Tag Archives: obamacare

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Delay on ACA mandates was unavoidable

With the announcement from the Obama administration regarding the delay of the Affordable Care Act’s employer mandates, business owners took a slight sigh of relief heading into the Fourth of July weekend.  In the announcement made on the U.S. Treasury’s website, the “concerns about the complexities” was cited as a reason for delay.  A vast number of businesses do not have the resources, or the understanding of the intricacies of the guidance, to meet the deadline of 2014.

The administration underestimated the financial burden that the reporting requirements would place on employers, insurers and the entities receiving those reports. Furthermore the Health and Human Services, the DOL and the IRS have been unable to effectively manage or provide realistic, timely guidance for employers.  The business community has been voicing their discontentment for quite some time and, as the 2014 deadline looms closer, those voices become louder.

There are several factors at work that made this delay unavoidable. The federal government did not anticipate the number of states that would opt for a federally run exchange.  By adding the employer mandates and tracking requirements on top of implementing the exchanges, it all became too much of burden under the proposed timeline.  This does shift the focus from the employers to the individual mandate but with this huge concession it leaves room to wonder what else will be delayed.  The announcement also referenced streamlining the reporting and alleviating requirements for employer groups that meet compliance standards.

Many employer groups have invested dearly in trying to prepare their businesses to meet the convoluted guidance that has been released thus far and, although relieved for the extension and hope of simpler requirements, this delay can add to the frustration caused by the legislation and the far-reaching implications. The lack of final guidelines has left many employers to guess what to do next and puts vendors, who are developing technology to assist businesses, in a position to make assumptions that could be costly and create unnecessary work for employers.  This reprieve gives everyone – including policy makers – an opportunity to take a much-needed step back.

The question remains how this will ultimately affect the life span of reform and the impact on the Obama administration, and what the inadvertent consequences will be from this decision.  It is difficult to say if this will be a win or lose.  On one hand, they are counting on favor from business owners due to the sympathetic, “careful, thoughtful” ear they have given them regarding implementation of the requirements.

Others will argue that this is the beginning of the end and will give critics new ammunition to attack the legislation, picking it apart piece by piece.  In light of this development it will be interesting to see what the final guidance will reveal and the national reaction to such an announcement.  The Administration will continue to communicate the need for reform as it is the cornerstone of Obama’s presidential legacy but, more than likely, this delay will fuel criticism that is already strong for the repeal of reform.  Some unintentional results could include employers not expanding coverage to employees not currently benefit eligible but also may keep employees’ hours from being cut.

Some employers, in order to avoid penalties, were cutting a majority of their hourly employees to below 30 hours a week.  At 30 hours a week, an employee is considered full time under the mandate and penalties can be assessed on those employees.  This also stands to have a bearing on Medicaid expansion, and sheds doubt on the assurances that have continued to flow from the White House that everything is on track, a statement made as recently as June.  And one cannot help but raise questions about the timing as it relates to mid-term elections.

 

Shay Bierly is the director of client services for MJ Insurance and its Employee Benefits division in Phoenix.

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Obamacare penalty delayed for big businesses

Obama, delay, penalties, large employers, Affordable Care Act

The Obama administration has announced a one-year delay on penalties against large employers who fail to offer workers insurance coverage under the Affordable Care Act.

Although the administration said the decision was the result of “careful, thoughtful” consideration, opponents of the federal health-care law said it reflects general disarray in the program.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, assistant treasury secretary for tax policy, wrote in a blog posted on the department’s website Tuesday.

“We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action.”

In response to the announcement, U.S. Rep. Jim Bridenstine, a Republican representing Oklahoma’s 1st District, tweeted “Yet another admission by Dems that Obamacare is unworkable.”

The tax penalties of $2,000 per uninsured employee after the first 30 employees are now set to go into effect Jan. 1, 2015.

obamacare-signing

Who pays Obamacare’s tax hikes?

