Supreme Court has Spoken; Health Care Reform (Obamacare) is Law– Impact on Businesses: Costs, Jobs, Compliance… Opt-in or Opt-out…

I support health care for people. I want people well taken care of. But I also want health care that we can afford as a country. I have people and friends closing down their businesses because of Obamacare. ~Donald Trump

The Supreme Court has spoken– it’s law: This ruling on ‘The Patient Protection and Affordable Care Act’ (Obamacare) has evoked a myriad of responses from across the U.S.– from the far right to the far left, from small businesses to giant corporations, from pundits to the person on the street.

Those who oppose the, now, law are concerned that it gives the Federal government too much control over personal health care decisions and benefits, forcing a ‘complex one-size-fits-all health care system’ onto the states. Those who are in favor of the Act want lower health care costs, overall, by making it affordable for more people… it also means more people will pay more taxes… the taxes are both ‘progressive’  (aimed  at rich people) and ‘regressive’ (aimed at the middle class and poor people)…

Even though the Supreme Court has made the big decision; clearly, lots remain to be sorted out. One question that arises is the way businesses and, especially, insurance companies, should conduct themselves under the new plan. Under the new law, citizens will be required to carry health care insurance (or face penalty tax ), and health care insurance companies will be required to sell policies to all comers, regardless of pre-existing health conditions.

While the debate has focused primarily on proper role of government, this new law clearly has significant implications for private companies. With regard to health care insurance companies, the distinction between private and public is far from ironclad. How should these companies conduct themselves when they play a role in delivering public-mandated insurance?

Should they continue to think of themselves entirely as private, profit-seeking entities? Or should they– like industrial firms in times of war– take-up public values? Of course, health care insurance companies are private corporations, and they are guided by seeking profits for shareholders. So the question the health care insurance companies face, at least in principle, is whether they should conduct themselves like private or public entities. The answer is not clear. The coming years are sure to see significant changes in the health care industry and, especially, insurance companies that support it…

In the articleWhat Does Obamacare Mean for Business?” by Dean Barber writes:  Businesses of all size are going to have to figure out just how to comply with a very complex and not well understood law– ‘Patient Protection and Affordable Health Care Act’ (Obamacare). While some see the specter of higher costs, others are excited at the prospect of a wider insured pool that spurs increased demand for health care services and even a lowering of costs. Critics contend that consumers will spend less on other goods and services in reaction to new costs, while proponents argue they’ll spend more as their out-of-pocket medical costs fall.

Job growth may be curbed by new costs, or helped as higher proportion of the population flows into the health care system. The fact of the matter is that we just don’t know yet. Taking partisan politics out of it for just a moment, if that is possible, the reality is one of uncertainty, at least for now. We do know that by January 2014, employers will have to come up a plan that complies with the law, or opt-out and pay a penalty tax.

Companies with 50 workers or more will be required to offer health care insurance to their workers or pay a penalty-tax. Faced with the prospect of higher costs to comply with the law, they just might choose to stop offering coverage altogether, if they decide the penalties are cheaper than administrative costs of running a broader plan. Some people are convinced that the landmark health care law will make lives of business people harder with this additional tax, which was what the Supreme Court called it.  

However, tax credits contained in the law could help millions of small businesses obtain health care coverage for their workers, if they don’t already offer it, or lower the cost of coverage, if they do. Yet a recent Wall Street Journal/Vistage International poll shows that 66% of small-business CEOs doesn’t know about credits, and another 24% think their business doesn’t qualify.

Excessive regulation has become the biggest concern of business owners, which probably is a primary reason why most view the expansive and perplexing new health care law with a jaundiced eye and as just another layer of local, state and federal regulations that choke their businesses. So what does the new law really mean? How will this all play out? Will this be good or bad for business? There are plenty of theories floating about, but the fact is, we really don’t know yet…

In the article Here’s How Much The Obamacare Penalty-Tax Will Cost by Henry Blodget writes:  The good news is that, for most people and businesses, the ‘penalty tax’ for those who choose not to buy health care insurance will cost a lot less than the health care insurance.

