By Ken Brock
After months of rancorous public debate (and often melodramatic spectacle), it appears that our elected officials may actually be inching toward a definitive compromise on the most comprehensive health care reform legislation since the enactment of Medicare.
While the details are still being worked out, what is certain is that HR 3200 – or the America’s Affordable Health Choices Act of 2009 – will ultimately have a profound effect on the American health care system.
While most of the public discourse has focused primarily upon the highly controversial public health option, the potential impact the law might have upon the nation’s small businesses appears to have been largely overlooked.
Considering the lion’s share of new jobs is, in fact, created by small businesses, this is clearly an unfortunate oversight.
According to statistics published by the U.S. Chamber of Commerce, approximately 60 percent of the nearly 47 million Americans without health care insurance are currently employed by a small business. Given that small business health insurance already costs approximately 18 percent more than the cost of coverage for larger businesses, it’s not difficult to see why the ever-increasing cost of health care coverage has forced many small business owners to either shift more of the cost burden to their employees or to simply cut benefits altogether.
To address these spiraling costs, the most recent version of the health reform bill would, among other things, create a state-level, health care insurance pooling mechanism, or “exchange” through which carriers would essentially compete for enrollees. This same version would also provide funding for the creation of nonprofit health care insurance cooperatives to compete within the small group insurance market. The overall objective of these strategies is to ultimately “bend the cost curve” for health care coverage by interjecting some badly needed market competition into what in many markets has essentially become an OPEC-style oligopoly.
While HR 3200 would not necessarily require small businesses to provide coverage per se, employers with 50 or more employees could ultimately be assessed a penalty of up to $400 per each full-time employee for failing to do so. If the coverage available through the employer were determined to be “unaffordable” (currently defined as 13 percent or more of the employee’s gross income), the employee would instead elect to receive tax credits to purchase insurance through the exchange, in which case, the employer’s obligation to provide coverage would never arise.
To help offset the cost of coverage, small business employers with up to 50 employees who do provide health care insurance would generally qualify for annual tax credits of up to $1,000 per individual employee and $2,000 per each employee receiving family coverage. The precise amount of any such credits would ultimately be calculated on a sliding-scale basis determined by the number of the employer’s full-time employees.
To qualify for the premium credits, however, the employer must not have paid an average wage of more than $50,000 during the preceding taxable year and must pay at least 60 percent of its employees’ coverage. Provided these criteria are met, supplemental credits would also be available for each additional 10 percent of the employee’s insurance expense paid by the employer.
These premium credits aside, small businesses that do not currently offer insurance would obviously incur at least some additional costs. At the same time, it is worth noting that, provided employers provide a minimal level of coverage, HR 3200 expressly allows employees to keep their existing employer-based plans. Since most plans already provide the required minimum coverage, the overwhelming majority of existing employer-based plans would ultimately be largely unaffected by the additional mandates.
Consequently, for most small business owners, the question of whether HR 3200 would represent a burden or benefit would appear to be based upon the degree to which it managed to bring down their own cost of coverage.
Ken Brock is a corporate, intellectual property and health law attorney with the law firm of Gaw Van Male Smith Meyers & Miroglio and can be reached for comment at firstname.lastname@example.org.
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