One of the key policies of Barack Obama’s presidency is arguably the Affordable Care Act (ACA) that aims to provide universal health coverage to all Americans. However, Americans who do not participate in this universal health insurance program will have to pay a penalty. Furthermore, anyone who does not participate in a government-run or employer-provided health insurance program will have to enroll in a health insurance exchange in order to access federal health insurance as well as federal subsidies.
Nevertheless, ObamaCare has caused a lot of concern especially among business owners with some saying it will reduce insurance costs and others saying that the ACA will increase employer-provided healthcare costs. For instance, a study carried out by the Kaiser Family Foundation found that the number of employers who offer health insurance to their employees currently stands at 57% from a high of 66% in 2003, which is a nine percentage point drop. One company that feels ACA will increase the cost of providing health coverage is United Parcel Services (UPS). According to a report published by CNNMoney, UPS has informed its employees that the ACA will increase the cost of healthcare by 4% in 2014. Other notable employers who echo the same sentiments as UPS include University of Virginia and Delta Air Lines.
To understand why employers are feeling jittery about ObamaCare, you need to take a closer look at the taxes and fees that businesses must cough up. To start with, employers must pay an annual health insurer fee set at about 2.5% of total premiums in 2014. However, this fee will rise to 4% by 2017. In general, the more a business’s premiums grow, the more the health insurance fee will rise.
Secondly, employees who fear penalties under the individual mandate will most likely enroll in employer-provided healthcare plans. As a result, employers will have to part with more cash to cover the cost of their employee’s insurance policies. In fact, Delta Air Lines reckons that this aspect alone will add as much as $14 million to its annual healthcare expenses.
Thirdly, employers will have to cough up a transitional reinsurance fee for the next three years. The aim of this fee is to help state-based insurance marketplaces settle large claims. Starting in 2014, business owners will have to part with $63 for every insured employee. The good news is the transitional reinsurance fee will drop during the last two years.
Fourthly, business owners will have to contend with the “Cadillac” tax staring from 2018. This target will specifically target employers who offer their employees generous benefit packages because such employers will have to pay a 40% tax on any amount of money over a certain threshold. For family coverage, this threshold is $27,500 while individuals have a threshold of $10,200.
Finally, employers must consider the cost of Patient Centered Outcomes Research Institute fees that will initially cost $1 per insured person in 2013 and rise to $2 in 2014.
To allow businesses some breathing room, the Obama administration has said it would delay penalties on the employer mandate until 2015. This is certainly good news for companies with 50 or more full-time employees. Before the announcement of this extension by the US Treasury Department, businesses were facing the prospect of having to pay annual penalties of as much as $2,000 for every employee by the start of 2014. The International Franchise Association lauded this move saying that the employer mandate would have affected a large number of franchisees with more than 50 employees. However, the vice president of the Small Business Majority, Mr. Terry Gardiner, reckons that this postponement will not have a major impact on the operations of small businesses. In addition, he says that up to 96% of employers with 50 employees or more provide some form of health coverage.