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While it’s widely talked about and endlessly debated by politicians and talking heads, many people, including small business owners, aren’t entirely sure what Obamacare or the ACA is and what it exactly entails. So in layman’s terms, here’s a quick definition and some of the basics of Obamacare:
The Patient Protection and Affordable Care Act (PPACA), more popularly known as Obamacare or the Affordable Care Act, is President Obama’s signature policy achievement to date. It was signed into law on March 23, 2010. It is the most significant change to the U.S. healthcare system since Medicare and Medicaid passed almost 50 years ago.
Its stated primary purpose is to extend health coverage to uninsured Americans and reduce the future health insurance cost curve. To achieve this purpose, the ACA has built in subsidies, tax credits, penalties, and mandates. The bill itself has ardent critics and supporters on both sides of the political spectrum. One of the most debated provisions is the “individual mandate” that specifies that everyone must be covered by health insurance or pay a tax with only a couple of exceptions.
Individuals and some SMBs meeting specific requirements will be able to get subsidies if they purchase insurance coverage in government-run health insurance exchanges that rolled out on October 1st, 2013. These exchanges may be run in each state; however, if any state refuses to enact an exchange, the Federal Government will force that state to be enrolled in a federal exchange. An exchange is a marketplace where individuals and SMBs (known for SMBs as “Small Business Health Options Program” – SHOP) can compare and buy policies. Like everything else, the cost and funding aspects of Obamacare are vehemently debated but in theory, it is funded by a variety of taxes and cost savings.
Taxes for funding the bill include everything from the Medicare tax rate, health insurance providers, medical devices, premium tax increases and even taxes from such services as tanning. Spending offsets include projected savings in the Medicare program and home health care payments.
While this impact, and whether it will be positive or negative for the U.S. economy as a whole, is still widely debated, there is little doubt that it will directly change small business behavior in several ways. Most notably the impact could play out in various areas of a small business such as hiring and staffing, benefit packages, and even financial projections as employers grapple with uncertain costs based on the requirements of the law. These changes, scenarios, and cost considerations for small businesses are covered more in depth in the Obamacare and Small Business section.
Reduces freedoms and employers' flexibility and benefit designs.
The individual mandate that requires that citizens buy insurance is unconstitutional. Those on the right view it as a form of socialism where the wealthy and/or healthy are required to subsidize health care costs of others against their will.
Enforcement mechanisms of the individual mandate won’t work; e.g., citizens will simply pay a penalty rather than buy insurance and drive up costs or simply find new loopholes in the law.
Government regulation in health care will lead to higher costs as a whole, since government regulation is argued to ruin a free-market system.
Higher taxes on health insurers will be passed onto individuals and companies buying in the "fully insured" market. This will lead to higher costs and kill small businesses.
It will hurt the economy through lower job creation due to increased hiring costs as a result of uncertainty.
Increases spending and costs when the government is already significantly in debt.
The Affordable Care Act has already lived a full life in its short existence. Democrats and those who support the bill have pushed hard to get it signed into law, while Republicans and those who reject it having fought it every step of the way to repeal Obamacare by fighting it as an unconstitutional law. The timeline of Obamacare below shows a brief history of some of the most significant events and important dates of the law known as the Affordable Care Act.
President Barack Obama signs into law the Patient Protection and Affordable Care Act (PPACA). Implementation of the law begins with some grandfather clause exemptions for some policies, but in many cases provisions of the law begin to affect current policies. The law begins to roll out over the next four years, with most of the actual changes to the healthcare system beginning in 2014.
After legal challenges and lots of rhetoric from a broad range of groups and states, the Supreme Court rules that the ACA is constitutional in the case National Federation of Independent Business vs. Sebelius.
Employers are required to provide print notification of employees’ ability to shop for a plan in state-run exchanges. This was deadline was originally March 2013 but it has been pushed back to October 1, 2013 for current employees. After this date, employers are required to provide notice within fourteen days of hiring.
Open Enrollment Begins for individuals and small businesses to buy health plans in the insurance marketplace. Federal and State Health Exchanges opened on this date. These markets will feature the “individual health insurance market” and “small group market” to cater to individuals and small employers, respectively. A large group market for employers with more than 100 employees won’t be available until 2017.
Many aspects of the law become effective starting January 2014. These include government subsidization of individuals up to 400% of the federal poverty line, the individual mandate, health insurance tax (HIT) to be levied on insurers, prohibition of annual limits on group health plans, etc.
Employers with greater than 50 FTE employees must offer insurance or face penalty.