Wednesday, April 22, 2015

Will Your Spouse Lose Their Health Insurance Because Of ObamaCare?

As of January 1st, the Employer Mandate of the Affordable Care Act went into effect.  Any company with at least 100 full time employees must now offer health insurance to at least 70% of their employees in 2015.  At least 95% in 2016.  Otherwise, the company will face fines of $2500 per uninsured employee. Also, by the first of next January, any company with 50 or more full time employees must also provide their insurance or face the same penalties.

In addition to providing the insurance, there are other caveats that employers must meet.  The insurance must meet minimum standards under the ObamaCare law, such as providing free birth control, one free annual doctors checkup, free screenings for a variety of illnesses, etc.  Also, it must be affordable.  By that, the employee's cost must be less than 9.5% of their gross wages, and the policy must also cover an employee's dependents up to the age of 26.

Now, those are the rules and here are the problems.

Marginally profitable and unprofitable firms may just go belly up.  The ObamaCare employer mandate makes no exception for struggling companies.  Either provide the insurance or pay the fine.   Some businesses simply won't survive that. Most struggling companies cannot afford to raise prices in order to cover the high cost of health insurance. Also, as a result, the cost of starting a business has just gotten a lot more expensive.

Companies may lower their costs of providing insurance by not covering spouses.  The Employer Mandate says that companies must provide insurance to dependents up to the age of 26.  But, interestingly, a spouse is not considered a dependent under the new healthcare law.  This actually gives companies an excuse for not covering them.

Low wage employers are disproportionately punished by the law.  Before ObamaCare, most employers offered insurance to their employees on a cost sharing basis of about 50%.  In other words, the employer would typically pay 50% of an insurance bill that, today, is in excess of $6,000 a year per single employee or more than $16,000 for a family.  Today, there is the affordability rule.  At a maximum of 9.5% of salary, a minimum wage worker should only have to pay $1,254 for insurance on the basis of an annual salary of  $13,200; leaving the company to pick up the remaining cost of more than $4700 for a $6,000 insurance policy.  On the other hand, if an employee makes $40,000, the employer might only be on the hook for  a maximum of $2,200.

Some companies may rather pay the fine than pay for insurance. In the example above, a company faced with paying more than $2500 per employee may just find it cheaper to pay the fine and force a formerly insured employee to purchase their own insurance.

The Employer Mandate will reduce federal and state income tax revenues.  Providing health insurance is a taxable deduction.  So, every dollar a company pays to provide insurance, has their tax bill reduced by that same amount.

We will all pay billions in higher prices. The cost of providing employer-based insurance is certain to show up in the cost of much of what we buy.  There's a difference between an employee paying for their own insurance or having the company pay for it.  In other words, we will end up footing the bill through raised prices.


ObamaCare Employer Mandate:

Employers Adjust Health Benefits for 2015:

7 Trends in Employer Health Benefits:

2014 Employer Health Benefits Survey:

Obamacare and the Employer Mandate: Cutting Jobs and Wages:

The Obamacare Mandate Is Still Bad News For Employers:

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