As with everything tax-related, there’s no simple answer to: How much is the penalty tax? To provide some clarification, here are key points, from ‘FactCheck.org’:

  • The penalty/tax will be phased in from 2014 to 2016.
  • The minimum penalty/tax in 2016 will be $695 per person and up to 3-times that per family. After 2016, these amounts will increase at the rate of inflation.
  • The minimum penalty/tax per person will start at $95 in 2014 (and then increase through 2016)
  • No family will ever pay more than 3X the per-person penalty, regardless of how many people are in the family.
  • The $695 per-person penalty is only for those who make between $9,500 and ~$37,000 per year. If you make less than ~$9.500, you’re exempt. If you make more than ~$37,000, your penalty is calculated by a formula…
  • The penalty is 2.5% of any household income above the level at which you are required to file a tax return. That level is currently $9,500 per person and $19,000 per couple. The penalty on any income above that is 2.5%. So the penalty can get expensive quickly if you make a lot of money.
  • However, the penalty can never be more than the cost of a ‘bronze’ health insurance plan purchased through one of the state ‘exchanges’ that will be created as part of Obamacare. The Congressional Budget Office estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.

What are health exchanges, under the new law? Health exchanges are new organizations that will be set up to create a more organized and competitive market for buying health insurance. They will offer choice of different health care plans, certifying plans that participate and providing information to help consumers better understand their options.

Beginning in 2014, Exchanges will serve primarily individuals buying insurance on their own and small businesses with up to 100 employees, though states can choose to include larger employers in future. States are expected to establish Exchanges–which can be government agency or a non-profit organization–with the federal government stepping in, if a state does not set them up. States can create multiple Exchanges, so long as only one serves each geographic area, and can work together to form regional Exchanges. The federal government will offer technical assistance to help states set up Exchanges

In the article “Businesses Bemoaned Obamacare Uncertainty” by Suzy Khimm writes:  In general, hurdles on business are hurdles of the unknown, and uncertainty undermines the ability of businesses to plan for the future, and to make informed decisions on growth and hiring. Now that the Supreme Court has ruled, do businesses feel any better– and do they expect the economy to pick up accordingly? It depends on who you talk to.

According to Jim Paulsen, investment officer, believes that there’s an economic upside to the ruling– and that the new certainty outweighs the potential downside. Whatever you think about the bill– good and bad– the fact that we kept it and now we know the ‘rules of the road’ going forward, and I think it’s ‘good’ for the economy. Business can now start making decisions, making adjustments and planning… That is, the ‘bad’ of this legislation I think is better than the ’uncertainty’ created by whether it would be thrown out, or not.

But not everyone believes that the Court’s ruling has provided significant clarity. There’s still lingering confusion over the intricacies of the law. According to Bob Jensenius; It’s a large [law]… people are still trying to see what’s in it.

The high court has spoken; companies must now treat the law as business reality. In January 2014, employers will either pony-up a plan that fulfill the legal requirements or opt-out. In large companies, there is probably not so much to do. Most already offer a wide range of benefits through their existing health care plans. In a survey of America’s largest firms, it suggested that employers may drop health care coverage for their workers, once they do the math and see how much they can save.

Under the law, large employers can save serious money by dropping coverage. Among 71 firms responding, the estimated savings come to $28.6 billion, in 2014 alone, and $422.4 billion through 2023. This is despite the law’s penalty tax of $2,000 per full-time employee paid by companies that decide not to pay for coverage. The net savings per dropped employee would be $4,821, on an after-tax basis, in 2014. The companies were not asked what they intend to do, but their financial incentives are clear. The new survey also jibes with other research suggesting that many firms would shift their covered workers to tax-subsidized insurance exchanges.

A 2011 McKinsey & Co. survey said 30% of employers ‘definitely or probably’ would end coverage. The Congressional Budget Office (CBO), which initially played down the potential shift to the exchanges, said in March that– up to 20 million could be dropped by employer health care plans. The shift would be a mixed bag for workers. Those higher on income scale with generous employer paid health care plans might have to settle for an inferior product on the exchanges with no subsidy. Lower income workers with mediocre health care plans might come out ahead, with better coverage and their premiums covered. In all cases, burden of the new subsidies would fall on taxpayers. So, much uncertainty  still remains…

Critics fret that consumers will spend less on other goods and services in response to the new costs, but others argue the opposite… Some say, job growth may be slowed by this new expense and other say it will be helped, as a higher proportion of the population goes into health care.

What is clear: The health care reform law (Obamacare) is a reality, and every business leader must; confront it, plan for it, and implement it– and, either opt-in or opt-out…