With the change in the Presidential administration in January 2017, it was widely expected that health insurance laws would change. This article will look at the factual differences of the Affordable Care Act (ACA) (aka Obamacare) versus the new American Healthcare Act (aka Trumpcare), and how they affect small businesses.
Obamacare vs Trumpcare: Summary of Key Differences
|Comparison Point||Affordable Care Act (ACA)||American Healthcare Act (Trumpcare)|
|Employer Mandate||Businesses with 50+ full time equivalent employees must provide health insurance or pay penalty||Penalty eliminated (technically Employer Mandate remains though)|
|Pre-Existing Conditions||Insurance companies cannot deny coverage based on pre-existing conditions.||States can set their own policies on pre-existing conditions via waiver application.|
|Women’s Health||Women’s health coverage needed to be included in ACA-compliant plans||States can remove women’s health benefits by applying for a waiver|
|Affordability of Care||Elderly cannot be charged more than 3x a young person’s premium||Elderly can be charged up to 5x a young person’s premium|
|Medicaid||30+ states expanded coverage with federal support.||Federal expansion support removed by 2020; annual caps on funding available to each state.|
|Insurance Marketplaces||Created federal and state insurance online marketplaces where people can compare and shop for insurance plans||Unclear on the future of the insurance marketplaces|
|Business Tax Impacts||Taxes increased for insurance companies, medical device makers and wealthy Americans (over $250K income)||Tax increases introduced by the ACA will be eliminated for insurance companies, medical device makers and wealthy Americans (over $250K income)|
Now, let’s expand on each point in further detail.
Point 1: Employer Mandate
Definition: The Employer Mandate is a well-known part of the ACA that imposed a tax penalty on businesses of 50 or more full time employees (or the equivalent to it) who did not provide affordable health insurance to their employees.
Under the ACA: Starting in 2013, the ACA required businesses to provide affordable health insurance for their employees. While it started with businesses of 100 employees or larger, this was later lowered to 50 and has remained that way since 2015. There are a number of stipulations and mathematics to determine what is considered affordable, although most insurance companies only carry ACA compliant plans (so if you use a broker or national carrier- you should be compliant). Here is a handy flowchart from the Kaiser Foundation that has the math and the penalty you might have to pay under the ACA.
Under the new bill: According to SHRM, the new bill cannot remove the Employer Mandate and it will still be law of the land. However, what the new bill is removing is the penalty for non-compliance, which renders the Employer Mandate toothless.
How it affects small businesses: Trumpcare would effectively remove the requirement to purchase health insurance once you reach 50 or more full time employees. If you are a small business, you may then be considering removing the coverage you are providing in order to save money. However, it would be prudent to wait and see how other employers around you react IF the new bill is passed. If no other businesses near you remove their health insurance and you do, you will lose valuable employees (and vice versa if you keep it, you might find yourself with some new applicants).
Point 2: Pre-Existing Conditions
Definition: A pre-existing condition in terms of health insurance is defined in two different ways:
- The objective standard definition of a pre-existing condition is *any* condition that a patient has previously received treatment or advice from a medical professional.
- The broader, “prudent person” definition considers a pre-existing condition as anything for which symptoms were present and a “prudent person” would have sought treatment.
Here is an example difference between the 2 definitions:
John has knee pain and can no longer run on the treadmill, but he can still walk and get through his day with some over-the-counter painkillers. If John goes to an orthopedic to look at his knee, this becomes a pre-existing condition. If John does not go to the doctor, he may still have his knee considered a “prudent person” pre-existing condition depending on his insurance carrier.
Under the ACA: One of the key changes that the ACA made was that it banned the practice of insurance companies denying coverage to individuals due to their pre-existing conditions. It also outlawed insurance companies charging sick consumers more for coverage, imposing annual or lifetime limits of coverage, and required that every plan available must include a basic set of benefits that includes mental health, prescription drugs and maternity care options.
Under the new bill: The new proposed health insurance bill would not completely eliminate guaranteed coverage, but would allow states to seek waivers from several consumer protections on an individual state-by-state basis. This means that states could be able to create their own policy on pre-existing conditions. These states would then be allowed to scale back benefits that insurers must cover, and this could then allow insurers to reimpose annual and lifetime limits on some coverage.
How it affects small businesses: Prior to the Affordable Care Act, the only option for health insurance that many people with pre-existing conditions had was to join an employer with a group health insurance plan. With the Affordable Care Act, these same employees were able to get affordable insurance on their own, and may have gone to work at a small business that does not provide group coverage. If these employees lose their coverage, small businesses without group plans may lose employees, and become less attractive to employees pre-existing conditions going forward.
Point 3: Women’s Health
Definition: Women’s health is usually defined as healthcare that pertains to a woman’s reproductive system including but not limited to birth control, maternity, and post-natal care.
Under the ACA: Currently, insurance companies cannot charge women more than men for the same health insurance plan. Insurance companies are also required to provide a basic set of women’s health related benefits like maternity care and birth control. A major non-profit called Planned Parenthood, which has been at the center of much of the media healthcare attention, receives federal funding for family planning and other medical services used by Medicaid recipients. Note that abortion cannot be funded with federal dollars.
