The Band-Aid This article is a re-printed from the May 2010 edition, as approved by the UP Business Today
By David Saint-Onge Regardless of your position to the left or right of the aisle, one thing is crystal clear, health care reform is now part of the fabric of America and all of us will have to learn to deal with it. As a country we flirted with the murky waters of ‘Obamacare’ for over a year now and, admittedly, there still seems to be a general sense of discomfort because we may not fully know what lies below the water’s surface. HR 4872 passed the U.S. House of Representatives on a partisan 219-212 vote. Memorialized in over 2,000 pages, this sweeping federal program brings about massive changes to health care in America. It can certainly be argued that an overwhelming majority of Americans felt something needed to be done. The question is does this legislation cure what ails us? There have been plenty of partisan claims as to what effect this new law will have on individuals, small businesses and corporate America. Given the Congressional Budget Office estimates, none of us will really know the full effect of this legislation until it actually happens. In the meantime, speculation will continue, estimates will be derived, and attitudes promulgated. In the end, we will deal with the good, the bad and the ugly aspects of this sweeping change. Some will win and some will lose, but we are all hopeful the good outweighs the bad. Until such time as history plays out and the real results are experienced, we will need to do our homework to learn how this new program affects each of us. In this regard, the editor of the UP Business Today asked me to do my best to formulate a summary of the health care changes and try to assess how this issue affects business. Here goes…
Overview First the bad news: expanding coverage to include 32 million more people will not be free. As enacted, individuals earning more than $200,000 per year (and couples earning more than $250,000 per year) will pay an extra 0.9% (for a new total of 2.3%) in their Medicare payroll tax above these thresholds starting in 2013. They will also pay a new tax on unearned income, including money from investments, dividends, annuities, royalties and rent. Social security, pensions and IRA income is exempt from this additional tax. For those individuals covered by “Cadillac” employer-sponsored health plans that cost more than $10,200 for individuals or $27,500 for a family, a new 40% tax will be levied on insurers starting in 2018. You can bet these new taxes will be passed onto the consumer. For those without health insurance, they are not immune to the full reach and financial impact of this new legislation. Starting in 2014, those individuals who do not have insurance but are required to will have to pay a penalty of $95 or 1% of taxable income. This penalty rises over time to include $325 or 2% of taxable income in 2015 and $695 or 2.5% in 2016. After 2016, the
penalty increases with a cost-of- times what younger members pay for the same coverage, and out-ofliving adjustment. pocket expenses are limited to The new law is expected to lower $5,950 for an individual or the monthly cost of insurance in $11,900 for a family during 2010. 2014 by providing tax credits or How much premiums will cost to refunds to reduce the cost of pre- join the high-risk pool, which hosmiums. The credits are available pitals and doctors will participate, to people whose income falls into and exactly what will be covered a specified range and who are eli- are among the key details yet to be gible to buy coverage through worked out. This program ends in new state-run health insurance 2014 when insurance companies exchanges. Because it is imprac- will be required to sell policies to tical to try to predict the cost of anyone, regardless of their preexhealth insurance premiums in 2014, it is impossible to know isting medical conditions. how much the credits are worth in dollars. At the very minimum, these credits will be a percentage of income, from 2 to 9.5 percent, if your income is under a certain level—the current range would include individuals with incomes of $14,403 to $43,320 and families of four with incomes of $29,326 to $88,200. In addition, new consumer protections will take effect in September 2010 that can also help make coverage more affordable. For people who buy new group and individual policies, insurers cannot set lifetime limits on how much they will pay, cannot cancel policies after you get sick, and cannot exclude children with preexisting medical problems. And certain preventive screenings and vaccinations will be provided at a price that can’t be beat: free. For those with preexisting medical conditions who have been unable to obtain health insurance for at least six months, these folks will be eligible to buy coverage through a temporary federally funded program called a “highrisk pool.” Under the new law, this option—expected to be available by July 2010—will cover about 2 million men and women. Older members of the “pool” cannot be charged more than four
Patient Care vs. Doctor Availability With 32 million more people sitting in the doctor’s waiting rooms, there is a concern regarding doctor availability. During the health reform debate, Republican critics such as Florida Senator George LeMieux warned that a physician shortage could undermine the entire reform effort: “It’s not health care reform if the doctor is not in,” he said. The new law addresses the shortage of primary care doctors in three basic ways. • Primary care doctors who treat Medicare patients will receive an extra 10 percent bonus from 2011 to 2016, and earn another small bonus if they file health care quality reports with Medicare. In addition, the law adjusts Medicare payments to reflect the variations in medical costs by geographical area, which the American Medical Association says will benefit doctors in 42 states. The measure also raises payments for family physicians who treat patients in Medicaid, the government’s health care program for low-income people. And it reduces paperwork for doctors who treat Medicare and Medicaid patients— another sweetener to entice physicians into the programs.
