The Patient Protection and Affordable Care Act – Practical Implications for Business Owners

The Patient Protection and Affordable Care Act was passed by Congress and signed into law on March 23, 2010.  The act was then amended by the Health Care and Education Reconciliation Act of 2010.  A recent article in the Oklahoma Bar Journal discusses the requirements and consequences for employers.

First, the new law requires employers to provide a “free choice” voucher to their employees.  This allows an employee who opts out of its employer’s insurance program to use a mandated state sponsored insurance program.  This program provides a voucher from the employer for the value the employer would have paid in premiums.  If the voucher is greater than the cost of the state program, the leftover amount is refunded to the employee.

There are new enhanced benefits, including: coverage for children until the age 26, preventative care, elimination of lifetime limits and pre-existing conditions.  An employer with 25 or fewer employees and an average annual compensation of $50,000 or less, are allowed tax credit for up to 35% of the premiums.  In addition, certain small businesses can participate in salary-deferrals or cafeteria plans.  To receive the incentive, the employer is required to make a minimum contribution, and the plan must meet the minimum eligibility requirements.

The new law also imposes some consequences.  Employers will have more responsibilities with tax reporting and for withholding additional Medicare tax for those employees earning an excess of $200,000 per year.

Due to the so-called “Cadillac plan” excise tax imposed on insurance companies, the cost of coverage for quality insurance will raise a significant amount.  It may be beneficial for employers to consider separate policies for dental/vision, hospital or disease indemnity, disability and long-term care coverage.  In addition, because of increased Medicare tax, employers should consider S-Corporation status to avoid or reduce additional Medicare tax.  Ultimately, businesses should be prepared to greatly enhance their reporting and administrative requirement, as well as be prepared to pay additional taxes and higher premiums.

If you would like our assistance in understanding the new health care laws and its impact on Oklahoma businesses, please contact our Tulsa based Oklahoma business attorneys for more information.