In parts one through four of our series on the Affordable Care Act, we have examined a few of the benefits that are seen as the most desirable provisions of the law, things like no pre-existing condition, no-cost birth control, and the ability for children to remain on their parents’ plans. There are other benefits, like cash subsidies to assist in the purchase of the ACA health care plans that will be examined later in the series. For part five, we will skip ahead and discuss the law as it relates to small business and corporate America.

Who Must Comply with Obamacare?

Under the ACA law, any business with more than 50 full-time employees must offer health insurance to its employees. This health insurance plan must be compliant, meaning the benefits of the plan must meet or exceed the minimum benefit thresholds in the ACA law. If a company does not offer a plan or has a plan that does not meet the minimum standards, then the employer will be assessed a tax fine of $2,000 per employee. This provision is not quite as straightforward, however, because technically the company is only supposed to pay the fine for employees who are eligible to receive subsidized health care costs.

Since everyone is mandated to have coverage, that means the fine would apply to all employees, not just the ones receiving government subsidies. In addition, the first 30 employees are exempted from the fine. For example, a company of 51 workers would pay a $2,000 fine on 21 workers (51-30=21) or $42,000. A good guide for explaining different scenarios can be found at the National Federation of Independent Business website.

If you have fewer than 50 employees, you are not required to provide health insurance. However, if you have up to 25 employees, the government will provide a tax credit if you have employees earning at least $50,000 per year and offer health insurance. In 2013, the tax credit amount is 35% of your annual cost for health insurance premiums and goes up to 50% after 2014.

However, that is only if your average employee salary is $20,000 or less. If the average salary is higher than $20,000, then the tax credit will be reduced by a factor determined by how much the average salary is above $20,000. In addition, if the company has more than 10 employees, regardless of salary average, the tax credit will be reduced. Lastly, there are no tax credits allowed for employees considered “highly compensated.”

For the ACA law, highly compensated is considered anyone making over $80,000 a year. If you noticed how the first sentence in this paragraph contradicts with the numbers in the third sentence, that is not a typo. It is contradictory, but that is what is written in the ACA law. You can find this information at the healthcare.gov and on page 319 of the ACA law.

Implications

The number one implication of the small business and employer provision is the flooding of potential ACA recipients into the system, resulting from employers dropping coverage. Most proponents of the ACA law have dismissed this idea as conservative scaremongering at best and corporate greed at worst. That, however, is because they are not the ones writing the checks. This is a simple math equation. The increase in required ACA benefits increases the costs of the health insurance premiums, because more items are covered.

At current levels, the Kaiser Family Foundation puts the average cost of employee health insurance at $15,073. Only $4,129 of that is paid by the employee, meaning close to 11,000 of the costs is paid by the employer. The ACA coverage mandates will increase those premiums, but even at current levels, paying a $2,000 per person fine is better than $11,000. This is simple math, and as you move into companies that have 5,000 or more employees, you are now talking about saving hundreds of millions of annual costs. Make no mistake, many companies will take this option.

For the companies that bite the bullet and provide health insurance, their costs will increase. This will be because of higher premiums charged by the insurance companies for having to cover more health care benefits and for costs related to keeping up with the regulations that come with the law. There is no definitive way to determine the costs accurately ahead of time, but the Congressional Budget Office projects the costs of ACA to be double what they originally projected.

To be fair, the CBO estimates were for the first 10 years. New projections that go out 11 years have the cost down 0.64%. Why the CBO would go out just one year on their projections is a little strange, especially given the paltry reduction in costs it would show. More telling is that the projection is based on additional revenue provisions that would pay for the law. This is always the problem with the CBO; it only answers questions based on the paper and assumptions put in front of them.

If any of those figures are wrong, if something is left out (like payments to doctors left out by Democrats when the bill was originally submitted), or the revenue gathered is less then projected, then the whole analysis is thrown off. Garbage in, garbage out is the old saying. The primary common sense question to this is simple: When has any government program ever cost less than promised? The answer is never.

The other implication is that the country may see an increase in temporary agency usage. Companies on the cusp of going past 50 employees and either wish to expand or have no choice to can avoid that employee threshold by going through temp agencies. This will alleviate some added costs to them, but only marginally as the temp agencies will also be charging a higher fee per employee supplied.

Lastly, small businesses will not get near the benefit from the tax credit. As discussed above, employers cannot have more than a $20,000 in average salary to receive the full tax credit. If you have higher salaries, the tax credit percentage goes down. Any company that can only afford to pay an average salary of $20,000 or less, in all likelihood, cannot afford to pay for health insurance regardless. Look at the numbers: With an average employer cost of $11,000, an employer could get a $5,500 tax credit, and they pay the other half.

