Sinas discusses Obamacare’s affect on business owners

Dan Sinas, vice president of PRemployer Personnel Resources in Dothan, spoke to the Enterprise Lions Club, Nov. 14, about the implications the Affordable Healthcare Act (AHA) could have on business owners when it goes into effect in 2014.

By itself the law is 2,700 pages and Sinas told the Lions Club that he would only be able to scratch the service of what the new policy could mean for the business community.

“Here we are post election, and if anything has been answered, it’s that healthcare reform is here to stay,” Sinas said.

Sinas did agree healthcare in America is in need of serious reform.

“The premiums of insurance and the costs of healthcare are rising at exponential rates,” he said. “Our private and public systems such as Medicare and Medicaid are going bankrupt.”

Sinas said a good portion of the AHA is unclear, which has business owners nervous more than a year before the law takes effect.

“For business owners, the first step is figuring out whether you are a large business or not,” he said.

Sinas said in the AHA, 50 or more full time or full time equivalent employees categorize a business as a large business.

The law also defines any employee working more than 30 hours each week as fulltime.

“For the large businesses with 50 employees or more, there is a provision called Play or Pay,” Sinas said. “It says those business either have to offer healthcare coverage to their employees, which would have to meet certain qualifications of affordability and have certain specific provisions. If they don’t offer healthcare, then they will pay a penalty of $2,000 per employee minus the first 30 employees.”

For a company with 50 employees, this would equate to $40,000 in penalties alone, penalties which are not tax deductible.  

Sinas estimated the average healthcare coverage cost for a single employee to be around $4,500 a year. 

“Employers of 50 or more are looking at hundreds of thousands of dollars they’re going to have to spend in order to provide healthcare coverage,” he said.

Sinas said this would likely keep businesses from hiring or encourage them to terminate positions in order to avoid qualifying for the “Play or Pay” provision.

Sinas also focused on the creation of insurance exchanges, which is an additional requirement of the law.

“Exchanges are basically market places for insurers where individuals and small companies can go to shop for various kinds of health insurance,” Sinas said. “I actually don’t think this is a bad idea because it opens up competition in the insurance market.”

Sinas said if an employer offers health insurance and it doesn’t meet affordability standards, meaning if the premium the employee is required to pay exceeds 9.5 percent of that employee’s annual income, then the employee can go through an exchange and purchase health insurance and potentially qualify for premium subsidies.

“These premium subsides can be used to help purchase health insurance,” he said. “But those subsidies are provided by exchange through the government, which as we all know means more taxpayer dollars.”

Sinas said even if a business does provide insurance it can still face penalties if the premiums are deemed unaffordable.

“If the insurance doesn’t meet affordability standards, the employer is penalized an additional $3,000 for each employee that qualifies for health care subsidies,” Sinas said.

Sinas said ultimately, the Affordable Healthcare Act would drive up unemployment rates, which would subsequently raise suitor rates, affecting all businesses.

“When suitor rates start to climb it impacts all businesses, regardless if they have unemployment claims experience or not,” Sinas said. “This means the cost will spread across the entire business community in terms of the increased suitor rates.”

Sinas said when these individuals enter the unemployment system they are going to drain money from the unemployment fund, which would likely be operating with significantly less payroll dollars.

Sinas said the stress on the unemployment system would drive up the suitor rates even further, which he described as a vicious cycle.

Partial unemployment benefits could also become more prevalent as employers cut hours to keep their employees under 30 hours per week, which would put even more strain on the unemployment system at both the state and national level. 

“Healthcare reform theory is, ‘If we get everyone into the system and spread those premium dollars, then we lower the premiums by increasing the pool against those who are going to be insured,” he said. “If you dig deeper, you’ll see that these provisions do just the opposite.”

Sinas said the AHA mandates that preventive care, such as pap smears and mammograms, be covered by health insurance without the clients paying any co-pay or deductible.

“That all sounds really good, but who’s going to pay for that?,” Sinas asked. “I don’t think the insurance companies are going to eat that cost. It will be passed down, further driving up premiums.”

Sinas said the elimination of the preexisting condition exclusion would also drive up the costs of insurance.

“The government has basically told insurance companies they can’t control their risk and have to accept everyone regardless of health status,” Sinas said. “Again, that all sounds good, but as much as you may hate or love insurance companies, the fact is their business models are based upon risk management.”

Perhaps the most controversial portion of the AHA is the individual mandate, which will require that every resident of the United States purchase health insurance or pay a penalty.

“In 2014 the fee is $95 and it goes up to $695 by 2017,” Sinas said. “If you’re young and healthy, you’re likely going to opt out thinking that you don’t need the coverage.”

Sinas said this creates what is called adverse selection.

“Adverse selection means only those that need the care opt into the plan and those that are healthy don’t,” he said. “When all the healthy people opt out, there’s less premium dollars to cover the risk of those who actually need to use the claims dollars, which drives up premium costs dramatically.”

Sinas said even if someone opts out they can buy into the insurance system at anytime and with any illness due to the elimination of the preexisting condition exclusion.

Sinas said there are still many aspects of the law that have not been publicized.

“If we had been smart we would have said ‘this a complex issue and we’re not going to solve it in 2,700 pages,’” he said. “Maybe we could have started with trying to control fraud and abuse and then moved on to the next stage of reforming the system.”

Despite projections from the federal government that the AHA will reduce the U.S. budget deficient and the national debt, Sinas says President Barack Obama’s approach to healthcare reform could end up causing more than a trillion dollars in additional debt.

“The business community is very nervous about the implications of the new law,” he said. “I don’t mean to be Chicken Little and say the sky is falling, but to a certain extent, the sky is falling.”

The entire law can be viewed by visiting healthcare.gov and clicking on “The Healthcare Law and You” tab at the top of the website.