Obamacare: Why It Was Implemented. Who It Affects And How
Obamacare
Why It Was Implemented
Who It Affects, How, Why And When
Why It Was Implemented
Who It Affects, How, Why And When
Will the Health-Care Law Help Small Businesses?
Change doesn't get much bigger than this. Or more contentious.
President Obama's Patient Protection and Affordable Care Act has rewritten the rules on health insurance. And it has left small companies scrambling to figure out what it means for them.
The section that has caused the most fuss among businesses is the so-called employer mandate. Companies with 50 employees or more must provide health coverage or pay a fine. And that coverage must meet new minimum standards.
The administration recently put the mandate on hold for a year, but that hasn't stopped the head-scratching among small firms. How much will the changes affect their bottom line? What about their future plans for hiring or expansion?
Critics say the new requirements will cost small companies more and stall their growth, as well as forcing them to take on lots of new bookkeeping and other administrative headaches.
Advocates argue that premiums will likely rise only slightly, and they will be much more predictable than they are now. They also point out that the Act doesn't apply to companies with fewer than 50 employees—the firms that theoretically would be hardest hit—and say that the Act opens up new options for companies and employees alike.
Small businesses have long faced a predicament with health insurance. The Affordable Care Act helps them solve it.
Many firms want to offer coverage. It's a good way to attract and retain workers, plus owners care about the well-being of their employees. On the other hand, it's costly and complicated, and premiums can vary enormously from year to year, as employees age or become sick.
The Act will help small employers that want to offer insurance, and open up new options for the few that don't.
Steady and Predictable
If a business provides insurance, premiums will be more steady and predictable, thanks to the new law. Insurers won't be able to vary premiums based on an employee's health condition and will have limited ability to do so based on age.
In addition, that business's employees will get a benefit that large-company workers have had for a long time: a choice of plans. Workers can either go with the plan their employer offers or take the money their employer pays for coverage and shop for a different plan on the insurance exchange.
The Act also recognizes that some small businesses would be better off not providing insurance, even after reforms are in place. The money and hassle just won't be worth it.
For firms with fewer than 50 workers, there's no penalty for making that decision. And their workers won't be left without coverage. Thanks to a reformed individual-insurance market, those employees will be able to buy insurance at fair prices and potentially offset the cost with tax credits.
Yes, firms with more than 50 workers must pay for not offering coverage. But instead of thinking of it as a fine, think of it as a choice: You can either offer your employees coverage, or help society pay for that coverage. Businesses are free to weigh the costs and benefits of both options.
What's the Cost?
Opponents argue that the Act will impose burdens on small business. But remember, there's no requirement for firms under 50 employees. For larger firms, the minimum benefits mandated are less rich than what almost all businesses offer today.
As for cost, most estimates of average small-group premiums suggest they will rise only modestly, because of the end of discrimination against sick workers. My estimates for several states find that the effects will be close to zero.
Others who project larger increases typically ignore key factors, such as the competitive insurance exchanges that will drive down premiums and the tax credit that offsets costs for many businesses. They also focus only on the subset of firms that will see premiums rise—ignoring the roughly equal subset that will see them fall.
A Red Herring
The argument that firms will not hire a 50th worker is a red herring. Only 2% of U.S. firms have between 40 and 75 employees, most offer insurance and the ones that don't are unlikely to have hiring decisions driven by this law.
Speaking of growth, let's not forget another important group: entrepreneurs. You might have an idea for a food shop or smartphone app. If you have a pre-existing condition that insurers won't cover, you might never start that business today. But the ACA will provide the insurance security that promotes entrepreneurship tomorrow.
The bottom line is that the Affordable Care Act will bring a leaner and better-functioning market for small businesses. Firms can assess the benefits of offering versus not offering insurance without worrying that they're leaving workers out in the cold. And if they do offer insurance, they'll have cost certainty and new choices.
Big Firms Overhaul Health Coverage
Two big employers are planning a radical change in the way they provide health benefits to their workers, giving employees a fixed sum of money and allowing them to choose their medical coverage and insurer from an online marketplace.
Sears Holdings Corp. and Darden Restaurants Inc. say the change isn't designed to make workers pay a higher share of health-coverage costs. Instead they say it is supposed to put more control over health benefits in the hands of employees.
Darden Restaurants, owner of Red Lobster, is giving staff money and allowing them to choose health coverage.
Some Workers Will Choose From Array of Benefits
The approach will be closely watched by firms around the U.S. If it eventually takes hold widely, it might parallel the transition from company-provided pensions to 401(k) retirement-savings plans controlled by workers and funded partly by employer contributions. For employees, the concern will be that they could end up more directly exposed to the upward march of health costs.