However, $5,500 dollars is a quarter of a $20,000 salaried employee’s pay. A business that small cannot afford to pay that. They cannot afford to risk going under just to satisfy some politician’s belief that paying for health insurance is the right thing to do–no matter the cost. Also, this tax credit does nothing for large employers because they are not eligible. If you have 51 or more employees, you cannot get a tax credit at all. Because of this, there is no incentive.

The primary problem is political and social philosophy intruding on policy and business. Things like health care, time off, vacations, etc., used to be called fringe benefits. They were there to create greater employee loyalty and a way to compete for better employees. They were, in short, extra benefits. Today, they are seen as items that are owed to employees.

The President and the Democrats have determined that health insurance is a right, and if the government cannot get a bill through for single payer, then employers are responsible for paying for that right. Whether this is true (health insurance as a right) is an argument for a different day. The point here is when you approach policy that way, then you end up with bills that have consequences far beyond what is written or intended. Businesses exist to provide a product or service, and make a profit. That is all. They are not smaller surrogates for government to be enlisted in the care and feeding of the population.

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When it comes to solving the problems and challenges of a country or organization, few things are more frustrating than policies or programs designed by ideology. This is an ever present problem in politics, and is often the reason bills and laws are several hundred pages long. You need that much room to put in rules that address whatever political or social world view of the politicians crafting the bill. The Affordable Care Act (ACA) is no different, and in installment four of Toonaripost’s Series on the law, we will touch on two provisions written into the law that illustrate this phenomenon.

Equal Premiums for Women

In web advertisements and mailers, the Democratic Party refers to this provision as, “being a woman is no longer a pre-existing condition.” The reason for this is that under ACA a woman can no longer be charged a higher premium for health insurance than a man of equivalent age. Two people, male and female, in the same city and town, of the same age, will now have the same or equal monthly premiums.

Implications

There are two implications to this provision. The first, as discussed in Parts One, Two, and Three of our series, is that it is just one in a long list of items that create higher premiums. Why would this be? The reason is simple. Insurance companies do not charge higher premiums to women because they dislike women, they charge higher premiums because women have higher overall health care costs.

Insurance of any type is a service meant to provide money or expenses paid for various types of risk. Companies determine through statistics and probability computations what the company’s risk is for paying out a claim are in a given market; auto insurance, life, or in this case, health care expenses. Premiums are not determined in isolation; there is a reason for them.

According to a study by the Health Services Research center, the per capita lifetime expenditure for a female is $361,200, a third higher than males, at $268,700. Two-fifths of this difference owes to women’s longer life expectancy. Another reason is that women give birth.

If you contrast this with auto insurance, then the roles are reversed. Men pay higher premiums, because men have more accidents, get more speeding tickets, and are more aggressive drivers than women. As a result, women pay lower premiums. That is not unfair or discrimination. That is a function of risk and real costs.

Whether a person agrees with the ACA law is not the issue. This series is about the provisions of the law, and its implications apart from political sides. Nonetheless, this is a provision that has a political viewpoint driving the policy. On the political left is a view that everyone should be treated equal in all things and in all areas.

Those on the right would not disagree, but it can be construed that sometimes the policies from the left, substitute the word equal, with the phrase “the same.” Everyone is equal, but not everyone is the same. And sometimes those differences are significant in financial terms. If politicians continue to make laws based on ideology and not reality, there will be more bills and laws that are long, complicated, expensive, and do not fix the problem they were designed for in the first place.

The 80/20 Law

Even though the most publicized area of contention about ACA was the individual mandate, it is not the only mandate in the ACA law. As we discussed in Part Three, there are mandatory coverage items that must be in each insurance plan. There is also a provision called the Medical Loss Ratio. The health care law generally requires insurance companies to spend at least 80 percent of consumers’ premium dollars on medical care and quality improvement. Insurers can spend the remaining 20 percent on administrative costs, such as salaries, sales, and advertising. Noticeably absent from that list is any mention of a profit ratio.

Implications

The 80/20 law is perhaps the most partisan provision within the ACA law. It has nothing to do with costs, and nothing directly related to health care. What it does is reflect a worldview as it relates to health care.

The view for most Left leaning politicians and individuals is that health care and health care insurance is not something you should be making a profit from. It is seen as profiteering off the misery of sick people. Whether that is right or wrong is immaterial to this series, but that is the view. That opinion is now law, because there is effectively a backdoor price fixing mechanism within ACA.

Insurance companies now have a ceiling to which they can achieve a positive return on their operations. Over the long haul this will turn health insurance into another form of public utility. If you do not agree with profit motive being a part of health care, then this may not bother you. If you want lower prices, then you should be alarmed.

