Obamacare Update
By Steve Barlotta, CPA
Earlier this month President Obama delayed until 2015 the mandate requiring businesses to provide their workers with health insurance. Under the original Affordable Care Act, companies with the equivalent of 50 or more full time workers would have to provide health care coverage for their employees starting January 1, 2014.
Delaying the starting date of this requirement will surely come as a relief to many small businesses who are not currently equipped to handle the implementation of these complex regulations. While White House officials viewed the delay as a prudent decision that is necessary to give employers more time to comply with the rules, many Republicans feel this decision is further evidence that the health care law is unworkable.
However, the individual mandate requiring many taxpayers to purchase coverage through the new insurance exchanges, if not covered by their employer, will kick in, as originally planned, on January 1, 2014. If these individuals do not carry health insurance by this date, they will be assessed a penalty of $95 per person (not to exceed 3 people per family) or 1% of their household income in 2014, whichever is higher. The penalty increases each year as well; 2% for 2015, and 2.5% for 2016. “Household income” is a new definition and it includes the modified adjusted gross income of the taxpayer and their dependents, if they are required to file a tax return.
Opponents of this new law have accused the White House of applying a double standard to this mandate. While admitting that businesses need additional time to comply with the law’s complexity, individuals are not afforded the same break. Administration officials have made it clear that other aspects of the original health care law will not be delayed. For those individuals that plan on purchasing health insurance from the new exchanges, they expect to be open for enrollment starting October 1, 2013.
I can’t help but to feel that small businesses and, more importantly, their employees will be negatively impacted by the Affordable Care Act and its mandates. A new survey by the U.S. Chamber of Commerce indicates this. According to the poll, “27 percent say they will cut hours to reduce full time employees, 24 percent will reduce hiring, and 23 percent plan to replace full time employees with part-time workers to avoid triggering the mandate.”
If small businesses trim their work force and or reduce the hours of their full time employees, more people will have to buy individual coverage through the new law’s insurance exchanges, which will offer tax credits to individuals to help cover costs. More people on the insurance exchanges would mean more federal spending on the tax subsidies, which would increase the health care law’s costs substantially.
We’ll keep you updated if any other changes develop.
Sources:
“What Obamacare Means For Your Taxes”, Marketwatch, Eva Rosenberg, July 16, 2013