The White House has pushed off the employer mandate section of the Affordable Care Act until January 2015, a one-year delay. A quick refresher: this mandate calls for businesses with over 50 employees to provide affordable quality insurance that meets minimum standards or pay a fine of $2,000 per employee. A lot of what has been written about this development has been politically driven, and we will not go there with this blog.
The economic reality is that 96% of all U.S. businesses have less than 50 employees, so the employer mandate has no impact on health insurance implementation. The Affordable Care Act does provide for a tax credit (always better than a deduction) for firms with less than 25 employees who provide health insurance. The reality is that the employer mandate will not become a financial burden to most of us.
Consider the fact that out of all the U.S. businesses with 50 or more employees, a mere 0.2% do not already provide health insurance. We are not talking a significant economic impact on U.S. businesses. The delay in the employer mandate is not expected to change our forecast for 2014 or 2015.
The other key to the new healthcare law is the individual mandate, which does begin in January 2014. This requires most Americans to obtain insurance through their employer or through a federal, state, or hybrid exchange. Only 16 states have said they would set up their own exchanges, which puts a lot of pressure on the federal government to carry the load. Twenty-four states have refused to expand Medicaid, as required under the healthcare law. That means 24 states have chosen to not bear the financial burden of the new law.
The federal and state financial burden will be borne by all of us in the form of higher taxes. We have been telling audiences across the country to make sure your cash planning includes a provision for higher taxes in 2014 and extending into the future. The cost will be for establishing and maintaining funds or for subsidizing the insurance for the 30 million people the administration hopes to add to the insurance rolls. The total cost of all this is bound to be impressive!