Given the amount of attention the Affordable Care Act continues to receive, and the many questions surrounding it, now is an opportune time to examine the basics of this new legislation and how it affects business owners and consumers.
While many of us can agree that the Affordable Care Act is a highly complex piece of legislation, once we understand the basics, it becomes far less intimidating.
“What are the new requirements?” and “How much is this going to cost me?” are questions people ask every day. They are a great place to start.
The act, popularly known as Obamacare, requires companies with more than 50 employees to provide health insurance coverage to employees or pay a penalty. Those with fewer employees are not required to provide coverage.
The deadline to report intent was October 1, 2013, and employers must be compliant with the provisions of the Act by 2015.
Individuals who find themselves without coverage have access to the Health Insurance Marketplace, also known as the health insurance exchange. The exchange allows private insurance providers to offer plans as an alternative to employer-provided health plans. It provides small business owners with more options than they had before.
Deciding whether to opt for the company plan or the exchange is a decision employees must weigh carefully, taking into consideration plan options and affordability. In determining affordability, consumers should research their eligibility for tax subsidies, which are based on such factors as family size, income level and age. Eligible individuals can make up to 400 percent of the federal poverty line, equivalent to $45,960 for one person and $94,200 for a family of four.
Employers may also provide subsidies and direct employees to the Marketplace. In some instances, it will be less expensive for employers to increase wages (so employees can purchase their own insurance) and simply pay the penalties.
While coverage and cost options in the Marketplace are still to be determined, competition is expected to drive rates down. However, actual premiums are a function of the profile of the employee’s company and will be influenced by increases in the number of elderly and those with pre-existing conditions (who can no longer be denied coverage under the Act).
It’s important to note that the number of companies providing health insurance coverage was on the decline before the Affordable Care Act, with 66 percent of companies offering coverage in 2003 and just 57 percent today.
Despite the complexities of the Affordable Care Act and the challenges so often reported by the media, it is doing exactly what it was intended to do: make healthcare affordable by spreading out the cost among taxpayers. It simply makes sense from a moral and a health perspective.
Randal Pinkett Ph.D. is the co-founder, chairman and CEO of BCT Partners, a multimillion-dollar management, technology and policy-consulting firm based in Newark, N.J. The first African-American to receive a Rhodes Scholarship at Rutgers University, he is the author of Campus CEO: The Student Entrepreneur's Guide To Launching a Multimillion-Dollar Business and No-Money Down CEO: How to Start Your Dream Business with Little or No Cash. The above article first appeared in his e-Newsletter of November 25.