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Landmark health care reform signed into law on March 23, 2010 (and modified by a reconciliation measure enacted three day later) will affect how all businesses provide and administer health care benefits to their employees. But the impact will be felt differently depending on the company’s size.
Strictly speaking, the reform measure will not require employers to provide health care benefits to their workers. However, many companies with 50 or more employees that don’t offer health care coverage to their staffs will be subject to a tax penalty of $2,000 for every full-time worker. A company’s first 30 workers would not count toward the penalty, but the assessment could be a sizable one.
The reform measure shouldn’t have a huge impact on large businesses that already provide health benefits, sources familiar with the issue say. And businesses with fewer than 50 employees will be exempt from the penalty. These changes will take effect on Jan. 1, 2014; the final rules could be changed by a reconciliation bill that must be approved by the Senate.
Employers that offer health benefits but have at least one employee who applies for a federal subsidy to purchase individual health care insurance would also be subject to the penalty. The penalty as passed by the Senate in December 2009 was set at $750 per employee. However, the House approved a reconciliation measure along with the reform bill.
The reconciliation bill accounts for the increase in the penalty employers will have to pay. Employers that do offer health care coverage might still be required to provide help to their low- and middle-income workers who opt out of the company’s health insurance plan and want to buy health insurance on their own. Any employee who earns less than four times federal poverty level and pays more than 8 percent of their income for the employer-sponsored coverage will have the option of purchasing health insurance through health care exchanges, which the new reform law will create.
If an employee chooses to purchase a health plan through an exchange, an employer will have to provide a “free-choice voucher,” which must be equal to the amount paid to provide coverage to participants in the company’s health care plan.
Under the reform measure, businesses with more than 200 employees will be required to enroll employees into their health care plans automatically. Employees will then have the choice to opt out of the plan.
The reform measure will create state-operated exchanges that would permit self-employed workers, small businesses and people without health care coverage to shop for insurance plans. By 2014, states will have to set up Small Business Health Options Programs, or “SHOP Exchanges,” which will allow small businesses to create buying pools to purchase health plans. The measure defines small businesses as organizations with 100 employees or less.
The reform measure will require individuals by 2014 to purchase health care coverage. People who have religious objections or cannot afford coverage would be able to apply for waivers. Individuals who do not obtain coverage would pay a penalty of $95 in 2014, which would increase in 2016 to $750 or 2 percent of their income (whichever amount is greater).
The legislation as passed would establish a grant program designed to help small and mid-sized employers develop and strengthen workplace wellness programs. The grant program would require participating employers to offer wellness programs to all employees, and employers could not require participation in a wellness program to qualify for financial incentives.
Beginning in 2018, employers that offer workers higher cost plans–those with total premiums of $10,200 or more for individuals and $27,500 for families–would be subject to a 40 percent tax on the excess premium. Although the taxes would be levied on the insurer, experts predict that the assessment would be passed on to the consumer in the form of higher premiums or reduced benefits.
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