The other day I was chatting with a small business owner about the Affordable Care Act, mostly known as Obamacare. I found her as a representative sample of the many misperceptions about this imperfect, but groundbreaking law. When I made the comment about the number of people who got refunds from insurance companies two months ago based on provisions of the law that insurance companies cannot make too much profit on premiums, she was dumbfounded.
When I made the comment that employers under 50 employees need not worry as much about the law, she again was dumbfounded. For the most part, small employers will have an enhanced ability to offer affordable coverage, but the ones with less than 50 employees are not obligated to do so. Further, for employees who produce less than 250 W-2s per year, they need not worry about reporting the cost of medical premiums on the W-2 for illustrative (not taxation) purposes. It is not unheard for retail or restaurant employers to have many more W-2s than employees due to turnover of staff.
I mention these two examples out of many as Obamacare is very misunderstand based on the active public relations machine unleashed against it. It is not at all a stretch to say many were against it not because they understood it, but were told to be against it as it was a campaign wedge issue. I will leave political comments to my earlier posts and focus below on some of the salient points.
For the most part, it is for the greater good that Obamacare will continue. This is one of the very positive outcomes from the election, as in addition to the features that are already in place – elimination of pre-existing conditions for children, ability to extend coverage for non-college student adults on the parents’ plans until age 26, elimination of lifetime maximum benefits, opening of access to preventive care, closing of the Medicare Rx doughnut hole for seniors, and aforementioned limitation on insurance companies on their acceptable profit margins – there are additional good changes coming down the pike in 2014.
Just yesterday, Mercer released its national healthcare cost trend information, the largest healthcare survey of its kind. In 2012, the healthcare costs were tempered to 4.1%, the smallest increase in 15 years, and down from 6.1% in 2011. One of the reasons cited is due to continued movement to more Consumer Driven Health Plans, but another one is the steps taken to soften the impact due to Obamacare. Yet, other companies have cited the increase of 3 million covered adult children under 26 and emphasis on preventive care, which are also paying dividends. The under age 26 adults are better risks for the most part and will dampen the cost increases for older adults and families in the birthing age period due to the cost of deliveries.
Another interesting comment from the Mercer survey echoes what was said in earlier surveys – only 7% of large employers will drop coverage and 22% of small employers (under 500 employees) would be inclined to do so. In essence, the law requires employers to offer access to affordable and essential coverage to employees who work regularly 30 hours a week or more. For people who are unemployed and who don’t have access to such coverage due to hours worked or the cost of the employer plan is too high, they are obligated to access coverage through an insurance exchange or Medicaid. Yet, the premiums for the exchanges (which is an insurance market bag of choices) will be heavily subsidized based on your income relative to the poverty level. phasing out at 400% of the poverty level (about $45,000 for an individual). And, for those who are beneath the poverty level, Medicaid is there at no charge.
The reason employers will not drop coverage is they pay a penalty for not offering affordable care to those who work 30 hours a week or more. Offering coverage ends up being more economical for the significant majority of employers. However, the employer will play a heavier hand in describing choices for their employees. For some employees, especially those under 30 hours per week, they may actually be better off with the exchanges and the premium subsidy. And, Medicaid is a huge safety net for those under the poverty level (about $11,000 for an individual). It should be noted, even before Obamacare, some retail employers had a non-inconsequential percentage of employees covered by Medicaid (6% for one large retailer and 18% for another smaller one, e.g.).
On this Medicaid point, the states will be picking up more covered individuals and the Federal government will fund the additional cost and then phase it out slowly over time. Some states may choose not to take this on. Yet, I do not think that will happen for one simple reason – the hospitals will tell them to take the money. One of the least discussed pieces of Obamacare is this one simple fact – hospitals and insurance companies like it. Why? They are more assured of payment upfront and in a budgetable way. From the hospital side, this will reduce exposure to indigent costs which are huge and causing some hospital to have to merge or go out of business. Plus, it moves non-urgent care to the doctors’ and clinic offices and out of the ER. Finally, Obamacare opens up access to affordable preventive care which pays dividends.
Note, Obamacare is far from perfect, yet it helps tremendously with a societal issue. We need to make sure people have access to healthcare. With 46 million uninsured, too many Americans are dying needlessly and going bankrupt due to the absence of care. And, for people who cheered when the comment was made at the GOP primary debates to let someone die without coverage, my comment is very succinct – you are respectfully full of shit. If that person was you or a loved one, you would be doing whatever it takes to get medical care. Words are cheap. Behavior speaks volumes.
Obamacare is the law of the land. Let’s make it work better. It is a good thing it will continue. One final thought for naysayers – a version of Obamacare was Governor Romney’s greatest success as governor of Massachusetts. He cannot hide that fact, although he certainly tried.