The “Patient Protection and Affordable Care Act,” also known as “PPACA,” or simply “ACA” or “Obamacare,” is a fatally-flawed creation. Two Supreme Court program “saves” merely extended the life of the program; the program’s voluntary structure is now sinking it.
Large corporations and smaller businesses whose members are in good health will choose to remain outside of ACA, self-insuring, while groups and individuals with significant health conditions will be attracted to ACA, where their medical conditions are not penalized. This condition will persist as long as ACA participation is voluntary, resulting in a classic “death spiral”—marked by an accelerating exodus of relatively healthy participants as rates ratchet ever higher for those who remain. Most healthy companies will remain outside of ACA, and self-insure their coverage.
Resolution seemed headed toward a “single payer” system similar to Canadian and British health care systems, had Hillary Clinton and the Democratic Party prevailed in the 2016 election. Instead, the Trump presidency has forced a Republican-led Congress to deal with death spiral consequences. Their feeble attempts so far to modify the ACA will likely result in a bastardized program which will become a political liability downstream. The Republican-controlled House—which controls the purse-strings—could have terminated ACA at any time since its inception by simply withholding further funding.
Informed Libertarians including Dr. Ron Paul have come out strongly in favor of getting the federal government out of the healthcare business, and allowing the free market to take over. In any event it appears at this point that a replacement program, whenever it occurs, will at least remove mandates on companies and individuals.
Extreme turbulence in the marketplace last year was averted once again, as grandfathered and other transitional programs were extended to January 1, 2018.
Penalties under Obamacare can apply to both business and individuals. The penalty for non-participation by an individual increased in 2016 to $695 per adult, plus $347.50 per child, to a maximum of $2,085 per family or 2.5% of family income. However, a tax expert writing for Forbes noted that Obamacare offers little to no repercussion for anyone who avoids coverage. No jail time, no liens on property, no levies on wages or accounts. The IRS might seize a tax refund, but that can easily be avoided by under-withholding!
Businesses face non-participation penalties only if employing over 50 (100 in some states, including Texas.) One common business reaction has been to reduce hours below the 30 hour/week threshold above which ACA applies—embarrassing and frustrating labor unions who supported the program’s passage in 2010.
As long as the employer mandate is in place, employers seeking to comply at the lowest level are installing Preventive Services Only Minimum Essential Coverage (PMEC) plans. PMEC plans can also be offered with full coverage plans for supervisory or managerial employees.
Our recommended action for small business owners is:
- If you have a healthy group of 5 employees or more, look into partial self-funding.
- If less than 5, consider concierge-care for yourself.
- For serious healthcare issues at an elevated age, look outside the U.S.
There is one significant caveat to self-funding: if the business is likely to be heavily affected by deteriorating economic conditions, loss of medical insurance participation (through layoffs) could make it difficult for a company to live with a self-funding contract.
Other ACA components include:
- Although ostensibly established to facilitate health insurance coverage for the 18% of Americans who were uninsured, we believe ACA was established as a control mechanism. Why else would the government destroy a system that was satisfactory to the majority?
- The Supreme Court ignored the facts and ruled that the federal government was within its rights to establish ACA, classifying it as a tax. Then in 2015 SCOTUS re-interpreted actual program language and sanctioned subsidies to members from states which had declined to set up separate exchanges.
- Insurance coverage availability outside the Exchanges is due to a Congressional mandate.
- Individuals earning less than 250% of the federal poverty level receive a subsidy.
- Four new fees to support the program began in 2014.
Key ACA plan features include:
- Guaranteed issue (individuals cannot be declined for coverage) and community rating (most everyone gets the same rates) are the principal cost drivers.
- Rate viability depends on enrolling enough healthy young participants to offset higher medical expenses for older members.
- Its Independent Payment Advisory Board is an unelected non-medical administrative panel which has the power to decide who gets treated and at what age. For example, citizens age 67 or older are not eligible for cancer treatments.
- Mandates added after passage include preventive services, removal of deductible dollar limits and coverage under parents policies until age 26.
- Collection of the health insurance providers fee was pushed to 2017, and implementation of the tax on “Cadillac” plans has been delayed to 2018.
ACA implementation has featured
- Doctors in large numbers shuttering practices and retiring, or joining hospital staffs, or establishing “concierge-care” clinics that do not accept insurance coverage.
- Closure by a majority of the 23 non-profit plans created in 2011, due to “unexpectedly high” medical claims.
- Restriction by hospitals of the companies and networks they will accept.
- Abandonment of a number of geographical areas by insurance companies.
- Falling participation—down 15% in 2016 from 2015 enrollment. Participation at the end of 2016 totaled only 13 million, from earlier government estimates of 21 million.
- Young citizens are opting for mandated penalties, rather than signing up for coverage.
- Congress—not surprisingly—exempted itself and its staff from mandated coverage. The IRS, which is the primary ACA enforcer, also asked to be exempted.
- Covert reimbursement for insurance company program losses.
Small Business Administration: http://www.sba.gov/healthcare
U.S. Department of Labor: http://www.dol.gov/ebsa/healthreform
U.S. government website: https://www.healthcare.gov
The Institute for Health Care Consumerism: http://www.theihcc.com
National Association of Health Underwriters (NAHU) to assist you in finding a local agent: http://www.nahu.org/consumer/findagent2.cfm
We’ve been in the health insurance business for 25 years and are on top of ACA developments. If we can help you establish and execute a strategy, please email us or give us a call.