Highlights of the Affordable Care Act
Confused by what the Affordable Care Act may mean for you? Here are some important aspects of the new law.
For about 85 percent of citizens, the Patient Protection and Affordable Care Act (or ObamaCare as it has become known) is already a reality. This article covers some of the elements that affect individuals and small business owners.
Employees of large companies are typically still covered by the same policies they had before the Affordable Care Act, but insurance is now typically more secure. Coverage can no longer be denied or cancelled because of poor health, and adult children are now covered under their parents’ policies until age 26.
Starting in 2014, non-working and self-employed individuals will have access to group-style policies that have typically been unavailable to them. That means rates will be based on age, gender and tobacco status only, not on pre-existing health conditions. Further, some who’ve been unable to get insurance at any cost due to pre-existing conditions will now be able to buy coverage.
Individual policies will be available through health insurance exchanges, which are competitive marketplaces meant to offer more choice for those without coverage through their jobs. Enrollment for the exchanges — some run by states, others by the federal government — is set to begin in October 2013. Consumers should expect a wide variation in costs from state to state for these policies.
The so-called insurance mandate began in 2013 as well. A financial penalty is applied to individuals who fail to buy a policy.
Medicare for seniors is generally seen as having been strengthened and stabilized under the Affordable Care Act, with a gradual phase out of the prescription drug Plan D now under way.
Much has been implemented already. But some key provisions have yet to kick in, especially those that apply most directly to small to mid-size businesses.
Uncertainty for business owners
While the Affordable Care Act is generally seen as a positive change for individuals who have struggled to buy coverage in the past, the overall impact on small businesses is still in question.
Under the new law, employers with more than 50 full-time equivalent employees (for instance, two half-time employees equal one full-time equivalent) must offer insurance or pay a penalty. This leaves many owners of small to mid-size businesses uncertain about how to proceed, as the penalty is known but the cost of policies under the new plan is not.
For businesses with more than 50 full-time equivalent employees, the penalty will be $2,000 for each employee working 30 hours or more each week. The penalty is waived on the first 30 employees. So an employer with 55 full-time employees would pay an annual penalty of $50,000.
To avoid the penalty, businesses with 50 to 100 employees must provide coverage that meets minimum standards at affordable rates for employees — where affordable is defined as no more than 9.5 percent of household income. Uncertainty about actual costs that businesses will incur to provide appropriate coverage has hamstrung some employers, who may want to offer insurance to attract top talent but also must control costs to stay competitive.
There are many elements to the law to consider. As you make health care decisions, you may need to confer not only with your insurer and benefits consultant but also with your wealth manager and tax advisor.
(This article describes the provisions of PPACA most likely to affect high net worth individuals; it is not meant as an exhaustive record of all provisions. J.J. Flotken, a partner at Caravus, was a source for this article.)
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