Under the new bill: Insurance companies would still be banned from charging women more than men, however states could seek waivers to allow insurance companies to drop some basic women’s health benefits, like maternity care. Medicaid would be barred from providing funding for any health clinics that provide abortion services, including Planned Parenthood, even for expenses unrelated to abortion.
How it affects small businesses: Under Trumpcare, some employers would have an option whether or not to cover women’s health services in their plan. These employers will need to balance the cost savings of a more bare-bones plan with the value women’s health services will bring to female employees, and male employees with female dependents.
Point 4: Affordability of Health Insurance Plans
Definition: One of the main issues between the current and potential new plans is the rising cost of healthcare plan premiums, which the monthly payment you make in order to have insurance (it works similarly to paying rent- you pay in advance for the month’s coverage).
Under the ACA: Regarding health insurance premiums, the ACA enacted the following:
- Outlawed insurance companies from charging older consumers more than 3 times what younger consumers pay (they can still charge up to 3 times, just not more than that).
- People using healthcare marketplaces and making less than $48,000 a year receive subsidies to help them buy insurance from the government. The amount of the subsidy is tied to the person’s income and location, and it is automatically applied to the bill.
Under the new bill: Regarding health insurance premiums, the new bill would:
- Allow insurance companies to charge more to sick applicants and older consumers (up to 5 times more than younger consumers versus 3 times more currently). However, this could mean a price break for younger, healthy people.
- People would still receive subsidies, which would phase out at incomes of $75,000 per year. The amount would be tied to a person’s age, not their income or location.
How it affects small businesses: If you provide health insurance to your employees, then you are most likely looking for the best plan available for the money. While it’s difficult to say for certain, it seems likely the new bill would lower costs for some, and raise insurance costs for others — in particular, seniors and people who were previously relying on subsidies.
Point 5: Medicaid
Definition: Medicaid is a healthcare program funded by the federal government, but run at the state level. The Medicaid program assists low-income families or individuals in paying for long-term medical and childcare costs. Coverage varies state to state.
Under the ACA: Right now, the federal government and states share the cost of insuring the poor via Medicaid. The amount of money that the federal government gives each state varies based on the state’s coverage of their program. Because the ACA is currently picking up the bill, 30 states and the District of Columbia have expanded their programs.
Under the new bill: The new bill would implement a fixed “per capita cap” or a “block grant” for each state. That amount would increase annually by a percentage dictated by the inflation rate. However, by 2020, the federal government would freeze additional funding for states that expand their number of enrollees.
How it affects small businesses: Medicaid does not impact most small businesses, unless you employ low-income workers. If most of your employee base receives health insurance coverage by Medicaid, you may be impacted, but it is hard to tell at this point how.
Point 6: Insurance Marketplaces
Definition: Insurance marketplace is a new term that was coined directly because of the ACA. Insurance marketplaces are the online sites like Healthcare.gov and other state-specific sites where individuals, families, and small businesses can purchase health insurance plans.
Under the ACA: The Obamacare insurance marketplaces (i.e. HealthCare.gov) enables people who don’t get health benefits at work to compare insurance plans, similar to looking at airline tickets on a site like Kayak.com. All plans on the marketplaces must offer a basic set of benefits, like mental health services and prescription drugs, which make them ACA compliant plans. The marketplaces are available through some states and the federal level.
Under the new bill: The future of the online insurance marketplaces is unclear on the new bill. There is concern that all insurers may pull out of the marketplace due to higher costs and/or consumers may no longer find plans useful if they no longer provide basic services.
How it affects small businesses: If the insurance marketplace collapse or fold, small businesses could face pressure from their employees to provide health insurance, regardless of their size. This could also impact the number of people walking around uninsured, which could impact small businesses indirectly by a potential increase in sick days taken due to the inability to get proper treatment for illnesses or injuries.
Point 7: Business Tax Impacts
Definition: With changes to the healthcare law comes changes to how businesses are taxed. We looked at the differences that businesses could face regarding taxes.
Under the ACA: Currently, the ACA has a policy that Insurance companies and medical device makers had an increase in their business taxes. Individual taxpayers with incomes over $250,000 also saw a tax increase of 1-2.5% depending on their size of household.
Under the new bill: Trumpcare eliminates these tax increases causing medical device makers, insurance companies and Americans with over $250,000 in income to receive a tax cut.
How it affects small businesses: This portion of the bill does not impact your small business, but may impact you individually. It is unclear if the tax cut for insurance companies will lower insurance plan prices.
Other Sources of Information
You may also want to keep your eye on other unbiased sources of information as the new bill continues to go move through congress. Here are a few websites that can keep you informed in a non-partisan way:
- SHRM (Society of Human Resources Manager)
- National Library of Medicine (run by the National Institute of Health (NIH))
Over to You
How do you think the new versus old healthcare bill will impact small business owners? Let us know in the comments section below.