Who gets thumped by higher taxes in President Barack Obama’s health care law? The wealthiest 2 percent of Americans will take the biggest hit, starting next year. And the pain will be shared by some who aren’t so well off — people swept up in a hodgepodge of smaller tax changes that will help finance health coverage for millions in need.

For the vast majority of people, however, the health care law won’t mean sending more money to the IRS.

And roughly 20 million people eventually will benefit from tax credits that start in 2014 to help them pay insurance premiums.

The tax increases — plus a mandate that nearly everyone have health coverage — are helping make the law an election-year scorcher. Obama is campaigning on the benefits for the uninsured, women and young adults. His rival, Mitt Romney, and Republican lawmakers are vowing to repeal “Obamacare,” saying some health care reforms are needed but not at this cost.

Lots of the noise is about the financial consequences for people who decline to get coverage and businesses that don’t offer their workers an adequate health plan. Some 4 million individuals without insurance are expected to pay about $55 billion over eight years, according to the Congressional Budget Office’s estimates. Employers could be dinged an estimated $106 billion for failing to meet the mandate, which starts in 2014.

But that mandate money, whether it’s called taxes or penalties, is overwhelmed by other taxes, fees and shrunken tax breaks in the law. These other levies could top $675 billion over the next 10 years, under the CBO’s projections of how much revenue the government would lose if the law were repealed.

The biggest chunk is in new taxes on the nation’s top 2 percent of earners — some $318 billion over a decade.

Other major taxes are aimed at the health care industry, and some of that cost is sure to be passed along to consumers as higher prices.

A rundown of the most significant tax changes — and who pays:

THE 2 PERCENT

Who pays: About 2.5 million households — individuals making more than $200,000 per year, couples $250,000.

How much: A 0.9 percent Medicare tax on wages above those threshold amounts; an additional 3.8 percent tax on investment income. Should raise $318 billion over 10 years.

The lowdown: Together these are the biggest tax increase in the health care law.

For those wealthy enough to owe it, the 3.8 percent investment tax comes on top of the existing 15 percent capital gains rate, which is set to rise to 20 percent next year unless Congress acts.

Over the years, more and more people will be caught by the new taxes, because the adjusted gross income level that triggers them doesn’t rise with inflation.

But fears that the investment tax will land on most folks’ home sales seem overblown — few sellers will be affected. A couple’s profit — not sales price — of up to $500,000 from the house they’ve been living in is exempt from taxes; only gains above that amount are taxed.

When: 2013

ARTIFICIAL-SUN WORSHIPPERS

Who pays: The 28 million people who visit tanning booths and beds each year — most of them women under 30, according to the Journal of the American Academy of Dermatology.

How much: A 10 percent tax on the price of tanning. Expected to raise $1.5 billion over 10 years.

The lowdown: Tanning salons were singled out because of wide agreement among medical experts that baking under ultraviolet lights increases the risk of skin cancer.

When: Took effect in 2010.

THE “CADILLACS” OF COVERAGE

Who pays: Insurance companies or businesses that provide plans with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage. Employees covered by these so-called “Cadillac” benefits probably will feel the pinch.

How much: 40 percent excise tax on any amount of premium that exceeds the threshold. Expected to raise $111 billion over five years.

The lowdown: The majority of health plans aren’t affected because they don’t cost enough: Workplace family coverage now averages about $15,000, including the portion paid by the employer, according to the Kaiser Family Foundation’s survey. But some middle-class workers, especially those with strong union contracts, have health plans that exceed the threshold. Also hit are corporate bigwigs whose employer-paid plans cover virtually all expenses and lots of perks, akin to tax-free income.

Some employees will pay more for their share of insurance costs because the tax will get passed along to them. In other cases, businesses will trim benefits to bring their plans under the tax cutoff. Economists predict that many of the affected workers will get higher pay as a trade-off — but those raises would be subject to income tax.

The tax will affect more workers as time goes by. It’s indexed for inflation, but rising health care prices will probably outpace that.

When: 2018

BUSINESSES SET TO BOOM

Who pays: Insurers, drug companies, medical device makers. And some of their customers.

