A group of Mt. Airy-based business owners recently participated in a workshop to find out what the landmark Patient Protection and Affordable Care Act, commonly known as Obamacare, may mean for their bottom lines now and in the future.
Dr. Valerie Arkoosh, president of the National Physicians Alliance, and Erica Dowell from the Small Business Majority, spoke to seven local owners Tuesday night about PPACA’s provisions and timeline.
“We don’t believe the Affordable Care Act is a perfect law,” said Dowell, but “something had to be done” given the rise of small business healthcare costs.
Since 2002, the average premiums for families have increased by 97 percent. A recent Small Business Majority study done with Jonathan Gruber, an MIT economist, projects that small business healthcare costs would have more than doubled by 2018 had reforms not been enacted.
No coverage required
Dowell said once all of PPACA provisions comes into effect in 2014, businesses with fewer than 50 full-time employees are exempt from any requirement to provide healthcare coverage to those employees.
” You won’t be penalized if you’re not ready to take that plunge and offer coverage,” she stated.
For Adina Silberstein, owner of Queenie’s Pets, a local dog walking and pet-sitting service, this information comes as a “huge relief.” Prior to the workshop, she thought she would be required to provide and pay for insurance for her seven employees.
“I was really nervous about that,” noted Silberstein.
Tax credits available now
In the meantime, small businesses may already be able to cash in on some benefits of PPACA, such as an immediate tax credit.
There are three eligibility requirements: The business must have fewer than 25 full-time employees, the average annual wages of the employees must be below $50,000 and the employer must pay at least 50 percent of the insurance premiums.
The Small Business Majority has estimated that 90 percent of small businesses in Pennsylvania – a total of 160,700 – were eligible for the tax credit in 2010.
The tax credit works on a sliding scale, based on the number of employees and how much an employer chips in for the premium.
“The sweet spot” for small businesses is 10 employees, said Arkoosh. That’s because the credit was designed to better enable small owner-operated businesses to offer their employees health insurance.
For tax years 2010-2013, the maximum tax credit will be 35 percent. By 2014 that maximum will increase to 50 percent.
Non-profits are also eligible, though “they do not get as much of a credit and they get it through FICA,” said Arkoosh. The maximum tax credit for a small tax-exempt business is 25 percent. In 2014, it will increase to 35 percent.
The small business tax credit is not available to businesses owners and their families. Also ineligible: the self-employed. However, a tax credit for individuals and families will be available in 2014 to offset health insurance costs. In 2014, anyone who makes up to 200 percent of the Federal poverty level will qualify for a sliding scale tax credit.
” This will help an enormous number of freelancers,” Arkoosh declared.
Since the small business tax credit took effect in 2010, businesses can amend their old taxes to claim the credit if they missed it when they originally filed their returns. The credit will apply towards income tax, rather than employment tax. Small businesses will need to include the amount as part of their general business credit on their income tax returns.
Beginning this year, small businesses and individuals – such as owners and the self-employed – will benefit from PPACA’s rules on Medical Loss Ratio, or MLR.
Also known as the 80/20 Rule, it requires insurance companies to expend 80 percent of their premiums on medical care and quality improvement programs. It limits an insurer’s profit as well as administrative overhead and marketing costs.
An insurance company that does not spend 80 percent of its premium dollars on actual health care must then provide a rebate to the insured individual or to the policy holder, such as the employer that purchased the insurance.
“Even if it’s a check of only 50 dollars, when was the last time you got a check from your insurance company? We haven’t had that in the past,” Dowell remarked.
The Department of Health and Human Services (DHHS) estimates that $1.1 billion will be reimbursed in 2012. Pennsylvania’s average rebate is estimated to be $200.
Guaranteed affordable coverage
Another immediately accessible benefit is the Pre-existing Condition Insurance Plan (PCIP), which acts as a “bridge program” to insure eligible adults now until 2014.
After 2014, they’ll be able to start shopping for insurance inside Affordable Insurance Exchanges. The two eligibility requirements are: an applicant has to have been uninsured for at least six months and needs proof of pre-existing condition. The proof may be either a letter of denial from an insurance carrier or letter from the applicant’s physician.
The law also ensures that rates are not higher due to any pre-existing conditions. In Pennsylvania, PCIP costs individuals $283.20 per month with a $1000 deductible.
The availability of PCIP provides an option for those wanting to start their own business who, in the past, either had to stay in or seek a low-paying job rather than risk not having insurance.
Affordable Insurance Exchanges
Down the road, individuals and smal businesses can look forward to Affordable Insurance Exchanges, where they’ll be able to compare and purchase healthcare plans.
The exchanges are state-based health insurance marketplaces and will be set up as one-stop shop web portals.
Dowell said comparison shopping for insurance via the online marketplaces will be similar to how consumers use Expedia and Orbitz to compare and shop for airfare and vacation packages.
Small Business Health Options Program (SHOP) exchanges will “help to pool together small businesses so they look like bigger businesses when they go shopping for healthcare,” she explained.
Because the calculated risk becomes smaller with a greater number of employees, it’s hoped the exchange will help increase small business employers’ buying power.
Individuals will shop for coverage through a separate exchange, though states will have the option to pull the two exchanges together in the future.
Starting January 2014, those without employer-sponsored health insurance and those whose insurance premium costs more than eight percent of their income will be eligible to participate in the exchange.
Health insurance policies will also be sold outside of the exchanges. “Just think of the exchange as an option,” Dowell advised.
Silberstein, of Queenie’s Pets, said her small business experiences greater turnover because employees leave to find jobs which offer health insurance. Now armed with facts about PCIP and individual exchanges, Silberstein said she believes she’ll be able to be more of an advocate for her employees who need insurance.
“I can dispel their fears,” she said.