On the plus side, the law provides tax credits for qualifying employers, slows premium increases, requires insurers to spend 80 percent of premiums on care, and will require state-based exchanges to offer affordable coverage beginning in 2014. Critics oppose the penalties that will apply to some employers for failure to assure sufficient coverage of their employees and predict that the ACA will ultimately result in tax increases that will hurt business owners.
The National Federation of Independent Business and 26 states have joined the challenge to the ACA, alleging that Congress exceeded its power by imposing the individual mandate and denouncing the impact on state budgets they expect to result from the law’s expansion of Medicaid programs.
In the most closely-watched case since Bush v. Gore, the Court has three options besides simply upholding the law as it currently stands; it may strike just the individual mandate, strike the mandate and its associated insurance reforms, or invalidate all 2,700 pages of the ACA. Here’s what small business owners need to know about each possible verdict:
If the entire law is overturned: Small businesses will be back where they started in 2009. There will be no federally-required exchanges offering affordable coverage, although some states may continue to develop such exchanges. The restrictions on premiums and medical loss ratios have already helped small employers to hold down increases in coverage costs, but without those brakes, such costs may rapidly increase.
Small businesses would also lose the tax credits under the ACA. A few large carriers have announced they will voluntarily keep some of the more popular (but less costly) reforms, including dependent coverage until age 26, full coverage of preventive services and elimination of lifetime caps. However, without community rating and guaranteed issue, premiums will continue to soar.
And don’t forget that private insurance would continue to subsidize the cost of treating the uninsured that cannot be legally turned away from emergency rooms.
If only the mandate is thrown out: Look for private insurance availability to dry up. Without the “stick” of penalties for failure to purchase coverage, insurers will pressure Congress to offer “carrots” to encourage the healthy to jump into the pool, such as tax credits and mandatory open enrollment periods -- that is, if Congress can agree on anything in a polarized election year.
Insurers may not be willing to wait for political fixes to their revenue shortfalls and simply drop out of the market. Exchanges may still be developed but their ability to offer coverage may be hampered by negative selection and the failure to capture premium dollars from healthy populations who choose to remain uninsured. Employers may drop their coverage out of economic necessity and face whatever consequences may remain under the stripped-down ACA.
If both the mandate and the insurance reforms are struck down but other changes remain: There may be some remaining provisions that benefit consumers, purchasers and employers in the long run, but it is unlikely that they would have a meaningful impact on insurance costs.
Some promising ACA innovations, like the Medicare Shared Savings program for Accountable Care Organizations and the Bundled Payment initiative may be widely imitated by private insurers if they can demonstrate the ability to slow cost increases and maintain quality.
No matter how the Court rules this month, health reform will remain hotly contested and play a prominent role in both parties’ campaigns between now and Election Day, and beyond.
William H. Maruca is a partner in the health law practice group at Fox Rothschild LLP
Weigh in: Which verdict do you think would best support the interests of small businesses in the United States?