The Patient Protection and Affordable Care Act (PPACA) is perhaps better known as Obamacare. It’s a major healthcare reform that was effective on March 23, 2010, and has brought about much change for both individuals and businesses. While there are several reasons why this reform was put into place, the main goal was to increase the percentage of Americans with health insurance and to provide more affordable coverage. Insurance companies must also offer coverage to individuals with pre-existing medical conditions.
What is the Patient Protection and Affordable Care Act?
The PPACA was established to create a set of standards for health insurance policies. Regardless of a person’s age, pre-existing condition and income-level, they must have access to minimum coverage and can’t be denied. Failure to have the required coverage can result in a financial penalty. According to Larson Allen, “in 2014, the penalty is $95 or 1 percent of the individual’s income, whichever is greater. By 2016, it increases to $695 or 2.5 percent of income.”
This act resulted in the launching of health insurance exchanges, which involve an online marketplace where small business owners and employees can shop for healthcare plans. The first exchange began on October 1, 2013 and closed on March 31, 2014. This type of system utilizes web-based technology for a streamlined approach that wasn’t possible in the past.
What You Can Expect in 2014
The PPACA mandates that all health insurance companies offering coverage in your state have to accept every employer and individual that applies. They also have to renew coverage for you and your employees. This is beneficial for anyone with a pre-existing condition or elderly workers that would have previously had difficulty finding affordable health insurance.
In terms of waiting periods where a certain amount of time must pass before coverage begins, health insurance companies can’t require a period of more than 90 days. At the same time, you can retain a waiting period of up to 90 days for new employees that are hired without incurring penalties. Health insurance companies are also not allowed to have annual limits on essential health benefits.
A major advantage for employers that provide health coverage to their employees is that there is a significant tax credit increase. In fact, the tax credit will be raised from 35 percent to 50 percent for qualified employers in 2014. This can be a big help on your business come tax season and alleviate much of the financial burden. However, the tax credit is only available to employers who purchase a group health plan through the SHOP (small business health options program).
Regardless of your opinion of the PPACA, it’s important to understand the basics of how it works and how it will impact your company. This reform has been a catalyst for major changes in healthcare and will continue to move in phases into 2020. Knowing your options should ensure that employees have adequate coverage and prevent you from being penalized.
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