Speaker looks at health care reform laws

ESCANABA – The Bay Area Economic Club welcomed Jeffery Thomas, director of Agent Relations for the Small Business Association of Michigan, at Bay College Friday afternoon to discuss recent reforms to the Affordable Care Act.

“Some people refer to it as Obamacare – the president was actually doing that for a time – but it’s actually two pieces of legislation,” said Thomas.

The two laws, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act, and their numerous revisions currently span more than 30,000 pages.

“(Originally) it was 2,700 pages and in those 2,700 page there were 3,000 instances of ‘the Secretary of Health and Human Service may,’ ‘the Secretary of Health and Human Services shall,’ ‘the Secretary might’ – and each one of those instances with those words created a regulation,” said Thomas.

The original reforms, which were passed in 2009 following the 2008 economic downturn, were spurred partly due to the increasing cost of health care prompting many employers to drop their health care coverage for employees or reduce the number of people they employed. This created more uninsured Americans, created a growth in Medicaid costs, and put pressure on public and private budgets.

In a little over a decade the cost of insurance premiums for individuals have skyrocketed from $2,471 for an individual in 2000 to $6,515 in 2012. Family plans also increased from $6,438 to $15,745 in the same period.

As premiums have increased, the number of private sector employers offering coverage has changed. Over 98 percent of businesses with over 50 employees still offer employee coverage, but of businesses with under 50 employees only 36.9 percent offer coverage to their workers.

“It’s the smaller employers that are getting that that pressure. That’s where people are losing their coverage the most often,” said Thomas.

The ACA, which aims to reduce the number of uninsured Americans, has been implemented in stages. Some of the changes for small group health plans – such as tax credits for small businesses, coverage for children until the age of 26, coverage regardless of pre-existing conditions for children, the creation of Section 125 simple cafeteria plans, and new restrictions on rescinding coverage and out-of-pocket maximums on policies – have already been implemented.

Tax credits have not been a major incentive for for small businesses to offer employees health insurance due to the requirements that businesses have fewer than 10 employees, an average wage – excluding business owners – of less than $25,000, and a minimum of 50 percent of premiums being paid for by the employer. Of the 21,000 SBAM member companies surveyed, only 2 percent believed they would qualify for the tax incentives.

In 2013, changes were made to the Section 125 plans, the threshold for deducting unreimbursed medical expenses from federal taxes increased from 7.5 percent of an individual’s adjusted gross income to 10 percent, and the Medicare tax rate increased. Employers were also required to notify employees of the insurance exchanges which allow users to locate insurance and determine if they are eligible for subsidies based on income.

The federally run healthcare.gov exchange that the State of Michigan began using after failing to develop a Michigan specific exchange has been under scrutiny due to technical glitches and security concerns since it was first opened for use on Oct. 1.

“What happens is you put all your information in and it reaches out to the IRS to verify your income, it reaches out to Homeland Security to make sure you’re not incarcerated, it reaches out to INS to make sure you’re a citizen, just about every department of government is connected to this thing and they all have their own, old legacy systems that never had to talk to each other before,” said Thomas.

Because the portion of the exchange aimed at individuals searching for health insurance experienced a rocky start, the small business exchange was not implemented. The exchange is scheduled to be rolled out in 2015 and will feature plans for businesses with between two and 50 employees to offer their workers.

Using the Small Business Health Options Plan that will be available on the small business exchange – known as the “SHOP Exchange” – employees will be able to select their own plans meeting the coverage levels and contributions selected by their employers.

With the delays to the SHOP Exchange, the so-called “Employer Mandate” which requires employers with more than 50 full-time equivalent employees to offer affordable coverage that meets minimum essential health benefit standards to 95 percent of its employees or face a penalty was also delayed.

However, the Individual Mandate which requires U.S. citizens and legal residents who file income taxes to have health insurance begin next year. In 2014, an uninsured person will be taxed $95 a year or one percent of their taxable income. In 2015 that amount will increase to $325 a year or 2 percent of taxable income, and in 2016 the tax will be $695 per year or 2.5 percent of taxable income. Following 2016 the tax will be adjusted by cost of living.

“There’s not a lot of meat in the law to enforce it so they can only enforce the penalty – the tax – if someone has a (tax) return coming back,” said Thomas, noting that the government cannot garnish wages to collect the tax.

While the Individual Mandate may be unpopular with some citizens, individuals who purchase coverage through the Exchanges and have family incomes between 133 percent and 400 percent of the Federal Poverty Level may be eligible for subsidies or reduced cost sharing.