Many may think that this is not a big deal, because it will mean the insurance company may make 250 million instead of 500 million, but that is not how it works. What happens is that smaller companies cannot get to the 250 million. It means that the profit margin, about 2.5% per person now, could be cut in half, making it less attractive for new players to enter the market, or smaller ones to remain in it. Take, for instance, Humana healthcare. They started out as nothing but a single nursing home.

A company in similar circumstances today may look at the margins, the regulations, etc., and just not enter the market. Smaller and regional insurers will find it more difficult to complete and will go out of business or be gobbled up by bigger players. In the end, there will only be a few insurers in the market, making for even less competition than is already available on a state by state basis now. That means higher premiums, and often lower quality. That is the effect of price fixing, regardless of the marketplace you are talking about.

In 10 or 20 years the ultimate implication and consequence of this one, single provision could turn the Conservative boogieman of single payer into a reality.

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So far in our series about the Affordable Care Act (ACA), we have provided an overview in Part 1 and reviewed the benefits of Pre-existing conditions and continuing coverage for kids under their parent’s plans. This law is a complicated one, with over 2,700 pages. It is the goal of this series to explain the more common provisions in a simple and logical way, so you do not have to read the entire law. In Part three, we will look at the following provisions: no cap on lifetime benefits, and preventative care benefits.

No Lifetime Limit on Coverage

Most health insurance plans, either private or through employment, have a limit on the amount of coverage for each person. Often, that limit is between one million to two million dollars. This is an average, and can be more or less depending on the health insurance plan. When you reach that limit, you no longer have coverage. If you or your kids have a rare illness like hemophilia, or rare form of cancer, you can reach the limit fast. Once you do, you have to pay for your care out of your own pocket.

Congress set out to end this within the ACA law. Now there will be no limits on coverage. If you have a rare disease or other health care problem that costs five million dollars, then the insurance company must pay it. While there are no official statistics on people that reach and exceed lifetime limits, it takes only a few people with news stories of their plight to make this a popular provision of the law. It is hard to argue against.

Implications

The primary result of this policy is higher premiums. On one hand are the very real costs of paying the additional medical bills of people who would have reached and passed a limit. Not many people do, but that is not the issue. The insurance company must factor in the costs of additional expenses for everyone. That is how they figure out risk and determine appropriate rates: by using actuaries and high level math to determine risks, average costs, etc. When their expenses for payouts go up, their rates must go up as well. It is simple to say, “They should just eat the expense for the good of people over profits,” but without profits there is no company to pay any premiums.

On the patient side, you will no longer have to worry about being wiped out by an illness. If you can afford the premiums for coverage, then you will not have to stress over possible high health care costs.

A more subtle implication is the continuing argument over how much are and should people be responsible for their decisions. As we will discuss in detail in the section on preventative care, no limits are another barrier to people understanding health care costs, and being responsible. Often, insurance plans have riders that allow individuals to purchase a higher limit amount, and people decline to do so.

They see two million dollars, and think “Hey I’ll never have that many doctor visits.” Then, the illness hits and it is too late. Sometimes people are innocent victims of fate, other times they are the victim of their own choices. As laws take more and more responsibility away from individuals in different areas, there is the real effect of people being more irresponsible.

Preventative Care

If you have caught even a slight amount of news about the ACA law, then you have probably heard supporters of the bill tout this benefit. Beginning in section 4,000 of the law, a host of preventative services are now covered under the law at no co-payment.

The number of services covered are too numerous to fully list here, but include things like disease screenings, mental illness screenings, immunizations, and most controversial presently, birth control and sterilization procedures. Many of these services were covered under current plans offered for sale or through employers, but now they must be covered at no co-payment to the insured.

Implications

The primary idea behind covering preventive care in a comprehensive manner is the fact that the best way to keep costs down for serious illnesses is to not get sick. If individuals take better care of themselves, get regular checks-ups, and prevents illness, then over time health care costs will go down, and then premiums will go down. The problem, however, is that you cannot make people go to the doctor. Many insurance plans already cover items of preventative care at no cost, or very low co-pays.

Many offer lower premiums for things like joining a gym, or joining wellness programs. Yet, people still do not take better care of themselves. You cannot make people go to the doctor, get checks-ups, or engage in wellness programs. By making them free, you have just taken any incentive or responsibility out of their hands.

When you divorce people from real costs, they do not worry about costs. When you make something free that they were not planning to do anyway, then all you have done is raise the costs of premiums, because these services must be covered. By making all sorts of preventative services covered, both the practical like immunizations and the esoteric like fully funded wellness centers, you increase costs.

