Obamacare looms large on every shop’s horizon

john_englishAt this point, it’s still difficult to tell how the Patient Protection and Affordable Care Act will affect woodshop employees and owners. One thing is for sure: a couple of years from now, the law is going to look a whole lot differently than it currently does. That was true for the rollout of Social Security in 1935. It took almost 40 years to get that program to the point where most American workers were covered. It was also true of Medicare and Medicaid, Supplemental Security Income, the Children’s Health Insurance Program and most other nationwide social programs. It takes a while to work out the kinks.

With a Republican majority in the House and opinion polls saying that 62 percent of the public are now dissatisfied with Obamacare, it’s pretty certain that there will be some major changes in 2014. How the elections this year will affect things is still up in the air. With a strengthening economy (since its high of 10 percent in October 2009 the jobless rate has declined steadily to its current 6.7 percent), very strong markets (the Dow Jones closed 2013 up 26.5 percent, its best performance in 19 years), and the administration’s ability to stay out of yet another Mideast war (Syria), it’s going to be very interesting to see if Obamacare will turn the tide against Democrat candidates. If it does, the rules for woodshops and individual woodworkers looking at entering the health care market could be a whole lot different next January than they were this year.

One of the biggest issues with Obamacare has been the website (www.healthcare.gov), which has been an abysmal failure. It’s up and running now, but something very strange seems to be occurring. Many health insurance policies that ran $400-$500 before Obamacare seem to have doubled or tripled in cost. So when the Average Joe signs up and gets his new government tax allowance, that deduction might just cover the increase in the price of his premiums. In that case, his healthcare is no more affordable, and is often less affordable, than it was before the Affordable Care Act.

Who is enrolling?

During December, a little more than two million people signed up for Obamacare. While the data have not yet been fully analyzed, there are strong indications that a majority of those new participants are from more affluent households. One indicator is that only half of them signed up for subsidies. As wealthier Americans usually have insurance, this would imply that the folks whom the law was designed to serve — the 30 million who can’t afford health insurance — are not signing up in the same numbers. That’s not all bad news: the ones who are signing up now are the ones who will bear most of the cost.

A majority of analysts predict there will be about five million people enrolled by the end of March. One of the biggest reasons that number probably won’t reach the administration’s estimate of seven million is that too many people are still confused about the basics: who has to sign up and when. The when part is easy. The answer is now (more on this in a minute). The “who” is anyone who doesn’t get health care insurance through Medicaid, Medicare or an employer.

stockSo far, only about half the states have authorized the law’s expansion of Medicaid, so that’s another confusing issue for folks trying to evaluate where they stand. If you don’t make a lot of money and you’re in one of the states that opposes expansion, getting proper coverage could be a bumpy ride. The map on that looks almost exactly like the red-and-blue election maps. States that voted Republican in the last election are generally opposed and those that voted Democrat have for the most part either already expanded the program or are in the process. (Tennessee, Ohio, Pennsylvania and New Hampshire were still debating as of the first of the year and could go either way.)

Indirectly, we’re all going to eventually feel some impact in our premiums and (hopefully) in lower costs. But what is truly amazing about Obamacare is how few of us are actually going to be directly affected by it. Four out of five Americans get health insurance through either employers or the government. The other 20 percent (about 60 million) includes the self-employed and those who can’t afford health care. With that in mind, here’s how the government explains the role of poverty guidelines for self-employed woodworkers:

“As a rule of thumb, if your family income is less than four times the published Federal Poverty Guideline for your household size and you are not eligible for employer- or other public-assisted health care (such as Medicaid or Medicare), you will be able to receive premium subsidies to help you purchase affordable insurance through your state’s health insurance marketplace. Although technically a tax credit, which you will receive when you file your 2014 tax return, a tax credit advance will be paid directly to the insurance provider you choose, reducing the monthly premium you have to pay. If, at the end of the year, your income turns out to be more or less than expected the tax credit will be adjusted and added to or taken from any tax refund or payment due.”

In layman’s terms, this means that a woodworker making less than the amount shown in the righthand column of the chart for his/her family size (the 400 percent column) will probably qualify for reduced premiums through the marketplace in the form of tax credits the government awards now to insurance companies, but which you will be responsible for at tax time.

A woodworker whose income is less than two-and-a-half times the number shown in the 100 percent column now qualifies for reduced deductibles, co-payments and lower maximum out of pocket costs.

For people who live in one of the 26-and-counting states that have agreed to expand Medicaid, if they have a household income up to the number in the 138 percent column, their family will probably qualify for Medicaid.

Got employees?

A lot of woodshops are one-man outfits that hire their bookkeeper in the same way they work with insurance agents or other suppliers. They don’t put anybody on payroll. But how does Obamacare affect a business that has even one part-time employee? Almost half of that 20 percent of Americans without health insurance (prior to Jan. 1 2014) are small business owners and their employees. They are in a tough spot because during the last 50 years the cost of insurance premiums has gone sky high — so high that providing this benefit to employees simply hasn’t been an option. It was the difference between surviving and going broke.

One of the olive branches offered by Obamacare to these businesses is the Small Business Health Options Program (SHOP). Through healthcare.gov, businesses with fewer than 50 full-time employees can currently shop for group health plans. In 2016, that will expand to cover businesses with up to 100 employees. Under SHOP, taxes and tax credits are based on the number of “full-time equivalent employees” and their average annual wages and not solely on the number of employees. And, according to obamacarefacts.com, “small businesses with fewer than 25 full-time equivalent employees with average annual wages below $50,000 can get tax credits (as adjusted for inflation beginning in 2014) to help pay for employee premiums.”

If a woodshop has more than 50 employees (and there are some conditions regarding payroll here), then that company will have to provide health coverage to its full-time employees starting in 2015. At least that’s the law today. It has already been changed from 2014.

Another part of the law that concerns woodshops with a few employees (any business making more than $250,000 profit) is that their contribution to Medicare has increased. That 0.9 percent increase is split between the company and any employees making more than $200,000 a year.

Initial reaction among some employers to the 2015 mandate has caused a few problems already. These have included employees being told their hours will be cut and some anticipated costs have already being passed on to consumers. Woodshop owners might be best advised to talk with their insurance partner and a tax professional before making any decisions about next year. 

This article originally appeared in the February 2014 issue.

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