"It's a fundamental change…the employer is saying, 'Here's a pot of money, go shop,' " said Paul Fronstin, director of health research at the Employee Benefit Research Institute, a nonprofit. The worry for employees is that "the money may not be sufficient and it may not keep up with premium inflation."
Neither Sears nor Darden would say how much money employees would receive to buy health insurance. Darden says its sum would rise as health-care costs rise. Sears declined to disclose details of its contributions strategy.
Darden did say that employees will pay the same contribution out of their own pockets that they currently do for approximately the same level of coverage. Employees who pick more expensive coverage will pay more from their paychecks to make up the gap. Those who opt for cheaper insurance, which may involve bigger deductibles or more limited networks of doctors and hospitals, will pay less.
"It puts the choice in the employee's hands to buy up or buy down," said Danielle Kirgan, a senior vice president at Darden. The owner of chains including Olive Garden and Red Lobster will let its approximately 45,000 full-time employees choose the new coverage in November, to kick in Jan. 1. Darden says that employees with families to cover will be given more money to buy insurance than employees covering just themselves.
The hope is that insurers will compete more vigorously to get workers to sign up, which will lower overall health-care costs. Darden and Sears are both currently self-insured, meaning that the cost of claims each year comes out of company coffers.
On average, U.S. employers and workers are estimated to spend $15,475 in annual premiums for health insurance this year for a worker with family coverage, according to a survey by the Kaiser Family Foundation and Health Research and Educational Trust. The average employee pays about 28% of that amount and the employer picks up the balance.
The approach isn't directly tied to the federal health overhaul law, which largely goes into effect in 2014. That law will make it easier for employers to funnel workers toward purchasing plans in the individual insurance market, perhaps aided by an employer contribution. The exchange used by Sears and Darden still involves employer-backed group plans, not individual insurance, however, so it doesn't rely on the law's changes.
Several big benefits consultants and health insurers are betting on the employee-choice model. Major consulting firm Aon Hewitt, a unit of Aon PLC, is behind the insurance exchange that Sears and Darden will use, while rival Towers Watson TW & Co. in May bought Extend Health Inc., an online marketplace used by employers to hook retirees up with Medicare coverage. It plans to expand the marketplace to include active workers buying individual plans, starting in 2014.
"Within the next two or three years, it's going to be mainstream," said Ken Goulet, executive vice president at WellPoint Inc. WLP The insurer will roll out a product next year called Anthem Health Marketplace that lets employers offer a variety of its plans to workers, paired with a fixed contribution. Mr. Goulet said it is close to signing up more than 30 midsize and large employers for early next year, including one with more than 50,000 workers.
Other insurers say big companies will hold back until they see early successes. "There will be a lot of interest in taking a look at those results," said Yasmine Winkler, chief product and marketing officer at UnitedHealth Group Inc.'s UNH insurance arm, the nation's largest. But, she said, "The jury's out" on whether the approach will become widespread.
Though some employers today offer workers more than one health plan design, they don't provide as many choices as the exchanges will. The Aon Hewitt version will have five different levels of health plan, and five different health insurers. Workers also don't get the "shopping" experience, where they see the full cost of the plan, and apply their own allotted money to it.
A spokesman for Sears, which will have around 90,000 full-time employees eligible for the new health-benefits program, said the approach "is about increasing associate choice and options for their health care," and should benefit both the company and its employees.
But some consultants question whether the exchange setups will achieve overall savings for big employers, particularly those who already self-insure to shave costs.
Exchange operators today say they offer employers more predictable costs, as well as potential savings gleaned from workers' voluntary choice of skinnier coverage and competition among insurers offering plans on the exchanges.
"It drives competition and drives efficiency," said Ken Sperling, Aon's national health exchange strategy leader.
Aon's marketplace is expected to have around 100,000 employees, including Aon's own, when it launches next year. Bloom Health Corp., which is working with Health Care Service Corp. and Minnesota's Medica Health Plans, in addition to WellPoint and others, said it also expects to have around 100,000 workers at the beginning of 2013. Other employer-focused exchanges, including ConnectedHealth LLC, of Chicago, also say they are seeing growth.
Big Firms Overhaul Health Coverage
Two big employers are planning a radical change in the way they provide health benefits to their workers, giving employees a fixed sum of money and allowing them to choose their medical coverage and insurer from an online marketplace.
Sears Holdings Corp. and Darden Restaurants Inc. say the change isn't designed to make workers pay a higher share of health-coverage costs. Instead they say it is supposed to put more control over health benefits in the hands of employees.
Darden Restaurants, owner of Red Lobster, is giving staff money and allowing them to choose health coverage.
