Obamacare And The Election
It’s been several months since the Supreme Court ruling that upheld the health care reform law, but the debate over the decision and the future of the Patient Protection and Affordable Care Act has not waned. Along with the economy, the central theme going into the homestretch of the 2012 election ignores the question over whether the law is constitutional; instead the question is whether to repeal it before the most expensive and wide sweeping provisions take effect, like the individual mandate or the Medicare expansion.
In 2010, Republicans successfully tapped into the public’s skepticism with the size and scope of the recently passed law and the results were stunning. Republicans gained 63 seats in the House of Representatives and built the biggest majority seen by any party in more than 70 years. In the Senate, Republicans claimed six seats from Democrats without losing one of their own. Though it wasn’t enough to take the majority, it allowed Senate Republicans to assert their views on the Senate agenda.
Scott Brown’s landmark victory in the Massachusetts special election in early 2010 two months before the health care reform showed that running on a platform of repeal can work. So expect to hear a lot about what Mitt Romney and the Congress would do if Republicans can make a clean sweep in November.
Getting the votes to repeal could be a tall order, so assume for the sake of argument that the health care law remains in place for the next two years. It’s important to understand how the major provisions of the health care
reform law will affect contractors over the next few years. First, the law does not require businesses with less than 50 employees to provide health care coverage to its employees.
But starting in 2014, a business with 50 or more employees that does not provide coverage to its workers (or provides coverage that is unaffordable) will pay a penalty if a single employee is eligible for and receives a tax credit for purchasing health care coverage on one of the exchanges. A worker is eligible for a tax credit if their income is up to 400% of the poverty line. The employer’s penalty is equal to $2,000 per the number of employees over 30 employees.
If an employer with 50 or more employees offers a bare bones plan that covers less than 60% of the costs of typical covered services or where the individuals share is more than 9.5% of their income, the penalty is $3,000 for each employee who receives a tax credit up to $2,000 times the number of employees over 30 employees.
In an effort to encourage employers with fewer than 100 employees to provide coverage, the law offers tax credits based on size. As early as 2010, small businesses with less than 25 full time employees and an average annual wage rates of less than $50,000 per employee that pay at least half the cost of their employee’s health care coverage are eligible for tax credits.
The individual mandate provision takes effect on January 1, 2014. That provision requires individuals to get health care insurance from their employer or a federal program (like Medicare, Medicaid, or TRICARE), or one of the new state health care exchanges or pay a penalty based on income. In 2014 the penalty tax is $95 per adult and $47.50 per child (up to $285 per family) or 1% of the household income whichever is greater. The penalty increases in 2015 to $325 per adult and $162.50 per child (or 2% of household income) in 2015. In 2016 and beyond, the penalty is $695 per adult and $347 per child or 2.5% of household income whichever is greater.
In 2014 the states will have set up the health care exchanges necessary to provide coverage to individuals and through which small businesses will be able to obtain coverage if they wish. While the establishment of the exchanges is a complex topic, a few points are essential to understanding the impact of reform on employers. Individuals may obtain their coverage through these exchanges and most subsidies for individuals are tied to coverage through the exchanges. The exchanges will include Small Health Option Programs (SHOPs) through which small businesses may obtain coverage open to small businesses with up to 100 employees.
As I mentioned before getting the votes to enact a repeal might be difficult. The key is the Senate where Republicans would need to secure 60 seats or face the prospect of a Democrat filibuster. That may be out of reach when you look at the election dynamics. When you peel away the returning members and the “safe” seats, there are probably only twelve Senate seats really in play. In other words, the baseline is probably 44-44 going into the election and there’s very little possibility that Republicans can get 16 more.
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