Don’t be ostriches, National Association of Health Underwriters Executive Vice President and CEO Janet Trautwein told small business owners last week.
Sticking your head in the sand and pretending that health care reform has no impact on your business is a bad strategy, she said. And thinking about dumping employer-provided health insurance and paying the fine instead? Fuhgeddaboudit, she said.
“If you’re an employer out there who’s been thinking it’s business as usual, I would tell you that that is not the way it is. It’s not business as usual,” Trauwein said.
Trautwein updated a riveted audience of about 300 business persons, lawyers and insurance representatives on the latest known impact of health care reform on their businesses and their customers. The free session, open to the public, was sponsored by the Michigan Association of Health Underwriters, and more are expected to fill the schedule starting this fall.
Rules for implementation of the sweeping federal law that totals more than 2,000 pages are still being written, Trautwein noted. Regulations for the provisions that don’t go into effect until 2014 will be written last and are the language most likely to be vulnerable to review, she said.
“When legislation passes, that’s only the first step. Then we get in to the rule-making process,” Trautwein said. “There is a big opportunity to shape what comes into those final regulations. You probably don’t realize how much of an impact you can have.”
Among the hot-button topics Trautwein addressed:
Small businesses: Health care reform identifies small businesses as those with from one to 100 employees, a change from the typical standard today of two to 50 employees.
A tax credit based on coverage expenses is available for 2010 for businesses with 25 or fewer employees who earn, on average, less than $50,000. It will vary widely, Trautwein said. If average wages, minus the owner’s salary, are more than $50,000 a year, no tax credit for you.
“In general, the smaller the employer you are, the more money you are going to get. The lower your average wages, the more money you are going to get. Everything is on a sliding scale.”
The credit can be claimed for up to two of the years prior to 2014, when the major provisions of reform kick in, she said. No tax liability is required to claim it, and nonprofits are also eligible.
She recommended using calculators at the Internal Revenue Service Web site at www.irs.gov to gauge how the tax credit provision might impact a business’s specific circumstances.
“It’s not going to be as much money as you think it’s going to be, unless you’re a really small employer and you’ve got some very low average wages,” she said.
Children: Although the law as passed is a bit vague, Trautwein said she expects coverage for children will be expanded as Congress intends to make sure the youngest Americans are taken care of, regardless of pre-existing conditions. Pre-existing conditions, which allow most insurers to deny or delay coverage based on health status, will be eliminated in 2014.
“I think they’re going to say, if the parents have coverage, you’ve got to let the kids on,” she said. She added that she understands Congress’ intent is to model commercial children’s coverage after Medicaid, which could bring dental and possibly vision benefits under the umbrella.
Dependents up to age 26: Trautwein said she’s been fielding lots of questions about this provision, which could go into effect from immediately to the date of the next policy renewal after Sept. 23.
A Kaiser Family Foundation study found that in 2007, 30 percent of adults ages 19 to 24 were uninsured, the highest rate of any age category. For those between 25 and 34, 26 percent had no health insurance.
Many plans, fully insured as well as self-insured, already allow parents’ benefits to be extended to this age group if the adult offspring is in school or college. But one of the provisions effective in 2010 would require a blanket expansion to this age group. For “grandfathered plans,” which are those already in effect, young adults must be covered as long as the individual is not eligible for benefits elsewhere.
“The estimate is there will be a large number of young adults who will be covered as a result of this provision who are not covered today,” Trautwein said.
“If a plan covers dependent children at all, then the eligibility rules are changed, and this applied to all plans, self-funded, everybody,” Trautwein said. “The child has to be eligible until they are age 26. It doesn’t matter whether they are a student or not. It doesn’t matter if they are married. It doesn’t matter if they are a tax dependent. They’re eligible until they turn 26 — period.”
The law does not require coverage of an adult offspring’s spouse or child, she said. “So it’s not like the COBRA rules, it’s different, and we don’t know how it will interact with COBRA rules.”
“The cost estimates nationwide is that they will increase premiums by about 1 percent; who knows whether that’s correct or not,” Trautwein said. However, insurers may not add charges for families who are including young adults.
The law allows the changes to be made at the first plan renewal date following Sept. 23, which is six months after President Barack Obama signed the legislation. But the federal government has been pressuring insurers to institute these changes early, as they have proven to be popular, she said.
“We’re finding different insurers doing it differently, and so I suspect that in the state of Michigan, some will say OK, we’ll do it early and some will say we are not going to do it early.”
If they do it early, does it apply to kids who are aging out by virtue of high school or college graduation? When insurers say yes, that is the typical implementation, she said.
For young adults who aged off parents’ insurance in earlier years but have not yet reached that magical 26th birthday, carriers differ. “Many of them are requiring that you wait for open enrollment to add on kids that are not on today,” she said. “It’s the carrier’s option and they can do it that way if they want to.”
“I’ll Pay the Fine Instead Of The Premiums”: Today companies offer health insurance voluntarily, to remain competitive as employers, Trautwein said. That won’t change with the new rules that begin in 2014, she said.
Fines of $2,000 per full-time employee (excluding the first 30) kick in for employers that have 50 or more workers and lack a coverage plan if even one worker buys insurance on the exchange using a subsidy.
“By the way, the likelihood that an employer would not have that happen is zero because people up to four times the poverty level will be eligible for subsidies if they don’t have an employer-sponsored plan or if they have an employer plan that’s unaffordable to them. That’s $88,000 of annual income.
“So if you think that none of your employees are going to the exchange, then I don’t know what cloud you’re on. They’re going there. They will go there and they will get coverage. So when someone says there is no employer requirement to provide health care coverage, that’s laughable. Of course there is. This is a de facto employer mandate,” Trautwein said.
“Some of you may be thinking, ‘You know what, I’m just going to pay the fine. The fine is less than the cost of my benefits.’ I would caution you to remember why you offer benefits today.
“First of all, what some people don’t realize about this fine is that the $2,000 does not go to help their employees buy coverage in the exchange. The $2,000 goes to the black hole of how-do-we- pay-for-this-legislation. The employees, zero. Unless they qualify for a subsidy, nothing. That means all of them.
“And your key employees, who may have to qualify economically for a subsidy anyway, nothing. And by the way, remember those non-discrimination rules I told you about? You can’t give them the money to buy coverage unless you give it to everybody. And then, if so, why didn’t you just provide coverage?
“So it’s not as simple as paying the fine, that’s my point. It’s much more complicated. And did I mention that the fine is not deductible?
Health care reform analysis from Trautwein is available to NAHU members, and some to the public as well, at the organization’s Web site, www.nahu.org. Find the Michigan chapter at www.mahu.org