The other implication is that the Obama administration has set up a coming legal war over the issue of birth control. By mandating that religious organizations must cover birth control, they have impended, many feel, on the rights of the religious. Birth control is a personal choice, but the ACA has made it everyone’s business because it requires everyone to pay for it.

The crux of the situation is simple, should you have to pay for your neighbor’s choices? If you are an employer, religious or otherwise, should you have to pay for the choices of your employees? The ACA says yes, and many organizations will be fighting this provision.

The next part of our series will explain provisions requiring equal premiums for women, and mandates dictating how much insurance companies must pay in health care expenses. These are two of the more controversial provisions with wild and inaccurate statements flying in the media. Tune back in to get the real facts on these two provisions of ACA.

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The US Supreme Court announced the much awaited and crucial decision on the Patient Protection and Affordable Care Act, upholding it with a 5 to 4 decision.

On the other hand, this action by the Supreme Court junked all anti-Obama care outcries raised by Republicans and protestors, because in some sense the Supreme Court favored the proposal on health care reform. Health care reform has been at the core of the Obama administration since he won the elections in 2008. The Affordable Care Act was passed by Congress in 2010.

The Affordable Care Act, generally known as Obamacare, is a new health policy designed under the Obama Administration with the attempt to provide health insurance to 30 million of the poorest of the poor. There has been great controversy and strong opposition from the Republican party over the Affordable Care Act over the years.

More understandably, the Patient Protection and Affordable Care Act (PPACA) is a pivotal health reform legislation of the 111th United States Congress. The law requires every individual, if not covered by any employer or state, to maintain minimum essential health coverage.

Check here for a complete look at Obamacare features.

One of the most controversial components of this act is the shared responsibility requirement, generally known as the Individual Mandate, which requires everybody to purchase minimal health insurance coverage if it is not provided by any organization, government, or other institution. Minimum norms for health insurance policies will be established; annual and life time coverage will be abolished.

The Supreme Court provided a cushion to the highly controversial, bitterly opposed Individual Mandate by saying that it does not violate the US Constitution and therefore cannot be refused by states.

James Morone, specializing in Politics and Health Care at Brown University in Rhode Island, said ‘the decision really helps Obama, and the Democrats will ride that hard.’

The decision by the Supreme Court to uphold the Obamacare health reform might act as a principle theme for the presidential election this November, and in one sense it has boosted the morale among the Democrats in their fight for it.

Republican Presidential Candidate Mitt Romney has been a vehement opponent to the so-called Obamacare health reform and said ‘As you might imagine, I disagree with the Supreme Court Decision and I agree with the dissent,’ and he further said, ‘ What the Court did not do on its last day in session I will do on my first day if elected president of the United States. I will act to repeal Obamacare’.

Earlier, it was a battle between what is constitutional and what is not, but now the Court has favored Obamacare, reshaping the entire political clash between Republicans and Democrats.

Obamacare will be a central element of the struggle for authority between the two parties this November; in fact, it might potentially act as a cornerstone in determining the electoral success.

Image Courtesy of Ryan Rodrick Beiler / Shutterstock.com

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Around 10:15 AM today the Supreme Court announced that the Obama Affordable Care Act has been completely upheld, including the individual mandate. The Supreme Court ruled 5-4 in favor of keeping the new law known as “Obamacare.”

Justice Roberts did announce that the individual mandate could not be justified through the Commerce Clause but instead through the Taxing Clause. Roberts stated, “When a court confronts an unconstitutional statue its endeavor must be to conserve, not destroy the legislation.”

Roberts claimed that allowing the Commerce Clause to be used to justify the individual mandate would “open a new and vast domain” for Congressional Power. Never before has Congress had the power under the Commerce Clause to tell individuals to buy something. What the Supreme Court was worried about under this justification is that there would be no limit to what Congress could tell the American people to buy or not buy.

Justice Roberts also claimed that the required expansion of Medicaid may violate states’ rights. He wrote, “the states are given no choice in this case. They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding.” This part of the law is the one part that Roberts states the federal government cannot require of states but is still a limited ruling. Roberts says that the justices have not completely removed this part of the law but have stated that they have included a possible solution to this problem in their ruling.

So far the Physicians for National Health Program have already responded to the ruling claiming they disagree with the Supreme Court ruling because 26 million people will still not be insured. They also advocate for a single-payer option.

The GOP has already started the fight to repeal the ruling, writing on Twitter, “The fight for #FullRepeal begins NOW. The way to get rid of #Obamacare is to defeat Obama in November.” The GOP claims that the Supreme Court has set “the stakes for the November election.”

For continuous updates see the CNN News Blog.

Image Courtesy of  spirit of america / Shutterstock.com

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