Some Workers Will Choose From Array of Benefits
The approach will be closely watched by firms around the U.S. If it eventually takes hold widely, it might parallel the transition from company-provided pensions to 401(k) retirement-savings plans controlled by workers and funded partly by employer contributions. For employees, the concern will be that they could end up more directly exposed to the upward march of health costs.
"It's a fundamental change…the employer is saying, 'Here's a pot of money, go shop,' " said Paul Fronstin, director of health research at the Employee Benefit Research Institute, a nonprofit. The worry for employees is that "the money may not be sufficient and it may not keep up with premium inflation."
Neither Sears nor Darden would say how much money employees would receive to buy health insurance. Darden says its sum would rise as health-care costs rise. Sears declined to disclose details of its contributions strategy.
Darden did say that employees will pay the same contribution out of their own pockets that they currently do for approximately the same level of coverage. Employees who pick more expensive coverage will pay more from their paychecks to make up the gap. Those who opt for cheaper insurance, which may involve bigger deductibles or more limited networks of doctors and hospitals, will pay less.
"It puts the choice in the employee's hands to buy up or buy down," said Danielle Kirgan, a senior vice president at Darden. The owner of chains including Olive Garden and Red Lobster will let its approximately 45,000 full-time employees choose the new coverage in November, to kick in Jan. 1. Darden says that employees with families to cover will be given more money to buy insurance than employees covering just themselves.
The hope is that insurers will compete more vigorously to get workers to sign up, which will lower overall health-care costs. Darden and Sears are both currently self-insured, meaning that the cost of claims each year comes out of company coffers.
On average, U.S. employers and workers are estimated to spend $15,475 in annual premiums for health insurance this year for a worker with family coverage, according to a survey by the Kaiser Family Foundation and Health Research and Educational Trust. The average employee pays about 28% of that amount and the employer picks up the balance.
The approach isn't directly tied to the federal health overhaul law, which largely goes into effect in 2014. That law will make it easier for employers to funnel workers toward purchasing plans in the individual insurance market, perhaps aided by an employer contribution. The exchange used by Sears and Darden still involves employer-backed group plans, not individual insurance, however, so it doesn't rely on the law's changes.
Several big benefits consultants and health insurers are betting on the employee-choice model. Major consulting firm Aon Hewitt, a unit of Aon PLC, is behind the insurance exchange that Sears and Darden will use, while rival Towers Watson TW & Co. in May bought Extend Health Inc., an online marketplace used by employers to hook retirees up with Medicare coverage. It plans to expand the marketplace to include active workers buying individual plans, starting in 2014.
"Within the next two or three years, it's going to be mainstream," said Ken Goulet, executive vice president at WellPoint Inc. WLP The insurer will roll out a product next year called Anthem Health Marketplace that lets employers offer a variety of its plans to workers, paired with a fixed contribution. Mr. Goulet said it is close to signing up more than 30 midsize and large employers for early next year, including one with more than 50,000 workers.
Other insurers say big companies will hold back until they see early successes. "There will be a lot of interest in taking a look at those results," said Yasmine Winkler, chief product and marketing officer at UnitedHealth Group Inc.'s UNH insurance arm, the nation's largest. But, she said, "The jury's out" on whether the approach will become widespread.
Though some employers today offer workers more than one health plan design, they don't provide as many choices as the exchanges will. The Aon Hewitt version will have five different levels of health plan, and five different health insurers. Workers also don't get the "shopping" experience, where they see the full cost of the plan, and apply their own allotted money to it.
A spokesman for Sears, which will have around 90,000 full-time employees eligible for the new health-benefits program, said the approach "is about increasing associate choice and options for their health care," and should benefit both the company and its employees.
But some consultants question whether the exchange setups will achieve overall savings for big employers, particularly those who already self-insure to shave costs.
Exchange operators today say they offer employers more predictable costs, as well as potential savings gleaned from workers' voluntary choice of skinnier coverage and competition among insurers offering plans on the exchanges.
"It drives competition and drives efficiency," said Ken Sperling, Aon's national health exchange strategy leader.
Aon's marketplace is expected to have around 100,000 employees, including Aon's own, when it launches next year. Bloom Health Corp., which is working with Health Care Service Corp. and Minnesota's Medica Health Plans, in addition to WellPoint and others, said it also expects to have around 100,000 workers at the beginning of 2013. Other employer-focused exchanges, including ConnectedHealth LLC, of Chicago, also say they are seeing growth.
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Camera Specs:
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* Image Sensor: 1/4" Micron Sensor
* Resolution: 720x480 Pixels
* S/N Ratio: 45 db
* Sensitivity: 11.5V/lux-s @ 550nm
* Video System: NTSC
* White Balance: Auto Tracking
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