How much: More than $165 billion over 10 years

The lowdown: New taxes and fees target businesses expected to profit as more Americans get insurance. The companies will pass along these expenses as higher prices when they can. Companies that make or import brand-name prescription drugs paid a total of $2.5 billion in 2011, the first year for their fees.

Insurance companies will share in paying an annual fee that starts at $8 billion for the first year.

Companies that make medical equipment sold chiefly through doctors and hospitals, such as pacemakers, artificial hips and coronary stents, will pay a 2.3 percent excise tax on their sales, expected to total $1.7 billion in its first year. The device makers are lobbying for repeal, arguing that some small companies will have to lay off workers and reduce research spending.

When: Began last year for drug companies; starts in 2013 for device makers, 2014 for insurance companies.

THRIFTY SAVERS

Who pays: People who set aside tax-free savings to pay for health care.

How much: About $33 billion over 10 years

The lowdown: The law limits annual contributions to medical Flexible Spending Accounts to $2,500; there was no government limit before. Many employers had allowed $5,000 in the accounts, and some even more. But the average contribution was only $1,400 per year, so relatively few workers will be affected. Four in 10 employees have jobs that give them the chance to sign up for these accounts.

Last year, people with FSAs and similar accounts lost the ability to spend the money on over-the-counter medicines not prescribed by doctors.

Also, the penalty increased from 10 percent to 20 percent for money withdrawn for non-medical reasons from Health Savings Accounts, which people use to help pay high insurance deductibles.

When: Contribution limit begins in 2013.

TAXPAYERS WHO TAKE WRITE-OFFS

Who pays: People with big medical or dental bills who itemize deductions.

How much: Almost $19 billion over 10 years. Currently, taxpayers have to spend more than 7.5 percent of their adjusted gross income on medical care to qualify for a deduction. The threshold will rise to 10 percent. So a household with income of $50,000 would have to spend $5,000 on health care before deducting amounts above that.

The lowdown: Most Americans don’t have enough out-of-pocket expenses, those not paid by insurance, to meet even the lower threshold.

When: 2013 (delayed until 2017 for taxpayers age 65 or over)

 

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High Court Upholds Key Part Of Obama Health Care Law

WASHINGTON — The Supreme Court on Thursday upheld the vast majority of President Barack Obama’s historic health care overhaul, including the hotly debated core requirement that virtually all Americans have health insurance.

The 5-4 decision means the huge overhaul, still taking effect, will proceed and pick up momentum over the next several years, affecting the way that countless Americans receive and pay for their personal medical care.

The ruling hands Obama a campaign-season victory in rejecting arguments that Congress went too far in approving the plan. However, Republicans quickly indicated they will try to use the decision to rally their supporters against what they call “Obamacare.”

“While no legislation is perfect, more people will now have access to affordable health insurance, and that is a good development for patients and the hospitals that serve them,” said Arizona Hospital and Healthcare Association President and Chief Executive Officer Laurie Liles. “This is a pivotal time in our history, and hospitals are transforming the way healthcare is delivered, making care safer and more affordable for patients,” she said. “Arizona hospital leaders look forward to partnering with policymakers to achieve the goals of better care, better health and lower costs.”

Stocks of hospital companies rose sharply, and insurance companies fell immediately after the decision was announced that Americans must carry health insurance or pay a penalty.

Breaking with the court’s other conservative justices, Chief Justice John Roberts announced the judgment that allows the law to go forward with its aim of covering more than 30 million uninsured Americans.

The justices rejected two of the administration’s three arguments in support of the insurance requirement. But the court said the mandate can be construed as a tax. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness,” Roberts said.

The court found problems with the law’s expansion of Medicaid, but even there said the expansion could proceed as long as the federal government does not threaten to withhold states’ entire Medicaid allotment if they don’t take part in the law’s extension.

