Repairing Obamacare

By SBE Council at 25 September, 2013, 11:28 am

By Karen Kerrigan–

Many small business owners are exasperated by the new health care law.  New requirements, new health plans, mandates, notices, taxes, health exchanges, early renewal, paperwork, etc…there is still a great deal of confusion about complying with Obamacare, its overall cost impact, and how a small business can benefit from its provisions, if at all.

For individuals and small businesses with high deductible, “less-rich” plans, there will be sticker shock come renewal time. Obamacare compliant plans include “essential benefits,” which translate into higher costs for many small businesses.  So do the statutory caps on high deductible plans in the small group market.  The young and healthy will also experience rate increases as the law requires that individual plans price everyone the same regardless of health status and age.

On the advice of benefit consultants and insurance brokers, many small businesses across the country are working on early renewals for their policies to “avoid” the full brunt of cost increases that health insurance companies have been warning about all year.  At SBE Council, we renewed early. My decision came with an 8.5 percent total premium increase, which I am told beats the double to triple-digit-increases small businesses and organizations can expect with next year’s renewals.

But not all small firms are opting for, or are aware of, the early-renewal strategy.  It may not make sense for some, plus another 5 percent to 10 percent increase in premium costs is enough for many small businesses to simply throw in the towel altogether. Will the new health insurance exchanges help?

Starting next week, we get to see whether the health exchanges prove beneficial to workers employed by small businesses – as well as the owners themselves – who can’t afford coverage.  On October 1, we find out what consumers think about the exchanges and the coverage choices that are provided.  One news story provided early caution as to what consumers can expect as they navigate the new exchanges next week.  As the New York Times reported on September 24, insurers have been able to keep prices “low” by limiting choices:  “When insurance marketplaces open on Oct. 1, most of those shopping for coverage will be low- and moderate-income people for whom price is paramount. To hold down costs, insurers say, they have created smaller networks of doctors and hospitals than are typically found in commercial insurance. And those health care providers will, in many cases, be paid less than what they have been receiving from commercial insurers.”

Also, according to the Wall Street Journal, the costs of insurance and number of available carriers will vary by state. In some states, consumers will have only one or two choices.  The District of Columbia, however, will be awash with choices*. In Maryland, only individuals will be able to buy insurance on the state’s exchange at this time, and small businesses will have to wait until spring of next year. (See The Washington Post story here about the readiness of states.) Certainly, individual reactions to the exchanges will be shaped by the unique experiences and expectations of each consumer (as well as what state they are in). For those who have never had insurance, or have been on and off the uninsured rolls, the exchanges (and the subsidies attached to coverage) may be a godsend.  Others may get wacked by sticker shock, find the coverage options lacking, or decide that buying insurance simply does not make financial sense compared to the tax penalty under the individual mandate. People earning more than $45,960 are not eligible for subsidies, which means they will pay full freight for the Obamacare plan they choose.

October 1 Obamacare Requirement for Small Businesses: Remember, that if your business generates $500,000 in gross receipts or more, and if you have at least one employee (part-time or full-time) you must provide notice about the health care exchanges. For more information, read here.

“Repairing” Obamacare

As our members and supporters well know, SBE Council did not support the Affordable Care Act. Still, I attended every White House meeting with President Obama’s top health and economic advisors pre and post debate on the law to point out flaws and fixes to keep reform close to its intended purpose (providing entrepreneurs and small businesses with affordable choices in coverage).   A reform bill that was more competition-based rather than government-centered, in our view, is what the nation’s health care system needed.  Barring repeal, SBE Council’s job now is to limit the unintended consequences of the law, protect against higher costs and continue to push for reforms that provide the self-employed and small businesses the freedom to select or keep a health insurance plan that aligns with their financial and unique needs.

“You can’t change a complex economic structure like American health care this much without creating some problems, but they can best be solved if we all work together to fix them,” said former President Bill Clinton recently about the new health care law in a speech at his Presidential Library.  While the former president gave a rousing defense of Obamacare, he identified areas where the law could be fixed.  President Obama has repeatedly conveyed that he is open to ideas that would fix “glitches” in the health care law.  To date, the President has signed 7 pieces of legislation that have made changes to it.  Members of Congress on both sides of the aisle agree more can be done to fix flawed provisions.

For example, the clear trend in part-time-only hiring and cutbacks in employee hours is one area that must be addressed, and may be partially fixed within the scope of the employer mandate. Certain taxes in Obamacare (like the medical device tax, which impacts many small manufacturers, and the health insurance tax) are driving costs higher for small firms and hurting innovation. With respect to the latter, the 2014 tax targets insurance plans in the individual and small group markets, which means small businesses will be harmed by the tax.  According to the Congressional Budget Office, the new fees “would be largely passed through to consumers in the form of higher premiums for private coverage.”  Translation: higher costs for small businesses.

Regulatory and spending drivers embedded in the law are increasing costs, limiting choices and working against the goal of affordable, quality health coverage for all.  There are multiple steps Congress and the President can take right now to stem the loss of choice in the marketplace and help entrepreneurs and small businesses with coverage costs.  Many of these steps are included in bipartisan bills.  These pieces of legislation need to be acted upon now to ensure that we help as many small businesses as possible maintain health coverage. These changes will also help to improve the climate for hiring and investment.

