It’s ‘Affordable,’ so it must be good
For those who haven’t heard enough bad economic news the past few years, here’s one more tidbit to chew on: Across America, businesses with 50 to 60 employees are making plans to eliminate company health insurance, eliminate jobs or both.
The “Employer Mandate” takes effect Jan 1, 2014, sharing that launch date with the “Individual Mandate” that will penalize individuals without health insurance.
Let’s start with individuals:
Most people, if not on employer plans or Medicare, must buy their own health insurance. There are exemptions for people earning below the threshold to file taxes, those for whom health insurance would cost more than 8 percent of income, undocumented immigrants, prisoners, members of Indian tribes and people with religious exemptions.
Others who don’t buy health insurance will be penalized the greater of two amounts: $695, or 2.5 percent of income. There’s a three-year phase-in of that penalty, beginning at $95 or 1 percent of income in 2014, then $325 or 2 percent in 2015.
Individuals will be able to buy health insurance through either state-run or federal “insurance exchange” programs, with no discrimination allowed for pre-existing conditions.
The situation is vastly more complicated for businesses. Beginning in 2014, employers with 50 or more employees must provide health insurance that pays at least 60 percent of the cost of health services. Businesses failing that test will be taxed $2,000 for each employee above 30. Each 120 hours of monthly part-time work will count as one FTE employee, and same-owner businesses consolidated under the tax code will be treated as one business in counting employees.
Put another way, a business with 53 employees and no health insurance program would be taxed $46,000 per year. Those businesses paying more than $46,000 for group health insurance might drop those plans and pay the tax; others might eliminate enough jobs to drop below the 50-employee threshold.
Even if a 50-plus employee business does provide health insurance, it will be taxed if any of its employees receive federal insurance subsidies. To qualify, an employee would have income less than 400 percent of the federal poverty level and pay more than 9.5 percent of household income for the employee share of insurance premiums. That tax will be $3,000 per subsidized employee or $2,000 per employee above 30, whichever is less. And when those taxes are levied, I wonder how businesses will seek to verify the private financial conditions of employees before paying the fines.
It must be a good thing, of course, since it’s called the Affordable Health Care Act. We’ll see.
Jeb Bladine can be reached at firstname.lastname@example.org or 503-687-1223.