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Jim Lentini: The effects of health care reform

Posted: May 3, 2010 3:53 p.m.
Updated: May 4, 2010 4:55 a.m.
Second of two parts

The national health care reform bill recently signed into law by President Barack Obama will affect small businesses in a number of ways.

Tax credits

* Offers tax credits to small businesses to make employee coverage more affordable.

* Credits of up to 35 percent of the employer's contribution will be available to small businesses with 25 full-time employee equivalents or less for tax years 2010-2013, as long as the employer contributes at least 50 percent of a benchmark premium, and the employees' average annual wages are less than $50,000.

Beginning in 2014, these tax credits will increase to cover 50 percent of premiums for up to two years.

* Small businesses with 10 or fewer employees who have annual wages of less than $25,000 will be eligible for full credit.

Small business exchanges

* States will establish state-based health insurance exchanges for small businesses and individuals one year after the bill becomes law.

* By no later than 2014, states will have to set up small business health options programs, or "SHOP Exchanges," where small businesses (with up to 100 employees) will be able to purchase qualified coverage.

* The exchanges will be administered by a governmental agency or nonprofit organization within their state.

* States have the option to allow businesses with more than 100 employees to purchase coverage from the shop exchanges as well.

Insurance mandates

* Effective in 2014, a federal health insurance mandate will go into effect for individuals and small businesses.

* Businesses with more than 50 employees will be required to either offer health care coverage or pay a penalty of $2,000 per year, per each full-time employee (above 30 employees) if one or more employees receive a premium assistance tax credit.

* Businesses with more than 50 employees that do offer coverage, but have at least one full-time employee receive a premium assistance tax credit, will pay the lesser of $3,000 for each employee receiving the tax credit, or $2,000 for each full-time employee.

* The coverage offered will have to meet minimum benefits - covering both a specific set of services and at least 60 percent of the actuarial equivalent of the plan costs.

New regulations

Legislation includes several new regulations on insurance companies:

* Six months from the passage of the bill, there will be a ban on lifetime limits on coverage, and on the practice of "recession" (cancelling policies that have already been issued), except in cases of fraud.

* Effective in 2014, insurers will no longer be able to set rates or exclude coverage based on pre-existing conditions, and can vary premiums only by geographic location, family tier, age and tobacco use.

Types of plans

The law provides for four types of new health care plans to be offered via the small business and individual exchanges:

* Bronze plan: Covers 60 percent of the benefit costs of the plan, with an out-of-pocket limit equal to the health savings account (HSA) current law limit of $5,950 for individuals, and $11,900 for families.

* Silver plan: Covers 70 percent of the benefit costs of the plan with the HSA out-of-pocket limits.

* Gold plan: covers 80 percent of the benefit costs of the plan with the HSA out-of-pocket limits.

* Platinum plan: Covers 90 percent of the benefit costs of the plan with the HSA out-of-pocket limits.

In closing, let me say I have a hard time understanding all the ifs, ands and buts of this health plan. At the workshop put on by the Foundation for Health Coverage Education, the outline of the amount of departments to implement and regulate this issue is staggering, not to say what it will cost to businesses and taxpayers.

Keep in mind, it was also pointed out by the research of FHCE that of the number of Californians who are uninsured, 80 percent of them qualify for publicly sponsored programs already in force, such as Medi-Cal, AIM and Healthy Kids Plans. Be sure to express your opinion to your elected officials at all levels. Have a good day.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments Inc. His column reflects his own views and not necessarily those of The Signal.


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