A few minutes ago, the Supreme Court ruled 6-3 in favor of ObamaCare in King v Burwell. The ruling confirms Health Insurance Marketplaces in all states can provide premium tax credits to individual policyholders.
This decision is a huge win for small business owners and employees across the country. Since the passage of ObamaCare, small businesses have been saving up to 60 percent by giving money to employees to buy their own personal plans directly from insurance companies.
With the individual health insurance approach, instead of providing one group plan, a small business allows each employee to purchase his or her own personal plan independent of the company and provides a monthly allowance to cover the cost. Most small business owners and employees qualify for an additional allowance from the IRS to help cover the out-of-pocket health insurance costs. These additional allowances, called premium tax credits, were at the center of the above-mentioned Supreme Court case.
This decision cements the personal health insurance savings opportunity for small business owners and employees. With this decision behind us, let’s take look at what to expect in 2015 and beyond.
1. Congress will pass piecemeal fixes to improve ObamaCare
For the first time since the law was passed, both Congress and President Obama will now focus on passing piecemeal improvements to the Affordable Care Act (ACA) that make the law better for consumers and employers alike. We expect a flurry of new bills to be introduced in the coming months. Here are some easy fixes we expect Congress to target in 2015:
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Expand health reimbursement arrangements (HRAs). Congressmen and women on both sides of the political aisle agree small business owners should be able to offer health reimbursements arrangements to reimburse employees for health insurance premiums and medical expenses.
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Simplify employer IRS reporting requirements. There is unnecessary complexity in the structure of the ACA’s IRS reporting requirements. Congressmen and women on both sides of the political aisle agree that reducing the administrative burden on businesses will increase the number of firms offering employee benefits and reduce costs for everyone.
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Expand health savings accounts (HSAs). Congress can increase the value and utility of HSAs for retirees by allowing early retirees to use HSA funds to pay for health insurance coverage and by allowing Medicare-eligible retirees to pay for Medigap coverage with HSA funds.
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Modify the large employer shared responsibility requirement (“mandate”). We expect Congress to agree to change the definition of a full-time employee to 40 hours per week (vs 30), while at the same time adjusting the definition of large employers to only include employers with 100 or more employees. This would simplify the administrative requirements for both employers and the IRS.
2. Small businesses will transition toward individual health insurance
Today’s ruling solidifies that the individual market is the future of health insurance and will continue to be amended and improved. Small business owners, who are most affected by increasing premiums, now have the certainty needed to help transition themselves and employees to the individual market which we expect to increase to more than 100 million by 2025. We expect small businesses to continue to offer health benefits to employees in the form of monthly allowances (or “stipends”).
3. State exchanges will transition to HealthCare.gov
With access to premium tax credits upheld for all 50 states, we will see the states with state-run marketplaces transition to HealthCare.gov in the coming years. HealthCare.gov has the resources to operate and troubleshoot an online market that many smaller states could not properly fund or operate.
As of this writing, most of these states are considering legislation which would fold the state-run exchange into the federal marketplace at HealthCare.gov. Both Hawaii and Nevada have already decided to switch to HealthCare.gov. We expect other states to follow.
4. Healthcare reform will dominate 2016 elections
Although there is still room for Republicans to attempt a complete repeal of ObamaCare, these efforts would almost certainly be vetoed by President Obama. We expect Republicans to make the Affordable Care Act a central topic of debate heading into the 2016 elections.
Conclusion
Today’s decision has sent a clear signal around the country. The Affordable Care Act, and more specifically, individual health insurance, is on its way to being a core part of America’s health insurance system. How do you feel about this ruling?
