New Healthcare Debate Causes SMBs to Weigh Bottom-Line Costs against Long-Term Talent Investment
About 23 million people would lose health coverage in the next decade under the proposed Republican legislation aimed at repealing and replacing Obamacare, according to a report released this week by the nonpartisan Congressional Budget Office (CBO). For employers, the report underscores just how critical company-subsidized health insurance plans are for efforts to recruit and retain talent, especially among millennials and employees with families.
The bill, called the American Health Care Act (AHCA), is meant to fulfill a longtime and oft-touted goal of the Republican Party to eviscerate much of the Affordable Care Act (ACA), or Obamacare. President Donald Trump ran on a campaign promise to replace the ACA.
This news is far from reassuring to the nearly two-thirds of Americans who report being anxious about the future of healthcare. In fact, a slew of surveys and polls released in the last few weeks have shown that American families are more worried about paying their healthcare bills than they are about just about anything else, including terrorism, the economy and immigration.
These fears are even more pronounced among the millennial generation, many of who are facing a very near-future reality of caring for aging, disabled parents who, under the AHCA, may lose Medicaid coverage and be priced out of the private insurance market. Employers eager to recruit and retain millennial tech talent in order to stay ahead of the fast-changing and uber-competitive technology sector are facing a tricky situation. Funding employer-subsidized health insurance plans may be financially risky, but not doing so may cause top talent to choose employment at big firms and corporations just for the medical benefits.
When it comes to small businesses, the impacts of the proposed bill are significant. The AHCA proposes to eliminate the Obamacare mandate that employers with 50 or more full-time employees provide a healthcare plan, which opponents often cite as a deterrent to small business growth since employers who fail to comply with this mandate are hit with hefty penalties. In addition, the bill would repeal the infamous individual mandate imposing penalties on individuals who fail to maintain health coverage. However, it also proposes to eliminate the small business tax credit.
Any analysis that paints the healthcare market in easy-to-understand, simple terms should be taken with a grain of salt. The U.S. health insurance market is incredibly convoluted and complex, and the impact a business feels from any legislation is dependent upon a vast number of factors, including size, industry, geography, employee demographic, and so forth. And for business owners in the tech sector, the cost for not attracting top talent in hot fields like data analysis or cybersecurity could outweigh the cost of subsidizing healthcare plans.
The AHCA was passed by the U.S. House of Representatives earlier this month, where House Republicans received criticism for passing the bill before the CBO had a chance to review it. The bill would eliminate most tax subsidies for individual private health coverage, drastically scale back Medicaid coverage for the poor and disabled and replace the law’s income-based tax credits for buying medical coverage with credits based on age.
The bill also proposes to allow insurance companies to create so-called “high-risk pools” for people with pre-existing conditions. The AHCA allows states to apply for waivers for the Obamacare provision that mandates insurers cannot charge customers with pre-existing conditions higher premiums. The CBO report says this will result in about one-sixth of the U.S. population losing their coverage for pre-existing conditions.
… as a consequence, the waivers in those states would have another effect: Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all—despite the additional funding that would be available under H.R. 1628 to help reduce premiums. As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs. That instability would cause some people who would have been insured in the nongroup market under current law to be uninsured.
The coming months will surely see a continuation of the hot debate around healthcare legislation. The Senate is currently in the process of revising the House bill, but details are scant. For service providers and small firms in the tech sector, a lot rides on the future of the AHCA. Any way it goes, employers have some hard decisions to make.