What Obamacare means for small businesses

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By Brandon Mattingly

Since being signed into law more than three years ago, the Patient Protection and Affordable Care Act—better known as Obamacare—has come under both scrutiny and praise by those in federal government, and last Wednesday, business owners in Washington County were able to find out what it means for them.
Ashli Watts, manager of public affairs with the Kentucky Chamber, visited for last week's quarterly Washington County Chamber of Commerce meeting, and she said small businesses across the nation are wondering the same thing.
"This really is their No. 1 issue, and their No. 1 question right now is, 'What are we going to do about health care?'" Watts said. "I'm here to tell you it's less than six months until it's in full effect, and it's time to get ready.
"The Kentucky Chamber opposed the Affordable Care Act," she added. "We did not think it was the best way to go about health care, especially for businesses, but now it's here to stay and whether we like it or don't like it, we all need to be prepared."
Watts said that more than 40 agencies are involved in the rule-making of the Affordable Care Act, and that it will go into full effect on Jan. 1, 2014.
"It is going to be the law that every individual has to have health insurance," Watts said. "It's also a mandate that larger employers have to provide their employees with health insurance."
Businesses with 50 or more full-time employees—30 or more hours per week—will now be required to provide insurance for their employees, with part-time employment not being impacted by this legislation. According to figures presented by Watts, that will affect nearly half of retailers, restaurants and hotels.
The question of providing insurance for seasonal employees was also raised, and Watts said coverage will not be required for any employee working less than three months, full-time or otherwise.
Just looking at who currently provides insurance, it wouldn't appear many changes are on the way, as 92 percent of businesses with 51 to 100 employees and 97 percent of businesses with 101 or more employees already provide health insurance. The impact, however, will likely be in how much that coverage will cost businesses.
"The one thing that is going to change is the cost. We have been hearing that health care coverage premiums are going to go up approximately 40 to 60 percent," Watts said.
Currently, rates are determined by a modified community rate, which determines health care cost by a small group's collective bill of health. That will no longer be the case, and unfortunately for Kentuckians, rates in 2014 and beyond will be determined on a state-by-state basis.
"I don't think I have to tell everybody that Kentucky is usually ranked at the very lowest of the healthy states," Watts said. "We're not a healthy state, so our insurance premiums are going to go up."
The penalty for a business not following the new guidelines will be a $2,000 fine per employee, with a cushion of 30 employees that won't count toward the fine.
Watts said many businesses have already begun trying to find ways to limit the hit they'll take by dropping full-time employees below the 30-hour minimum and avoiding reaching the 50-employee threshold.
A small business tax credit has been implemented to allow smaller businesses an opportunity to offer health insurance as well. On average, small businesses pay 18 percent more for insurance than big businesses, so those with 25 employees or less, who average less than $50,000 per year, will be eligible for a credit. This allows employers to reclaim 50 percent of what they contributed to provide their employees with insurance, while non-profit organizations can claim up to 35 percent.
The tax credit has only been funded for the next two years, however, and Watts said the Kentucky Chamber has the same question as many small business owners.
"After that two years is up, is it going to be funded again, or are you just going to be left with a full bill?" she asked.
For those wondering where the "affordability" comes into play with the Affordable Care Act, the employees themselves will be required to be insured, but what they're required to pay will be limited.
Employees must contribute no more than 9.5 percent of their annual wages toward health insurance, with the business picking up the remainder of the cost.
Also, employees at qualifying business will have to be offered coverage within 90 days of starting their position. Businesses with 200 or more employees will be forced to automatically enroll all employees into their health insurance program after 90 days, but the employee then has the option to opt out.
Mandatory benefits of coverage will include: ambulance services, emergency room services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services, laboratory services, preventative and wellness services and pediatric services (including dental and vision care).
States had the option to run their own exchange program to provide insurance or to use the federal program, and Gov. Steve Beshear, as have many fellow Democrats, elected to set up Kentucky with its own exchange under the cabinet of health and family services.
"In 2014, individuals and small businesses will be able to go to this Kentucky-based health exchange web site and purchase insurance," Watts said. "They'll be able to see if they're eligible for tax credits and premium assistance."
Watts said the exchange essentially works as a human resources person, enrolling businesses into programs and providing pricing.
Beshear also used an executive order to expand Medicaid to 138 percent of the federal poverty level. As many as 400,000 additional Kentuckians will now quality for Medicaid as part of the expansion. The federal government will cover the cost over the next three years, and will phase out until the state eventually takes on 10 percent of the funding.
If you have questions about the Affordable Care Act or what it means for small businesses or individuals, visit www.kychamber.com/healthreform.
You can also email healthreform@kychamber.com or call (502) 848-8721 for more information.