The biggest changes brought by the Affordable Care Act go into effect Jan. 1, and many Americans, especially small business owners, do not know exactly how the bill will change employee healthcare.
Ragan Hunt, executive director of the Kentucky Voices for Health, presented a workshop Monday at the Madison County Extension Office on the ACA and what it means for Kentucky small businesses.
The dozen people that were present peppered Hunt with questions about tax credits, requirements on offering health insurance and how the bill’s initiatives are being funded.
Hunt admitted that the long-term affects of many of the bill’s stipulations are still unknown and won’t be determined until the ACA has been implemented. However, federal and state governments hope that under the ACA, more small business owners, their employees and the self-employed will be able to access affordable health insurance plans.
Small business tax credits
The ACA defines small businesses as those with fewer than 50 full-time employees and pay average annual wages of $50,000 or less, Hunt said.
Small businesses are not required to offer health insurance to their employees and will not be fined for this choice, Hunt said.
However, businesses that employ 25 or fewer full-time workers are eligible for tax credits if the owners offer health insurance to workers. The credits can equal up to 50 percent of a business’s portion of the premium.
In order to be eligible for the tax credits, the business must pay at least 50 percent of the premium cost for employees, Hunt said.
Businesses can actually start claiming this credit in their 2013 taxes for up to 35 percent of employers’ portion of the health insurance premiums for employees.
Statistics from 2011 reveal that two out of five businesses in the nation will qualify for these tax credits, Hunt said. This could affect 19.3 million employees and possibly provide $15.4 billion in tax credits to small businesses.
Currently 60.4 percent of small business employees have health insurance, but a study by the Rand Institute found that the ACA may be able to expand health insurance to 85 percent of these employees.
State health exchanges
The premiums paid by business owners, their families and the self-employed do not qualify for the tax credits, Hunt said. A 2012 Kaiser study showed that 28 percent of the self-employed are uninsured, and 18 percent of small business owners do not have health insurance.
The Kentucky Health Benefit Exchange open Oct 1 for residents to enroll. Insurance coverage will begin Jan. 1.
Health exchanges will be competitive online marketplaces that will offer healthcare plans to individual policyholders. The health insurance companies that currently do business in Kentucky will be offering those plans.
The website for the health exchange is www.healthbenefitexchange.ky.gov.
“It’s kind of a twist on how we do business,” Hunt said. The insurance companies will be competing for our business, instead of the other way around, she explained.
In 2014, small businesses also will be able to select employee insurance plans on the Small Business Health Options Program exchange, which will operate in the same manner as the individual healthcare exchange.
The exchanges will standardize health plans, promote competition between the insurers, give customers the ability to better compare plans and give greater transparency to the process, Hunt said.
There also will be a cap on how much an insurance company can raise its premiums each year, Hunt added.
The Medicaid expansion
A major part of the ACA is an expansion of the Medicaid program. Adults under 65 who earn up to 138 percent of the Federal Poverty Level will be eligible, Hunt said.
If an employee of a small business qualifies for Medicaid, the employer will not be penalized, Hunt said.
Kentucky is one of the states that could benefit the most from the expansion, Hunt said. She shared data with the group that has estimated the program will cover two-thirds of the state’s uninsured adult population.
About 650,000 Kentuckians are uninsured, and this results in about $718 million in uncompensated health services each year, Hunt said. The cost of uncompensated care is shouldered by taxpayers since many hospitals receive a set amount of federal funds each year to cover those losses.
The 2012 Census found that Madison County had 6,474 uninsured residents under the age of 65 that would qualify for the Medicaid expansion.
The costs of the Medicaid expansion are 100 percent covered by the federal government until 2017. After that, the government will pay 95 percent of Medicaid costs, and in 2020, this will be scaled back to 90 percent.
Hunt said the Medicare expansion will help people who are working but do not earn enough to make ends meet.
“These are people who are having to choose between tires and health insurance,” Hunt said. “And health insurance is losing out every time.”
Sarah Hogsed can be reached at firstname.lastname@example.org or 624-6694.