• The federal government will provide incentives for doctors who go into the primary care field. For example, the legislation expands loan forgiveness programs to defray the cost of medical school and provides money for primary care training programs at teaching hospitals. It also provides grants to medical schools to recruit and train students who will practice medicine in rural communities. There are similar incentives for training nurses and other medical providers. • Finally, the new program encourages changes in how patients are treated by creating “accountable care organizations”—physician and other medical groups—which will be paid according to how well the patient fares, rather than the number of services provided, explained Jean Silver-Isenstadt, M.D., Executive Director of the National Physicians Alliance. “This means that issues that can be handled over the phone, will be, and patients won’t be required to come in for an office visit just to ensure the physician gets paid,” she said. “This will free up valuable time for doctors to see more patients.” No one knows for sure whether bonuses and other changes will build up the supply of primary care doctors fast enough to keep pace with demand. Small Business Impact In a nation of more than 29.6 million small businesses with about 58 million employees, the primary concern with the new health care reform should not be a partisan issue as it relates to your stance either for or against. Quite frankly such an argument is not relevant with the passage of the legislation. The real issue for business owners is achieving a fair understanding of what the legislation means and how will your business be affected.
to yourself that you'll deal with it tomorrow," says Jerry Jellison, a small-business consultant who specializes in implementing change. "My clients tell me that when the wolf is in the bedroom with his mouth wide open and he's slobbering on them, that's when they'll deal with it." Here is a brief summary of the impacts and their effects: For Employers: • By 2014, employers who have more than 50 employees must offer health insurance benefits or pay penalties. Companies with 25 or fewer employees who meet certain wage requirements will also be able to get credits toward health insurance purchases. • By 2014, small-businesses owners, the self-employed and those who don't get work-provided coverage can get benefits through Small Business Health Options Programs (SHOPs). These staterun marketplace exchanges will work with carriers to pool insurance options, with the hope that costs will be lower. • By 2018, high-end health plans with premiums of more than $10,200 for an individual policy per individual and $27,500 per family — not including vision and dental — would be subjected to a "Cadillac" tax. The excise tax would be paid by employers that self-insure (most large firms do) and insurance companies, but small-business experts expect these costs to be passed along to smaller firms via premium increases. For Employees:
• There is an argument that states unhappy employees don't have to stay in a job they hate for fear of losing health insurance for themselves or their children. The new mandate say insurers can't deny coverage due to pre-existing conditions (effective this year for kids and in 2014 for adults). Adults can "When you're already over- also buy through SHOP exchangwhelmed with change and hear es. Also, insurers can vary premithere's one more coming, you say ums based only on a person's age,
geographic region and use of to- they can afford to be self-embacco, not on health status. ployed. "Our biggest expense is our health care," he says. "It's big• Within six months of the bill ger than our mortgage." becoming law, the workers can keep kids on their insurance poli- With all of this in mind, what cies until they're 26. worries me more than any other aspect of this legislation is not the • Also within six months, lifetime legislation itself. Yes, a 2,000caps on employer-sponsored in- page piece of legislation is unconsurance — often $1 million — scionable; you have to wonder would be removed. It is important what it really says. But if we give to note that a small employer that reasonable credit to the crafters of goes from a low lifetime maxi- the text, our collective concern mum to an unlimited maximum should really be how the legislacould see a substantial increase in tion is interpreted and implepremium costs, as much as 10% to mented by the bureaucrats. After 20%, depending on their history all, as most business owners know and how their respective health full well, it’s not the business plan coverage program is structured. necessarily that dictates success; it’s the way you implement it and The Big Worry under what dynamic conditions. When it comes to the full effect of Even though many parts of the health care reform to small busihealth care reform legislation ness – either positive or negative have yet to be sorted out, there are – the devil is in the details. plenty of small-business owners who are already against the plan Information Sources: whether it is fundamental, philosophical or functional. Based on “Health Care Reform Explained”, many comments I have received AARP Bulletin Today, Susan locally, the new health reform is Jaffe, dated April 12, 2010. just another on a growing list of uncertainties faced by small busi- “What Health Care Reform ness owners. When it comes to Means to Your Business”, CNN small business, uncertainty kills Money.com, Neil deMause, intuition, invention, and invest- March 22, 2010. ment. “Small Business Owners Unclear There are widely different views on Health Care Impact”, USA Toon how health care reform will day, Bruce Horovitz and Laura affect entrepreneurship. Steven Petrecca, March 23, 2010. Berglas says it'll basically kill it. "Entrepreneurs live in a reactive “Health Care Bill Should Help mode," says Berglas, an executive Small Business”, Yahoo.com, coach in Los Angeles who has Steve Strauss, March 22, 2010. written and taught entrepreneurship. Creating more bureaucratic “Cramer’s Health-Care Mea Culregulations for entrepreneurial pa”, CNBC, Tom Brennan, March small-business owners, he says, 24, 2010. "is like placing a speed-limit sign David Saint-Onge is President and in front of a Porsche owner." Principal Strategist for Black Ink But Robert Pasick, a clinical psy- Assets a business consulting chologist and executive coach company that enhances organizafrom Ann Arbor disagrees. Pa- tional performance, guides busisick, 63, and his wife, Patricia, are ness growth, helps businesses both self-employed. Between understand productive sustainthem, they pay more than $1,700 ability, and serves business owna month for health insurance. A ers with effective business exit few years ago, he says, that cost strategy planning and implemenwas closer to $500 a month. He tation. doesn't know how much longer (www.blackinkassets.com),