As you are likely aware, in June, the United States Supreme Court upheld the Patient Protection and Affordable Care Act. While the headlines may focus on the approximately 30 million Americans that are expected to become insured as a result, the ruling leaves many in the real estate and construction industries, asking, “How does this affect my business?”
While the exact answer to that question might not be known until after the November elections, based on the contents of the Act that was recently upheld, we do have some idea of what small business owners can expect. As it currently stands, the 2010 law will continue to be phased in over the next five years.
According to a White House study, small businesses tend to pay insurance premiums that are 18 percent higher, on average, compared to what large businesses pay for the same coverage. The Act attempts to address this cost disparity in a variety of ways.
Starting with the smallest employers, those with less than 25 employees and less than $50,000 in average wages, the Act offers a Small Business Health Care Tax Credit. The credit can cover up to 35% of the premiums that a small business pays to cover its workers. In 2014, the credit increases to 50%.
For larger employers, the Act begins to impose penalties on for those that do not provide health coverage for employees. This is in the form of a per worker penalty that the law will impose on companies with more than 50 full-time employees that don’t provide health coverage. This penalty currently sits at $2,000 per employee, although future legislation may tweak that number.
For employers with 100 or fewer employees, the Act aims to improve the buying power of smaller employers with the creation of health insurance exchanges for small businesses. These exchanges give companies with 100 or fewer workers the ability to pool their buying power and reduce administrative costs when purchasing insurance through the exchanges. The health insurance exchanges will be available beginning January 1, 2014 although some states are already working to make them available earlier.
In addition to the improved buying power for small businesses, the Act will also attempt to reduce the cost pressure when a small business employee becomes sick. Just one sick worker can suddenly increase premiums for an entire small business. By 2014, the Act is designed to end price discrimination based on illness and prohibit insurers from charging more to cover small businesses with sicker workers or from suddenly raising rates when someone gets sick.
The law also includes other provisions to shift some healthcare costs away from employers. Employees will now spend more of their own money when they seek medical care, with the goals being to prompt patients to shop around for care rather than consume health products and services without regard for cost.
To be sure, some uncertainties remain. Various specific regulations have yet to written by the Department of Health and Human Services. And, as mentioned earlier, the November elections will be vital in determining the long-term future of this Act.
However, if things stay as they are, real estate and construction companies will want to be aware of these upcoming regulations as they plan for their business’s future.
As the regulations change and evolve in the months and years, we’ll be sure to keep you up-to-date in this column as these changes may affect you or your business.
For more information on our Cleveland Real Estate and Construction Accounting Services, contact Kyle Rohrig by leaving a comment below or by calling 440-449-6800.