Affordable Care Act
On March 23, 2010, Congress enacted and the President signed into law the Patient Protection and Affordable Care Act, also known as Obamacare, which was intended to make available inexpensive health care services to all Americans in order to improve the overall health of the population. As is noted by Kominski, “The Patient Protection and Affordable Care Act of 2010 is the most significant piece of U.S. health legislation since the enactment of Medicare and Medicaid in 1965” (Kominski, 2013, p. 3). However, even with the benefits associated with the Affordable Care Act this universal health insurance law has been one of serious contention over the past several years, particularly due to the requirement that mandates most Americans to maintain minimum essential health insurance coverage.
Under the Affordable Care Act, if an individual does not maintain minimum essential coverage, then they will be required to “pay a shared responsibility fee for each month [they] are without minimum essential coverage each year. This is true even if [the individual has] coverage that doesn’t count as minimum essential coverage, like short term health insurance” (Minimum Essential Coverage). However, there are exceptions to the rule. An individual may be exempt from having to maintain minimum essential coverage if any of the following apply: religious objections, member of American Indian tribe, income below the level required to file income taxes, in jail, cost of obtaining insurance is more than eight percent of the individual’s income, or if the individual is undocumented. For those that are not exempt and do not maintain the minimum essential coverage, such penalty will be collected by the Internal Revenue Service by means of an individual’s yearly tax filings. The tax penalty for not maintaining the minimum essential coverage along with a separate Affordable Care Act requirement related to Medicaid expansion were challenged by several states along with the National Federation of Independent Business and upheld by the Supreme Court of the United States on June 28, 2012. Therefore, beginning with the 2014 tax year, United States citizens were required to report their health insurance status on their annual federal income taxes.
Why did the government feel the need to require a universal health insurance system? The Affordable Care Act “was targeted at (1) those who were too poor to buy insurance but who didn’t qualify for Medicaid because they lacked categorical eligibility or because they lived in a state with low income eligibility thresholds and (2) those who did not receive health insurance through their place of employment, largely because they worked for small employers who were less likely to offer health insurance benefits” (Kominski, 2014, p. 20). However, no matter the best intentions of the Affordable Care Act, individuals as well as businesses that employ a large portion of the United States’ labor market are being heavily impacted by the new requirements.
Impact on Small Businesses
The Affordable Care Act mandates that businesses that employ fifty or more full-time employees offer health insurance to their full-time workers or be assessed a penalty. However, businesses that employee less than fifty full-time employees are not required to offer health insurance to their workers. If a small business does not offer health insurance, then the individual worker is responsible for obtaining insurance coverage or they will be assessed the penalty. Further, the Affordable Care Act “provides generous tax credits to smaller businesses with 25 or less full-time equivalent employees” (ObamaCare Small Business Facts). This all sounds like a benefit to small businesses, but the reality is that small businesses have felt a significant impact following the enacting of the Affordable Care Act. A large majority of small businesses that employ less than fifty full-time employees were already offering health insurance coverage to their employees. The problem arises when such businesses that already offered health insurance to their employees enter the renewal coverage period and are faced with increased renewal rates. According to Magister, “In one case, a professional services firm with 42 full-time employees received an 87% increase in their premiums for next year” (Magister, 2014). The increased premiums are due to the Affordable Care Act’s rating process for new policies for small business employees, which only factors in geographic area, age, and tobacco use. This change in the rating system was intended to make it so that insurance companies could not hold an individual’s health against them when establishing the policies. Yet, with the new methods for insurance companies to rate policy members “one must question how this new reality may impact future employment and hiring practices” particularly when older employees add a higher cost to the small businesses’ insurance rates (Magister, 2014).
Another downside of the tax mandates on small businesses is that individuals with a desire to enter into entrepreneurship are less likely to leave their current jobs due to the regulations of the Affordable Care Act. The cost of either paying the penalty during their federal income tax filings or obtaining insurance coverage through the exchange winds up being too costly to outweigh the benefits of starting their own business. Further, there are specific reporting requirements for the Affordable Care Act, so it would require the new business owner to either outsource the reporting functions to costly accounting firms or hire an in-house specialist to ensure compliance with the regulations.
Impact on Low Income Workers
The negative impact has not only affected small businesses, but the low income workers that are employed by large businesses, as well. Because of the mandate to provide health insurance to their workforce, some large businesses have started to cut back on employees’ hours and drop them below full-time status. As is noted by Conover, “Not only have many workers seen their weekly hours get cut below 30 [hours] so that they are no longer eligible for employer health benefits, but new hiring has been severely altered as well” (Conover, 2013). These actions by large businesses have a devastating impact on the labor market. The low income workers that are searching for full-time jobs are unable to obtain employment in a full-time position since the large businesses are concerned with keeping their “full-time” numbers down and only hiring part-time workers in order to circumvent the mandate to provide costly health insurance to their workers. The low income workers are then still required to obtain health insurance through the exchange unless they fall into one of the exemption categories. This adds additional costs to the individual’s already low income.
Conclusion
It is undoubtedly important for individuals to have health insurance; however, it is not a universal right. Just as individuals have the right to work, individuals should also be afforded the right to choose whether or not they want to contribute part of their income toward a health insurance policy. Individuals and companies should not be penalized by the government for such choices. Many citizens believe this to be true, which is why there have been many attempts to repeal and potentially replace the Affordable Care Act. Up to this point, President Obama has been able to veto such bills aimed at abolishing the Affordable Care Act, but with the possibility of a Republican President in 2017, there is a strong likelihood that such a repeal may be successful during the next President’s term. If there is a repeal of the Affordable Care Act, then the taxes levied against individuals and businesses that do not meet the current requirements of the Affordable Care Act will be lifted, which will have a positive impact on the economy and labor market in the United States. Ultimately, if repealed, the biggest challenge facing the government would be to agree upon a fair and effective replacement plan.