For the past two weeks, I have written about the Affordable Care Act (ACA), or Obamacare, and how it affects large and small businesses. (Click here to view last week’s post.) I have also heard from several employees who are concerned about how this legislation will impact their lives. In truth, the law already has been in effect for over 3 years, but January 1, 2014 marks a new milestone in the way businesses and their employees are impacted. American workers are wondering if the cost of their health care premiums and coverage will go up as a result of this game-changing legislation.
Funding for all of the new expenses resulting from the ACA has to come from somewhere. Instead of increasing the deficit to fund the program, President Obama has introduced 21 new taxes; it’s estimated those taxes will negatively impact the incomes of only 2% of Americans, whereas 98% won’t see any change in their take-home pay. Click here for a full list of Affordable Care Act tax provisions.
However, on average, employers are expected to see a 6.5% rise in their rates from insurance companies, and that could create additional premiums for their employees. Obamacare forces insurance providers to offer coverage to all Americans, even those with pre-existing conditions, and those insurance companies may pass that increased expense onto employers. According to Mercer’s 2012 National Survey of Employer-Sponsored Health Plans, 58% of employers plan to pass a portion of their increases to their employees. It is at your employer’s discretion whether they will pass along that burden in some form or fashion; however, the Obama administration anticipates that benefits from the ACA will offset any reduction of income employees might see.
Will your coverage change?
The American Action Forum estimates that, under Obamacare, 35 million Americans will lose employer-sponsored health care coverage. Those employees will be forced into government-run exchanges, which the government is working to make affordable. The good news from just last week is that the exchanges may be even more affordable than previously thought. The Washington Post noted that the heavy competition among providers in California and Oregon is driving down costs to lower than what the Congressional Budget Office had anticipated. What plan you choose dictates what coverage you will have, which may or may not be different than what you were receiving previously.
Some Americans and their families will receive a tax break when purchasing their insurance plans through the exchange. The price for plans is capped at no less at 1.5% and no more than 12% of their income for health insurance premiums under the new law. The amount you will pay is determined using a sliding scale.
If your employer does not offer health insurance and you choose not to get an individual plan, you will be subject to a penalty of $95 or 1% of your income (whichever is greater) for noncompliance in 2014. Readers, you should expect this to rise in 2016 to $625 or 2.5% of income.
How should you prepare?
With all of the new laws, taxes, and regulations, it is important to plan ahead and prepare for the changes that are certain to take place. Your situation is likely to change in one way or another. You should start budgeting for an increase now, and be pleasantly surprised if it doesn’t come. If you have concerns over what will happen to your health care plan at your workplace, now is the time to have a conversation with your benefits administrator or human resources manager.
Readers, what are your employers doing to prepare for Obamacare in 2014? Have you developed a strategy of your own?
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