The Small Business Tax Credit: SBE Council believes the small-business tax credit in Obamacare needs to be more generous and vastly expanded. President Clinton thinks so too.  Family members working in family-owned businesses do not qualify for the health tax credit, and the income threshold must be higher to help more small businesses provide coverage for their employees.  The tax credit only lasts for two years, which also limits its effectiveness.  A permanent, simple, robust tax credit will help small firms provide coverage and compete more effectively with larger companies.  SBE Council has been pushing for this in meetings on Capitol Hill and at the White House.

(Clinton also identified the “family glitch” in Obamacare, which penalizes moderate-income workers who may be able to afford insurance for themselves through the workplace, but due to a “quirk” in the law cannot access the health exchanges to buy insurance for their families.  He said this is “unfair” and needs to be fixed.)

Forty Hours is Full Time Act of 2013: Senators Joe Donnelly (D-IN) and Susan Collins (R-Maine) proposed a bill to move the employer mandate threshold in Obamacare from 30 hours per week to 40 hours. They believe the employer mandate should match the traditional definition of a full-time worker, and SBE Council agrees as we have endorsed the legislation.  This important change in the Obamacare law will help stem the surge in part-time only jobs, and the well documented cuts in employee hours. The House bill is H.R. 2575, and the lead sponsor is Rep. Todd Young (R-IN).

Unnecessary Cap Act of 2013: U.S. Reps. Tom Reed (R-NY), Mike Thompson (D-CA), and Pat Tiberi (R-OH) introduced H.R. 2995 to repeal the statutory cap on deductibles for health plans in the small group market. Obamacare caps the maximum deductible for small group health plans at $2,000 for individuals and $4,000 for families. This limit applies only to small employers, which will drive up their health costs relative to those of large employers and individuals.  The caps are forcing a majority of small group plans to put consumers through significant and premium-boosting plan re-designs. (About a third of today’s small group customers choose plans with deductibles lower than the ACA’s caps– meaning that the remaining two-thirds would be forced to raise premiums, increase copays, or strip benefits to comply with the cap.)  SBE Council supports the legislation to repeal the cap, and we are working to advance the legislation.

The Jobs and Premium Protection Act: Reps. Jim Matheson (D-UT) and Charles W. Boustany Jr. (R-La.) have proposed H.R. 763 – a bill to repeal the health insurance tax.  The bill has enough cosponsors to pass the House. As noted above, the tax takes a direct hit on the health insurance plans of small businesses and individuals, which will drive their costs higher. Senators Orrin Hatch (R-UT) and John Barasso (R-WY) have introduced the Senate version of the legislation.  SBE Council supports this legislation, and is a member of the coalition working to repeal the tax.

Protect Medical Innovation Act.  H.R. 523, which repeals the medical device tax (assessed on gross sales, not profits) in Obamacare, boasts 261cosponsors.  According to Rep. Erik Paulsen (R-MN), and sponsor of the legislation, “the tax has collected more than $1.7 billion at a cost of over 10,000 jobs.”  The medical device industry is dominated by small firms (80 percent have less than 50 employees), and it’s a tough business.  Can you imagine paying a 2.3% tax on gross sales of $10 million, and you’ve yet to make a profit? The Senate voted to repeal the tax in a nonbinding resolution  – and it was overwhelmingly bipartisan (79-20).  SBE Council supports repealing the medical device tax.

Protecting Seniors Access to Care Act.  H.R. 351, sponsored by Reps. Phil Roe (R-TN) and Allyson Schwartz (D-PA) would repeal the Independent Payments Advisory Board (IPAB), which was created by Obamacare and is charged with making cuts to Medicare.  The legislation has 193 cosponsors in the House, which includes some Democrats. The Senate bill has 35 cosponsors (1 Democrat). According to Rep. Roe, IPAB will have little accountability yet “has been granted sweeping powers to ‘reduce the per capita rate of growth in Medicare spending.’ Medicare cuts proposed by the IPAB are to be considered using ‘fast track’ procedures and – absent a three-fifths vote of the Senate – Congress can only modify the type of cuts, not the amount. Should Congress fail to act on the board’s recommendations, they automatically go into effect.” IPAB is exempt from administrative or judicial review.  SBE Council supports the Protecting Seniors Access to Care Act.  Accountability in government is important to our members, and access to health care is a critical issue for America’s “encore entrepreneurs” – a rapidly growing slice of our nation’s small business sector.

Medical Flexible Savings Account (FSA) Improvement Act.  This bill, H.R. 1634, has nothing to do with the new health care law per se (in terms of repealing or reforming provisions); it would merely improve FSAs and by extension complement the goals of Obamacare.  This bill introduced by Reps. Charles Boustany (R-La) and John Larson (D-CT) repeals the “use-it-or-lose-it” FSA requirement.  The use-it-or-lose-it rule has a number of unintended consequences. Those who fail to
create or underfund FSAs often skip or delay necessary care. Those who have FSAs often spend
wastefully at the end of the year, in order to use up their balances.  Improved FSAs would lead to healthier people and greater efficiencies in our health care system.  Isn’t this a key goal of Obamacare?  SBE Council supports the legislation.

Congress and the President must act to help our nation’s small businesses and the self-employed.  It can be done with calm, assertive leadership. Who will step up?

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

* Update Sept. 25, 9:24 p.m.: D.C.’s health exchange announces new “glitch.” According to The Washington Post, D.C.’s exchange website will be up on October 1, but prices won’t be available until November.  The Post calls this “a pretty significant delay.” For more, click here.