Plan Now Or Pay up Later
Changes in the way America does business will be coming as far-reaching mandates of the Affordable Health Care Act, otherwise known as Obamacare, begin to kick in in 2014 and beyond.
That was the message to about 50 business owners and others attending a seminar this week at Froehlich’s Classic Corner, hosted by the Jefferson County Chamber of Commerce and the Ohio Small Business Development Center.
Scott Pipes, president of Pipes Insurance Services of New Philadelphia, and Mark Fearon of the accounting firm of Rea and Associates, told those gathered the next two years will deeply affect how individuals and businesses obtain health care insurance because of the law. Their message to business owners: Plan now or pay much more later.
“It’s not a new law – it’s just a massive law,” said Pipes of the coming mandates. “In my humble opinion, this law will change the labor market more than anything else in our lifetime.”
Pipes continued to say that, “When you file taxes on 2015, you will have to prove you had qualified health care coverage in 2014 or pay a fine.”
Pipes said the individual mandate fine is small at first, but gradually will increase during the next two years.
“There are nine exemptions to that (mandate),” said Pipes, adding those exempted from the individual proof of coverage include American Indians, those with religious objections, illegal immigrants, certain ministries, the incarcerated, those deemed unable to afford coverage and those who didn’t make enough to file an income tax statement.
Pipes said the penalty for non-proof of health care coverage begins at $95 per adult and $47.50 per child in a household or 1 percent of household gross adjusted income, whichever is greater. Those numbers will rise to $695 per adult and $347.50 per child or 2.5 percent of household adjusted income, whichever is greater, by 2016.
“The fines (for non-coverage) will be paid by that individual,” said Pipes, adding businesses also could be affected, depending on circumstances.
The reasons for the law include universal coverage and to make sure all individuals are paying into the health exchange pools, Pipes said. He said in the original law, individual states were required to set up health care exchanges to expand Medicaid for those with inadequate or without health care insurance.
“This part of the law was blown up by the Supreme Court,” said Pipes, adding the court ruled states are no longer mandated by the federal government to participate in the exchanges. “In Ohio, at first Gov. (John) Kasich wasn’t going to set up a (state) exchange, but he changed his mind and now is going to set up an exchange.”
“It’s (business owners’) duty now to make sure employees are covered,” he said, adding many of the numbers involved in coverage are based on the previous year’s income and tax returns for the employee. “You need to be thinking about this now for next year.”
Pipes said without the proper ratios, employees could leave a business’ health care plan and jump into one of the exchanges, which could lead to the business having to pay a penalty.
The number of employees, how many hours a week they work and how they are counted by the federal government, also will factor into companies avoiding fines. He said companies with or near 50 employees need to obtain professional guidance on how to best proceed with a strategy.
“If (a business owner) is at 50 employees or more, they need to talk to someone,” he said. “If you (own) other companies, you had better talk to someone.”
The law also stipulates any employee averaging 30 or more hours a week is considered a full-time employee and is mandated to be covered, said Pipes.
There are several triggers in the law that could lead to a business paying a fine, depending on everything from how the government counts employees to what percentage of an employee’s health care premium an employer pays, he said. According to the law, any penalties levied against a business are used to subsidize the health care exchanges, Pipes explained.
Some businesses will consider dropping health insurance for employees and elect to pay the penalties instead, said Pipes. He said while that may be a strategy for some businesses. it may not be in their best long-term interest.
“(Employees dropped from business health care coverage) will have two places to turn to – another employer that does offer (health care) coverage or to the exchange,” said Pipes.