Health Care: What to Know
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Now that the U.S. Supreme Court has all but guaranteed that the Patient Protection and Affordable Care Act (PPACA) is here to stay, small employers with fully insured small group health plans must start preparing to meet certain minimum standards beginning in 2014. Unfortunately, these new minimum standards—along with other fees and taxes—in the aggregate will increase the cost of these plans. And while proponents of PPACA say that the law includes provisions to help small employers, these provisions do not provide any meaningful relief.
Limits on Cost Sharing. PPACA limits the deductible of a fully insured health plan that may be offered by a small employer to its employees to $2,000 for single coverage and $4,000 for family coverage. In many states, the majority of high-deductible health plans (HDHPs) currently offered by small employers exceed these deductible amounts. Small employers will be forced to purchase a lower deductible plan, which by definition is more expensive than an HDHP (in some cases, the price difference may be 30%).
Essential Health Benefits. Essential health benefits are specified medical services that must be offered under a fully insured small group health plan. Significant controversy has surrounded which medical services should or should not be considered essential health benefits. If medical services that were not previously covered by a small group health plan must now be covered, the cost of small group plans will rise.
Fee on Health Insurance Companies. PPACA imposes a so-called fee (or excise tax) on health insurance companies. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT)—the economists for Congress—have found that this fee will be passed through to health care consumers. The result will be a 2.0% to 2.5% increase in health insurance premiums for policyholders in 2016, according to the CBO and JCT. The fee only applies to insurers selling fully insured products and not to self-insured health care arrangements. Because small employers typically purchase fully insured health plans, they will be disproportionately impacted.
Tax Credits: Targeted and Temporary. Proponents of PPACA argue that the new small business tax credit for health insurance will defray these cost increases. However, most small employers do not qualify for the full credit or do not qualify for the credit at all, and beginning in 2014, the tax credit is available for just two years before going away.