“Now that the Supreme Court has removed the uncertainty surrounding the constitutionality of the Affordable Care Act, it’s time for employers to get to work,” said Sheldon Blumling, an attorney with Fisher & Phillips, a national labor and employment law firm that represents employers. Blumling, an employee benefits attorney who counsels clients on how to comply with the law, continued by saying: “Employers must focus on how the employer “play or pay” mandate and other aspects of the law will impact their plan design and costs beginning in 2014. In addition to the long-term strategic concerns for employers, there are numerous new compliance obligations that must be addressed immediately. In the next 18 to 24 months, employers will be extremely busy getting their healthcare houses in order.”

The court’s four liberal justices, Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor, joined Roberts in the outcome.

Justices Samuel Alito, Anthony Kennedy, Antonin Scalia and Clarence Thomas dissented.

Kennedy summarized the dissent in court. “In our view, the act before us is invalid in its entirety,” he said.

The dissenters said in a joint statement that the law “exceeds federal power both in mandating the purchase of health insurance and in denying non-consenting states all Medicaid funding.”

In all, the justices spelled out their views in six opinions totaling 187 pages. Roberts, Kennedy and Ginsburg spent 57 minutes summarizing their views in the packed courtroom.

The legislation passed Congress in early 2010 after a monumental struggle in which all Republicans voted against it. House Majority Leader Eric Cantor, R-Va., said Thursday the House will vote the week of July 9 on whether to repeal the law, though such efforts have virtually no chance in the Democratic-controlled Senate.

GOP presidential candidate Mitt Romney has joined in calls for complete repeal.

After the ruling, Republican campaign strategists said Romney will use it to continue campaigning against “Obamacare” and attacking the president’s signature health care program as a tax increase.

“Obama might have his law, but the GOP has a cause,” said veteran campaign adviser Terry Holt. “This promises to galvanize Republican support around a repeal of what could well be called the largest tax increase in American history.”

Democrats said Romney, who backed an individual health insurance mandate when he was Massachusetts governor, will have a hard time exploiting the ruling.

“Mitt Romney is the intellectual godfather of Obamacare,” said Democratic consultant Jim Manley. “The bigger issue is the rising cost of health care, and this bill is designed to deal with it.”

More than eight in 10 Americans already have health insurance. But for most of the 50 million who are uninsured, the ruling offers the promise of guaranteed coverage at affordable prices. Lower-income and many middle-class families will be eligible for subsidies to help pay premiums starting in 2014.

There’s also an added safety net for all Americans, insured and uninsured. Starting in 2014, insurance companies will not be able to deny coverage for medical treatment, nor can they charge more to people with health problems. Those protections, now standard in most big employer plans, will be available to all, including people who get laid off, or leave a corporate job to launch their own small business.

Seniors also benefit from the law through better Medicare coverage for those with high prescription costs, and no copayments for preventive care. But hospitals, nursing homes, and many other service providers may struggle once the Medicare cuts used to finance the law really start to bite.

Illegal immigrants are not entitled to the new insurance coverage under the law, and will remain one of the biggest groups uninsured.

Obama’s law is by no means the last word on health care. Experts expect costs to keep rising, meaning that lawmakers will have to revisit the issue perhaps as early as next year, when federal budget woes will force them to confront painful options for Medicare and Medicaid, the giant federal programs that cover seniors, the disabled, and low-income people.

The health care overhaul focus will now quickly shift from Washington to state capitals. Only 14 states, plus Washington, D.C., have adopted plans to set up the new health insurance markets called for under the law. Called exchanges, the new markets are supposed to be up and running on Jan. 1, 2014. People buying coverage individually, as well as small businesses, will be able to shop for private coverage from a range of competing insurers.

Most Republican-led states, including large ones such as Texas and Florida, have been counting on the law to be overturned and have failed to do the considerable spade work needed to set up exchanges. There’s a real question about whether they can meet the deadline, and if they don’t, Washington will step in and run their exchanges for them.

In contrast to the states, health insurance companies, major employers, and big hospital systems are among the best prepared. Many of the changes called for in the law were already being demanded by employers trying to get better value for their private health insurance dollars.

“The main driver here is financial,” said Dr. Toby Cosgrove, CEO of the Cleveland Clinic, which has pioneered some of the changes. “The factors driving health care reform are not new, and they are not going to go away.”

