In less than a month the federal Affordable Care Act law over which there has been so much debate and speculation finally takes effect and it’s important that Vermont small businesses and their employees are ready.
On October 1, small employers will have to notify their workers whether they are going to offer insurance. It won’t be enough to give them a verbal notification. It has to be in writing. Employers offering insurance must describe the coverage they’re making available. If they’re not offering insurance they must explain to their workers the options available under the mandatory health care exchange.
The ACA requires that every state maintain a health care exchange. These are supposed to function like online marketplaces where individuals and some small businesses can qualify for subsidies to buy insurance. They were promoted as a way to create competition between multiple insurance companies that would bring prices down. In our exchange, the Vermont Health Connect, there will be little competition from two insurers – Blue Cross and Blue Shield and MVP Health Care.
Moreover, Vermont is the only state so far to require individuals and businesses with fewer than 50 employees to purchase their insurance through the exchange. The ACA explicitly bans mandatory participation and some members of Congress have raised objections to Vermont’s law. Nevertheless, there’s been no legal challenge and the administration has said that it won’t waive the mandate. Roughly 100,000 Vermonters will be forced into the exchange next month and many will have to trade their current insurance for whatever the government is offering.
Some individuals will qualify for a subsidy. Whether it will be enough to cover the higher premiums is an open question. Those who don’t qualify will have to make up the difference out of their pockets.
All of this may be confusing to people who cheered when President Obama promised multiple times and in many places that they can keep their current insurance. In the meantime, there are additional considerations for small business owners in Vermont:
• They’ll have to report the cost of employee health benefits (both employee and employer contributions) on IRS form W2 for tax year 2012. The IRS hasn’t caught up to this provision of the law yet, so until it can issue additional regulations, only employers filing more than 250 W-2s are required to start calculating health benefits immediately. For the rest it’s voluntary, at least for now.
• The threshold at which medical expenses as a percentage of income increases from 7.5 % to 10%.
• In January of next year, only 15 months from now, employers will have to decide whether they’re large or small as defined by the law. A small business is one with fewer than 50 full-time employees. But that’s not as simple as it sounds: The law defines full-time employment as 30 hours per week, not the traditional 40 hours per week. So some part-time workers are actually full-time workers under the law. Also, part-time employees must be added up to create Full Time Equivalents.
Businesses with only a handful of full-time workers may nevertheless be required to provide insurance for all of their employees; multiple small businesses under the same ownership can be lumped together to create one large business with more than 50 employees.
There are too many open questions and this has created massive confusion among employers and even the experts. Businesses have to make choices about cutting hours, eliminating jobs, and avoiding growth to avoid higher costs. Whether Vermont’s scheme will succeed remains to be seen.
The National Federation of Independent Business has been fighting the ACA for three years. Our members have warned from the beginning that it would disrupt the labor market, discourage hiring, reduce business competitiveness, and dampen the economy.
But the law is here so it’s up to small businesses to prepare as well as they can.