Feature:
The Good, Bad and Ugly of The Patient Protection and Affordable Care Act

Their mantra was: “We need to insure the 40-50 million uninsured. We need to lower the cost of healthcare premiums. And we need to get rid of pre-existing conditions.”

Succeeding at one of these may be the only thing the Health Act accomplished. But what does the Patient Protection and Affordable Care Act (PPACA) mean for your business?

1. Starting this year, small businesses with fewer than 25 employees and average wages of less than $50,000 (excluding owners) get a tax credit for their contributions toward buying health insurance for employees. The credit is up to 35% now and increases to 50% by 2014. The credit may be larger for groups under 10 employees.
2. Beginning in 2011, employers will be required to disclose the value of health care benefits on an employee’s annual W2.
3. Starting in 2014, employers with 50 or more employees must offer “minimum essential coverage” or pay $2000 for each employee per year. (The first 30 employees are excluded.) Depending on the size of the company, the penalty may prove to be less costly than buying the insurance. Those employers with around 50 employees will certainly take steps to be under the threshold to avoid the $2000 penalty.

And what does PPACA mean for your insured employees?

Under PPACA, employers and employees have the right to keep the coverage they had on March 23, 2010, and are exempt from many of the reforms. These plans are called “grandfathered.”

Unfortunately plans may have trouble maintaining “grandfathered” status because almost any change, including changing carriers, will cost them “grandfathered” status. Those that are not grandfathered are now required to include many preventive services including immunizations and colonoscopies, with no co-pay and no deductible.

PPACA will also require caps to be imposed so that the maximum out-of-pocket for individuals will be $5000, including the deductible and coinsurance. For families, it will be $10,000. This sounds great, but eliminates the option for major medical plans with high deductibles and low rates.

Beginning just months after the enactment of the bill, plans may no longer have annual limits on medical services and all plans will have to offer unlimited lifetime benefits.

Perhaps the hottest debate currently between regulators and insurance companies is the Medical Loss Ratio (MLR) which is set at 80% for small groups. This means that 80% of all premium dollars must be paid out in medical expenses and insurance companies will have to pay all administrative services, salaries, commissions, and profit with the balance of each premium dollar.

Obviously these changes and additional services won’t come without a cost. The president of an east coast health insurance company predicted PPACA will cause premiums to increase a minimum of 8% plus medical trend of 1-1.5% per year over the next few years. (This will effectively be a 20 – 26% increase in premiums per year.)

The author’s predications are that individual rates will rise faster than group rates. Because there will be no pre-existing conditions, individual rates will have to rise to meet group rates. Since there is absolutely no tort reform in the Health Act, rates will continue to rise even higher. Unless purchased by their employer, the youngest generations will simply not buy insurance, knowing they can buy it “on the way to the hospital.”

Curtis L. Turner III, CLU, ChFC is an independent life health and disability broker. For additional information, you can reach Curtis at cturner@executive-ideas.com.