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Experts resolve five misconceptions regarding health care reform under the Affordable Care Act.
Highlights
Some small businesses might qualify for a health care tax credit.
96% of businesses already offer coverage voluntarily, one source said.
When it comes to rising premiums, it’s all relative.
Paul Fronstin, EBRI
Joseph Smith, Chesapeake Hospitality
Robert Habeeb, First Hospitality Group
By Alicia Hoisington
Copy Editor / Reporter
ahoisington@hotelnewsnow.com
REPORT FROM THE U.S.—There is a lot of information circulating about the Affordable Care Act. Because of the uncertainty surrounding the law, misinterpretations have led to misconceptions.
Following are five myths of health care reform and commentary from sources:
Myth #1: The ACA will hurt all small businesses.
According to the ACA, only businesses with 50 or more employees are required to offer health coverage or face penalties in 2015. Therefore, some small businesses aren’t affected by the mandates.
However, some small business owners might want to offer coverage for their employees but think it’s not feasible to go it alone.
According to the Internal Revenue Service, some small business owners can qualify for a health care tax credit. To qualify for the credit, employers must:
Employ 25 full-time employees or fewer, including full-time equivalent employees;
Pay an average wage of less than $50,000 a year; and
pay at least half of employee health insurance premiums.
This year “the maximum credit is 35% of premiums paid for small business employers,” according to the IRS website.
In 2014, those credits will increase to 50% of premiums. To be eligible for the credit, a small business owner has to pay premiums on behalf of employees who are enrolled in a qualified health plan offered through a Small Business Health Options Program, or SHOP, Marketplace. The credit will be available for two consecutive tax years.
According to HealthCare.gov, the smaller the business is, the higher the tax credit will be. It cites the highest tax credit is awarded to companies that employ fewer than 10 people who are paid an average of $25,000 or less per year.
Myth #2: Employers have to provide all their employees with health insurance.
“Businesses don’t have to (provide coverage to) employees; they just have to offer coverage,” said Paul Fronstin, director of the health research and education program at Employee Benefit Research Institute.
Even so, Steve Wojcik, VP of public policy for the National Business Group on Health, said the average 30-hours-worked-per-week threshold set by the ACA tells employers which employees they will need to offer coverage. Although part-time employees count toward the total count of full-time employees, coverage only needs to be offered to actual full-time employees.
Myth #3: It’s better for the bottom line to just pay the penalties and not offer coverage.
Fronstin said about 96% of businesses already offer coverage voluntarily. “They’ve been doing this in absence of the mandate for many years.”
He said it’s obviously cheaper not to offer health coverage, but there are other variables at play.
“They’ve been spending the money because they think it has a positive impact on the bottom line,” he said. “Better recruitment of candidates, better retention, better health status of their workers and higher productivity.”
“There’s a lot that affects bottom line, including your employees’ health,” Wojcik added. “The healthier your employees are, the better it is for your bottom line.”
“We still want to provide benefits for our employees,” said Joseph Smith, executive VP of Chesapeake Hospitality. “It’s one of the reasons people choose to come work for Chesapeake to begin with. We want to still be the employer of choice by having a good plan.”
Myth #4: Health care premiums are rising for everyone thanks to the ACA.
“Yes and no,” Fronstin said.
“It’s all relative. For younger people, they’re going up relative to what they were paying in the individual market. For people in employment-based plans, they’re going up, but it’s debatable as to how much is attributable to the ACA versus how much would have happened anyway,” he said.
“The fact is premium increases have come down compared to where they’ve been in the past,” Fronstin added.
He said people can look at it two different ways: Premiums are still going up and that can be attributed to the ACA. Or, premiums aren’t going up as fast as they used to, and the ACA is slowing the rate growth.
According to the Small Business Administration, the ACA will reduce premium cost growth while increasing access to affordable care. Right now insurance companies face limits on administrative spending and must spend at least 80% of consumers’ premiums on medical care, and they are required to disclose rate increases of 10% or more so that states or the federal government can review.
The SBA cites the following reasons, beginning in 2014, for premium reductions:
Insurance companies can’t charge higher rates or deny coverage due to pre-existing conditions;
women cannot be charged higher insurance rates, and limits will be in place for additional premiums charged to the older population;
insurance companies will pool risks across small groups; and
there cannot be annual dollar limits on coverage.
Myth #5: It’s better for the bottom line if employers move all employees to part time.
Robert Habeeb, president and COO of First Hospitality Group, said his company considered moving employees from full time to part time.
“It only makes sense as you go forward, if you’re able to, to create more part time than full time because a part-time employee is exempt,” he said. “But honestly, is it a practical matter? Even though that’s a noble goal in an economic sense, it may not be realistically attainable.”
He pointed to the restaurant and retail industries, where some companies have considered the part-time model.
For example, Walmart announced in September plans to move 35,000 part-time workers to full-time status, after being attacked by labor groups for offering poor wages and benefits and reports of shelves that remained empty due to lack of full-time help.
“The truth of the matter is, in today’s labor market it’s going to be difficult to manage hours that tightly—to only have a smaller number of full-time employees,” Habeeb said.
He said at First Hospitality some of the part-time employees are such assets to the team that they would be offered full-time employment. “And it’s also the case that some of our best employees are full time, or at least they should be,” he said.
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