Justice Ginsburg said the court should have upheld the entire law as written without forcing any changes in the Medicaid provision. She said Congress’ constitutional authority to regulate interstate commerce supports the individual mandate. She warned that the legal reasoning, even though the law was upheld, could cause trouble in future cases.

“So in the end, the Affordable Health Care Act survives largely unscathed. But the court’s commerce clause and spending clause jurisprudence has been set awry. My expectation is that the setbacks will be temporary blips, not permanent obstructions,” Ginsburg said in a statement she, too, read from the bench.

For more information on the new health care law, visit The White House’ website at whitehouse.gov/healthreform.

Republican Presidential Debate at Mesa Arts Center

The Republican Presidential Debate Viewing Party

On Wednesday, February 22, the Republican party held their primary debate here in Arizona. I ventured out into deep Mesa to cover the debate, but since I couldn’t actually get into the building, I decided to walk around outside the Mesa Arts Center, where a large, outdoor viewing party was being held. There were plenty of journalists there reporting on the debate, so instead of writing a conventional news story, I decided to record a running diary of my time at the event. Pics are at the end of the post.

5:02 pm – Paul supporters out in full force today.

5:12 pm – Political events have the best people watching.

5:16 pm – About 50 percent of the crowd is vocal Ron Paul supporters. So far I have only seen a small number of people #SpreadingSantorum or showing support for the other two candidates.

5:21 pm – There is a large number of protesters here to support the DREAM Act, a legislative proposal that would provide amnesty for illegal immigrants. For the rest of this piece, I will refer to these protestors as “the DREAM Actors.”

5:25 pm – The city of Mesa hired a band to perform on stage before the debate starts. They’re trying really hard, but no one is listening.

5:40 pm –The DREAM Actors are now marching, while chanting “Sí se puede” and “We’re not afraid.” I have a feeling that immigration is going to be a hot topic at tonight’s debate.

5:45 pm – I just came across some demonstrators imploring the candidates to, “Please free Syria.” Sorry bros, maybe if you guys had more oil …

5:41 pm – There are also a small number of people here to support the #Occupy movement. I wonder if they know that Warner Brothers (a major corporation, man!) gets a cut from every single Guy Fawkes mask they buy.

5:50 pm – Governor Jan Brewer is now on stage getting the folks fired up! #ScorpionsForBreakfast

5:51 pm – “Tonight we will get clear and concise answers from the candidates…” HAHAHA! Good one, J.Brew!

5:53 pm – Arizona Republican Party Chairman Tom Morrissey comes up on stage to ask us if we love our country, and then to lead us through the Pledge of Allegiance.  But before we begin, he reminds us that there is no pause between the words “one nation” and “under God.” Thanks for the tip, Tom!

5:55 pm – The MC for the outside crowd instructs us to cheer wildly whenever they point the camera at us. “Get up, cheer, jump around, send gang signs… I mean, no, HAHA, don’t do that!” Are you sure you don’t want to see my gang sings, CNN outside party MC? I want to represent my crew. #westside

6:00 pm – “This is CNN.” LET’S DO THIS.

6:01 pm – THIS DEBATE COULD CHANGE EVERYTHING!!!! At least that’s what CNN says could happen.  CNN gives all the candidates a pro-wrestling style intro. Ron Paul’s is by far the lamest.

6:01 pm – During the introductions, Newt gets some polite applause; Romney and Santorum get a few cheers from the crowd outside. Paul has the loudest supporters.

6:04 pm – In the first answer of the debate, Rick Santorum says that he would cut Medicaid and food stamps, but not military spending. But hey, don’t criticize him. Rick is a good Christian man, and I’m pretty sure he’s just following what it says to do in the Gospel.

6:11 pm – Right now, Santorum is getting hammered on his voting record. It must be hard to get elected president after spending many years in Congress. Even the smallest and most routine votes can come back to haunt you.

