, the fine will be based on the cost-of-living adjustment every year.
The U.S. Supreme Court agreed to hear arguments relating to the constitutional challenges of PPACA on November 14, 2011 after the United States Circuit Courts of Appeals for the 11th and 6th circuits issued conflicting decisions on the issue. In March, the Supreme Court will hear oral arguments, and the Court is expected to rule on a decision before the end of its term in June 2012. Because the ramifications of the upcoming decision by the Supreme Court are unclear, states, employers, and all other health care affiliates must continue to prepare for the legislation changes set to go into effect.
Individual states face enormous challenges ahead as they are required to develop new insurance marketplaces called “Exchanges” in time to enroll individuals by 2014. An “Exchange” is an organized marketplace to help qualifying individuals and employer groups buy health insurance in a way that permits easy comparison of available plan options based on price, benefits and quality. The legislation gives states the option to establish one or more state or regional exchanges, partner with the federal government to run the exchange, or merge with another state’s exchange. If a state chooses not to create an exchange, the federal government will set up the exchange in the state.
In Georgia, Governor Nathan Deal issued an Executive Order on June 2, 2011 to establish the Georgia Health Insurance Exchange Advisory Committee, composed of 25 individuals who include several legislators, the Commissioner of Insurance, the Commissioner of the Department of Community Health, and the Chief Operation Officer of the Department of Economic Development. The Governor’s Executive Order emphasized his desire to “develop an exchange that reflects a free market, conservative approach to expanding health insurance coverage in Georgia,” and asked for the Committee’s final recommendations in December 2011. However, the Georgia General Assembly will not take up legislation to create a health insurance exchange during this year’s session.
Initially, only individuals and “small employers” will be eligible to find health insurance through an “Exchange.” A “small employer” is an employer that employed an average of at least one, but not more than 100 employees, during the preceding calendar year. Employers with more than 100 employees will not be eligible to participate in the exchanges until 2017. Both small and large employers will face important decisions about whether to provide group health coverage or instead obtain coverage through an “Exchange.” The differences in coverage eligibility, benefits, cost of coverage, administration of the of the coverage, and employer choices regarding each of these issues may vary greatly for employer coverage obtained outside the “Exchange” system or through an “Exchange.”
To further complicate the decision-making process, beginning in 2014, certain employers (generally those with more than 50 full-time employees) may be subject to penalty taxes for failing to offer health care coverage for all full-time employees, offering minimum essential coverage that is unaffordable, or offering minimum essential coverage under which the plan’s share of the total allowed cost of benefits is less than 60%. The penalty will apply if at least one full-time employee forgoes or is not eligible for the employer provided group health coverage, and the employee obtains coverage through an “Exchange” and is eligible for a tax credit for premiums paid. The penalty could initially be as high as $3,000 annually per employee who receives a tax credit for premiums paid.
For more information on how your business should prepare for the coming health care legislation mandates, seek the counsel of a healthcare and employee benefit expert.