The Affordable Care Act (ACA), aka Obamacare was passed in reaction to the growing number of uninsured in America. One component to address the access problem are health insurance exchanges created in Title I of the ACA.
A health insurance exchange is supposed to operate like an online shopping mall where individuals and small businesses will be able to purchase coverage.
Exchanges were supposed to be offered locally because each state regulates their respective insurance market differently, however, many states have determined to opt for the federal model because of the large costs associated with setting up them up.
Health insurance exchanges are the largest non-defense related technology cost in American history and they are the clearinghouse for five agencies of government.
What we are awaiting, and we will probably not know for a few years, is how small businesses will react to the exchanges. Experts predict some may end up dropping their plans because it will be less expensive for them to pay the penalty than offer coverage to their employees. Healthcare costs is one the fastest growing costs challenging businesses of all sizes and unless there is some effort at cost containment they may not have any other choice than to stop offering health insurance all together.
From a dollars and cents standpoint it makes sense but consider this.
Businesses may realize they do not want the federal government to have access to this information may explore other options like private exchanges or self-insuring.
What casual observers often over-look is the fact these exchanges are very complex and the mechanism for determining and enforcing all of the fines, penalties and taxes in the healthcare reform law.
What many also do not realize are the perverse incentives in the healthcare reform legislation. The health reform bill created a middle-class entitlement program because subsidies are based on income.
Once a person crosses a certain income threshold, however, they actually do not get a subsidy to help offset the cost of purchasing a health insurance plan.
The question will then become how will this translate to the middle-class worker who earns a raise or takes a job for more money but loses current coverage and is forced by the individual mandate into the exchange.
This person may actually see a reduction in take-home pay according to the chart above.
This is why employers need to have a discussion and begin planning for the ACA sooner rather than later.
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