Democracy is a cornerstone to what makes this country strong and the recent election has proven that we still believe in the power of the ballot. However, with politics comes controversy and certain topics cause even the most un-opinionated person to take sides. One such poignant topic continues to be the Affordable Care Act (ACA). As an individual and as an employer, this issue and it’s continuing complications can greatly affect you.
Currently the ACA is in the news again as debates and concerns are arising over the justices’ announcement earlier this month that tax credits that subsidize health coverage purchased on federal exchanges may be rejected. The credits are a central element in health care reform in states that decided not to set up their own exchanges. If the court negates them, coverage could be precarious for millions of Americans.
Here’s the problem as stated by the Obama administration: “The subsidies limit the cost of coverage to no more than 9.5% of one’s income for those who qualify. Those eligible for subsidies paid an average of $82 a month, compared to $346 without assistance.” In addition, they mentioned that about 87% of those who signed up for Obamacare plans on HealthCare.gov received these subsidies.
But the complexity goes even deeper. In July, a three-judge panel of the 4th U.S. Circuit Court of Appeals rejected the Virginia challenge voting that the tax subsidies were legal. On the same day, a three-judge panel of the D.C. Circuit Court of Appeals ruled 2-to-1 that the subsidies are not legal.
According to U.S. News, the confusion in the above cases lie in the fact that “more than 4.5 million people in three dozen states that use the federal exchanges receive subsidies under the law. But the D.C. court ruled that the law’s language ‘does not authorize the Internal Revenue Service to provide tax credits for insurance purchased on federal exchanges.’ The Virginia court, meanwhile, found ‘that the applicable statutory language is ambiguous and subject to multiple interpretations,’ giving the Internal Revenue Service freedom to pay subsidies to those in the federal exchanges.”
The part of the law establishing the formula for calculating the subsidies assumes that insurance will be purchased “through an exchange established by the state.” But the law also said that if a state chose not to run an exchange, the federal government would step in. Outside of the 14 states and the District of Columbia who have set up their own exchanges, 4.7 million people who have signed up for subsidized health coverage through HealthCare.gov could be affected.
Now let’s cut to the chase: what does this mean to the small business owner?
To some, it may not mean all that much. In a Michigan survey conducted earlier this year, the American Society of Employers (ASE) and Priority Health found that 98 percent of companies surveyed offered a coverage option for the 2014 plan year while only slightly fewer (82 percent) intend to offer coverage in 2015. Considering that health benefits come at a huge cost to employers, why in the world would so many still be willing to take on this expense? There are several reasons: first of all, nearly 70 percent of those surveyed said that offering health coverage was a major factor in attracting and retaining a talented workforce. Secondly, a productive employee who misses less work lowers costs to the employer overall.
And Michigan is not the only state foregoing public health care. “In California, for example, only 12,000 people were enrolled through the state’s small-business exchange, compared with more than a million who enrolled as individuals there. To date, few businesses have availed themselves of the tax credits available for purchasing coverage for low-wage workers,” wrote Reed Abelson of the New York Times.
To others, tax subsidies are what make health care affordable. In the ACA, it states that it “can cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent… The Congressional Budget Office estimates that the tax credit will save small businesses $40 billion by 2019… The Council of Economic Advisors estimates that 4 million small businesses are eligible for the credit if they provide health care to their workers. Qualifying firms must have less than the equivalent of 25 full-time workers (e.g., a firm with fewer than 50 half-time workers would be eligible), pay average annual wages below $50,000, and cover at least 50 percent of the cost of health care coverage for their workers.”
As this debate continues, small business owners need to review their budgets and employee needs and make the decision whether to provide health care as a part of a benefit package or forego the expense for a tentative individual government plan. If you are still uncertain as to which path to take, you can contact a business lawyer on UpCounsel to determine the best option for your circumstances.