Health Care Reform – What You Need to Know
In 2014, the Affordable Health Care Act will take full force. As both a health care consumer and employer, you should know what changes will take place as a result of this new law.
Some of the changes brought on by the Health Care Reform Act are already in place. For example, as of 2011, students up to the age of 26 can continue on their parents medical plan.
The goal of this article isn’t to debate the merits (or the politics) of the plan – just how it will impact you as a small business owner.
Here are 6 of the major changes in 2014:
1. Guaranteed Issue Clause. This means that an insurance company cannot use pre-existing conditions as a reason to deny coverage or to raise rates. Since health insurance providers will be required to cover “sick” people, this will potentially raise rates for everyone.
2. Individual Mandate Clause. Everyone in the US must have health insurance or face a fine. Fines would start at 1% of your yearly income. You will no longer be able to “skip” purchasing health care because you are healthy. The “Individual Mandate” combined with the “Guaranteed Issue” clause above is designed to minimize rate increases by having healthy people’s premiums help offset the higher cost of sick people.
3. Health Insurance Exchanges. States will offer an easy way to compare and shop for medical insurance from multiple insurance companies, promoting competition and lower rates. In addition, your final premium costs will be based on your income. For example, a family of four that earns $80,000 per year will pay a different amount than a family who earns $25,000 per year.
4. Minimum Essential Coverage. To stop health insurance companies from offering bogus policies or ultra-high deductibles for low cost, the law defines the minimal coverage every health insurance plan must provide. For example, under the Affordable Health Care Act, the highest deducible medical plan you can purchase is $2,000 for a single person and $4,000 for a family plan. This means that if you have a $4,000 or more deductible today to save costs, you policy will not meet the minimum coverage requirements after 2014.
5. Minimum Loss Ratio. Each insurance carrier will have to pay out 80-85% of premiums each year as claims. If a health insurance company does not pay out at least 80%, they are required to give refunds to their customers.
6. Subsidies for small business owners. For small businesses with less than 10 employees, the Affordable Health Care Act provides a tax credit to help subsidize the cost of employer-paid health plan enrollment. Beyond 2014, the tax credit will extend to 50 percent if the businesses choose a plan under the government’s health care options.
Under the new health care law, employers will not be required to offer health insurance to employees. However, if you as an employer offer a health insurance plan to your employees, it must meet the “Minimum Essential Coverage” criteria above.
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