Are Changes to Obamacare – and Compliance – on the Horizon?
Like it or not, the Affordable Care Act of 2010, commonly referred to as Obamacare, is the law of the land. However, its future is very much in doubt.
Opponents of Obamacare have been trying to repeal the law since the day it was passed. President-elect Trump and the Republican-led Senate and House of Representatives have promised to either change or “repeal and replace” Obamacare.
The great unknown is what exactly those changes will be. Details about a true replacement for Obamacare have been vague at best.
There are two provisions of the law that most elected officials, including President-elect Trump, agree should remain. The first involves preventing insurance companies from denying coverage to people with pre-existing conditions, such as cancer, or charging people higher or lower premiums based on their health status. The second allows young adults to stay on their parents’ health insurance plan through age 26.
Under the current law, those who can afford health insurance but choose not to purchase it and don’t qualify for an exemption must pay an individual mandate penalty when filing their income taxes. This requirement is just one example of many provisions included in Obamacare that could be on the chopping block.
Affordable Care Act in Name Only
Perhaps the biggest issue with the Affordable Care Act is that it hasn’t lived up to its name. Our clients have seen their health insurance premiums increase by an average of 20 percent per year for the past five years. Think about that for a second.
Who covers the cost? As an employer, you can’t eat that 20 percent increase, but you can’t just pass it along to employees. Ultimately, health insurance premium increases end up cutting into margins and employees’ take home pay. It’s a lose-lose proposition.
The Affordable Care Act itself is funded by additional payroll taxes on high earners, typically 0.9 percent on wages over $200,000. This doesn’t affect the employer, but it does affect those employees whose salaries exceed that threshold.
To be clear, health insurance has always been a major issue for employers in terms of both cost and complexity. However, the Affordable Care Act has done little if anything to address these issues. Many would argue that these problems have only gotten worse.
Some of the provisions of Obamacare are good, and millions of previously uninsured Americans now have coverage. But compliance is very difficult for businesses, especially those with 50 or more employees. If you don’t comply with the complex rules, the penalties can be severe.
For example, if you don’t provide affordable coverage to full-time employees, or the coverage doesn’t meet minimum value standards, you could end up paying thousands of dollars in fines. There is a lot of fine print that explains the conditions of this employer mandate, who is required to offer insurance, and what the exact penalties would be for noncompliance.
The complexity of the Affordable Care Act should make it clear that compliance is not a do-it-yourself project. You need to work with someone in the health insurance field who understands the nuances of the law to ensure that government regulations are met. Keep in mind that not everyone who sells health insurance is an Obamacare expert, so vet your advisers carefully.
You also need to look at ways to manage the costs of such a valuable employee benefit. Absorbing costs and passing costs along to employees is a delicate balancing act, so it’s worthwhile to explore different options for covering the cost of health insurance.
At the same time, monitor the situation in Washington. As we stated previously, the new powers that be in Washington seem to have prioritized efforts to overhaul Obamacare. Changes at the federal tend to move at a snail’s pace, but it’s important to stay informed so you can plan accordingly.