6:12 pm – People outside keep applauding the comments like the candidates can hear them.  Inside the Mesa Arts Center, Newt Gingrich has just informed the crowd that today is the 280th birthday of President George Washington. #historian #knowledgeBombs

6:14 pm – Gingrich’s big stumping point for this debate seems to be energy and gas prices; he has already mentioned it a few times. Also, there is a large man in a chicken suit standing right behind me. I don’t know what he wants.

6:16 pm – The chicken man is standing so close I can feel his breath on the back of my neck. #veryuncomfortable

6:17 pm – Ron Paul continues to get the loudest cheers. He tells the audience that we need to stop all foreign aid because it is a waste of money and it helps our enemies. But what about programs like the Peace Corps, or emergency food/medical services? That might make a good follow-up question, John King.

6:21 pm– Romney is bragging about deporting illegal immigrants while he was Governor of Massachusetts. The DREAM Actors protesting outside do not like this. Also, I have to wonder why the moderators allow the crowd inside the Mesa Arts Center to cheer/applaud during the debate. This has happened at every single Republican debate. It makes the candidates to pander to the crowd and it wastes time.

6:37 pm – Wow, a good follow-up question about the managed bankruptcies and the auto industry by John King. See I knew you had it in you! Still, I’m pretty disappointed with the types of questions I’ve been hearing throughout the Republican Primary. <rant> It seems like the reporters/journalists are covering the campaign like it’s a horse race; they’re not concerned with the actual issues. The news media is only searching for buzz-worthy, marketable, thirty-second soundbites; they let the presidential candidates spout of the same talking points, over and over again, unchallenged. No one ever asks the candidates about how that will actually make their plans happen, or speculates about the possible ramifications if the Republicans succeed </rant>.

6:42 pm – We’re still on the topic of the auto bailouts. Ron Paul is insisting that politicians shouldn’t meddle in corporate bankruptcies, because they can’t figure that kind of stuff out. Are politicians stupid? Does that mean we should start electing smarter people?

6:50 pm – All the Republican challengers seem to agree that President Obama has launched a vicious attack on religious freedoms in America (via contraception). Is Obama the next Maximilien Robespierre? #reignofterror

7:03 pm – Santorum and Romney keep blaming each other for causing Obamacare. Santorum says that Obamacare was based on Romney’s state healthcare plan in Massachusetts, while Mitt claims that Obama’s bill never would have passed through Congress if Santorum hadn’t indorsed Senator Arlen Spector (who voted for the bill after he was re-elected). Which Republican presidential candidate do you think deserves the credit for overhauling the American healthcare system?

7:04 pm – The crowd outside lustily boos Maricopa County Sherriff Joe Arpaio when he is introduced during the debate. They must have had a bad experience at tent city or something.

7:13 pm – Newt Gingrich loves Ronald Reagan. He loves Ronald Reagan more than you ever could. He wants you to know that.

7:14 pm – During commercial breaks, the CNN crew keeps asking us to cheer when they put us up on the big screen. Why do they need our cheers so badly? Are they terribly insecure, to the point where they need constant reassurance that they are doing a good job?

7:20 pm –The DREAM Actors and Ron Paul supporters have crowded around the CNN cameras. Their signs are partially obscuring the big screen, which is angering other people in the crowd.

7:26 pm – We are now on the topic of Iran and nuclear weapons. If you listen, you can hear the drums of war beginning to beat. This is getting the Ron Paul supporters and traditional Republicans fired up, but for very different reasons.

7:31 pm – You can tell people are into the debate when they loudly muttering their own personal commentary. It isn’t the least bit annoying. #sarcasm

7:47 pm – During the last commercial break, two men start chanting Romney’s name. No one else joins in and they quickly stop.

7:52 pm – Gingrich and Romney refuse to answer John King’s final question. They instead use the time for a closing argument about why they should be president. When John King tries to protest, Romney slaps him back down #WHO’SYOURDADDY

7:55 pm – It’s over. Time to get out of here.

