Affordable HealthCare Act

The Supreme Court has ruled. And ever since, too much time is being spent discussing if the so-called penalty should be classified as a tax. No matter the classification, it’s money that will be taken from the private sector and spent by the government. A more productive discussion addresses how the ACA will affect individuals, families, and businesses. After browsing the IRS website, I’ve boiled it down to a few talking points.

Insurance companies will be required to provide coverage for everyone by 2014, regardless of a pre-existing condition. In my opinion (IMO) this will cause premiums to rise.

Everyone will be required to have insurance. IMO – this should cause premiums to decrease. Except, there’s the penalty option which states that people without healthcare coverage will be required to pay. And the penalty option may be the less expensive choice. But then, there’s the tax credit feature that offers those who can’t afford healthcare a government subsidy to cover those costs.

Businesses with 50 or more employees will be required to provide health care coverage. If a business with 50 or more employees does not provide healthcare coverage they will be assessed a penalty of $2000  x their employee head count minus 30. Confused yet?

If the business does provide coverage and pays more than 60% of the cost, then they’re home free – almost. If any employee is paying more than 9.5% of their family income for health care coverage, then the employer must pay a penalty of $3000 x their employee head count minus 30. So, it’s easily possible for a business to provide healthcare coverage and still be assessed a very heavy penalty.

IMO – due to the potentially rising cost of individual healthcare coverage, businesses that employ more than 50 will find it difficult to escape the penalty. Many will choose to pay the penalty and drop group healthcare coverage. It’s impossible to know what affect that will have on individual cost of health care.

Businesses with less than 50 employees will qualify for tax credits to subsidize the cost of coverage. The amount of the tax credit is inversely proportional to the average employee’s compensation - the lower the average compensation, the higher the tax credit. IMO – this could result in small firms keeping the average compensation low in order to gain a higher tax credit.

There’s a lot of talk about tax credits and affordability. But there’s little talk about how the tax credits will be funded. In most cases, tax credits are a reduction of a tax liability. With regards to the ACA, tax credits are monies received separate from one’s tax liability.

The bill includes a long list of tax increases and new taxes in order to fund the tax credits. This list is complicated but can be found on the IRS website.

IMO – the ACA deals only with cost coverage and does nothing to address health cost drivers. And worst of all, the ACA will increase the overall cost and the decrease the quality of healthcare for everyone.