The Affordable Health Care Act... Is it Really Affordable?

The Affordable Care Act (ACA), which was signed into law on March 23, 2010, despite many businesses’ hopes that the controversial law would be repealed or revised, will go into effect on January 1, 2014.

“2014 is what everybody has been scared about as that is the full implementation date,” said benefits group manager for AHM Financial Group Tom Goedde, during his presentation to trucking fleet administrators at the 2013 CCJ Spring Symposium in Birmingham, Ala.

Basically, individuals have to have coverage or pay a penalty, while big businesses – those with 50 or more workers – have to offer healthcare coverage to its employees, according to Commercial Carrier Journal. Small business employers don’t have to offer coverage but if they choose to do so face costs that are higher than current healthcare plans because of market reform and higher taxes.

According to employer-related research on new healthcare policy, around 90% are keeping their plan coverage to retain current workers. Of those employers choosing to discontinue plan coverage, the biggest reason cited, at 86.4%, was that the cost was too high.

 “Unfortunately, I think we’re going to find that the Affordable Care Act, as it is called, is not that,” says Goedde. “It is going to add a lot more to business costs.”

Using numbers published by health carrier UnitedHealthcare, Goedde found that individuals, small businesses and big corporations will all face considerable premium increases. Big companies should expect a 20-25% increase, small companies a 25-50% increase, while individuals should see an enormous increase of 116% over pre-reform rates.

Depending on the size of your trucking company and the state in which it’s located, you may be able to buy a less expensive small group policy through a standardized insurance exchange. If your company has fewer than 25 employees but you choose to offer insurance anyway, the ACA will provide a tax credit to balance the price. Smaller trucking companies also have more incentive to self-insure, in which the businesses take on the financial risk of offering health benefits to its workers. Rather than paying premiums to insurers, they pay claims filed by workers and health care suppliers. Larger corporations with hundreds of employees or more often self-insure as well because they have the cash on hand to pay the majority of the claims filed right away.

Trucking companies, along with other large businesses will have to offer coverage with essential health benefits to all workers or pay a fine of $2,000 per person after the first 30 employees. “If you have 100 employees and choose not to offer healthcare, you pay a fine of 70 x $2,000, or $140,000,” said Goedde. “The problem is, if you do pay that fine, you’ll probably have to give out raises or gross up some incomes” so employees can buy their own coverage.

The Affordable Care Act’s employer mandate will not take effect until 2015, but employers are already realizing how deep the quagmire of compliance will be. Lawmakers are still writing many of the rules governing application of the ACA’s many provisions; meanwhile, rules that are already in place underscore the law’s unequal impact on different types of businesses.

For trucking companies, the rules regarding the ACA can have a variety of implications. Companies employing fewer than 25 full-time employees with an average salary lower than $50,000 are not only exempt from the employer mandate but are also eligible for tax credits as high as 50 percent of insurance costs, though the incentive may be contingent on purchasing coverage through the federal SHOP Marketplace for employers.

A small trucking firm for example, may only employ ten operators – well below the 25-employee threshold. They will still not qualify for tax incentives, however, if average earnings rise above the $50,000 per year.

Multi-truck operations, of course, will likely be subject to the employer mandate requiring employers with 50 or more full-time employees to provide minimum essential coverage or pay a penalty. The IRS definition of full-time is 30 hours per week, expanding the mandate to include many workers that companies consider to be part-time. This further complicates the matter for employers, who are also responsible for plan costs above 9.5 percent of an employee’s income.

A “part-time” employee working 33 hours per week makes less than an employee working 40+ hours per week but costs the same to cover, meaning employers will have to absorb more cost to cover part-time employees than to cover full-time employees.

Insurance companies are adding their own difficulties to the process. The ACA requires them to cover patients with pre-existing conditions, patients who most companies previously denied to avoid the higher cost of care. Now, providers are passing along their added cost to all policyholders in the form of higher premiums across the board.

Choosing not to provide coverage, of course, exposes mandated companies to an annual penalty up to $2,000 times the number of full-time employees minus 30, e.g. $50,000 for a company with 55 full-time employees. The penalty is set to increase in relation to annual premium hikes. In addition, those companies would fail to qualify for an additional tax deduction for offering coverage. Despite this, though, many trucking companies will find the penalty an easier financial pill to swallow than offering a health plan that meets the ACA’s minimum requirements