Final Take: During the debate, new frontrunner Rick Santorum boxed himself in by pointing out that he voted for large bills and packages that he didn’t believe in, such as Title X, which is not popular among the Republican electorate. He portrays himself as a principled Washington outsider, but by admitting and trying to defend the fact that he played the political game, Santorum lost a lot of his credibility. Honesty gets you nowhere in these debates. I expect Mitt Romney will get a boost over the next several days.

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Affordable Patient Care Act - AZ Business Magazine November/December 2011

Affordable Patient Care Act May Cause Businesses To Drop Healthcare Insurance

Although most small businesses in Arizona aren’t dropping their healthcare insurance plans right now, some are thinking about doing it when the Obama administration’s Affordable Patient Care Act is fully implemented in 2014.

Meanwhile, many small business owners are also looking for new plans that will save them money, but may also slash benefits for their employees.

“We’re not seeing a dramatic drop in coverage as of today, but small businesses are asking a lot of questions about the health care reform act,” says Jeff Stelnik, senior vice president of strategy, sales and marketing for Blue Cross Blue Shield of Arizona, which has more small group customers than most other health insurers in the state.

“Companies with from two to 49 employees are also thinking about whether it makes sense for them to drop their coverage. Those with from 50 to 100 employees and beyond are less likely to do that.”

On one hand, the smallest companies — from two to 49 workers — are not required to provide insurance for their employees in 2014 and are not subject to any penalties. Those with 50 or more employees will face fines for failing to do so. So that in itself makes it easier for the smallest firms to cancel coverage.

Another incentive for small businesses to end insurance benefits is that many now offer plans with high deductibles, ranging from $3,000 to $5,000, and requiring “strong” co-payments. These types of plans don’t meet the minimum requirements under the Affordable Patient Care Act. That means that as of 2014, they must upgrade their plans at great expense in order to keep insuring employees. Although some federal tax subsidies will be available to help small companies, it is still expected to be costly for small businesses to provide more generous health benefits to employees.

But even though the smallest businesses are considering dropping health insurance, “they absolutely would like to keep it if they can,” Stelnik says.

“If small employers drop coverage, they will probably give employees a bump in pay — another $50 to $75 in their paychecks,” says Thomas Katsenes, president of Katsenes Insurance in Phoenix. “But that’s not going to help those employees much when they go out to buy health insurance.”

One of his clients, who owns several fast-food franchises, is considering canceling an insurance plan it has for managers; the business does not cover other employees. The franchise corporate office provides no health insurance. “Those businesses most affected are the ones with fewer employees,” Katsenes says.

The full impact of the health reform legislation may not hit until 2014, but some changes already phased in have helped raise current health insurance costs by 15 percent and more, according to Katsenes.

“They’ve already phased in the mandated no-cost wellness benefits (like free mammograms for women) and the unlimited lifetime maximum costs for the insured, and they’re requiring coverage up to age 26 for children,” he says. “All these changes translate into higher premiums.”

Another broker, Bob Padgett, president of the Padgett Insurance Agency in the Phoenix area, hasn’t seen any cancellations yet, but some of his clients are looking at plans with $10,000 deductibles as well as partially self-funded insurance plans.

“Some businesses are reducing coverage for their employees, passing more of the cost on to them or no longer offering coverage,” says Donna Davis, CEO of the Arizona Small Business Association, a group in which 85 percent of the membership has 100 or fewer employees.

“In a recent survey of our members, 74 percent indicated that the cost of healthcare was a significant challenge to the future of their businesses,” she says. “Most businesses have seen consistent year-over-year increases even before the Affordable Patient Care Act was enacted.”

Some employers are investigating defined benefit plans that allow six doctor visits per year and pay a limited amount per day for hospitalization, Katsenes says. “I may have a client who will be going for that soon. He has 15 employees to insure.

“It’s unknown what lies ahead for small businesses,” Katsenes adds. “So far we’ve dealt with about 900 pages of regulations and another 100,000 pages lie ahead.”

[stextbox id=”grey”]For more information about the Affordable Patient Care Act, visit healthcare.gov.[/stextbox]

Arizona Business Magazine November/December 2011