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(Updated to correct the spelling of Sheldon J. Blumling’s name.)
Long before the Supreme Court ruling that upheld the Patient Protection and Affordable Health Care Act, the political battle lines appeared pretty clear. With lobbies like the National Federation of Independent Business (NFIB) acting as plaintiffs in the case, it was easy to assume the business community was solidly aligned in the “against” category on Obamacare, too.
But business reaction has been more mixed, even at the small business level. After all, the legislation addresses much more than the question of whether individuals should be forced to have health insurance. The June 28 decision also upheld a 2.3 percent tax on the revenue of medical device companies. And it offers intellectual property protection that was considered critical by many in the biotechnology sector. So while some see the specter of higher costs, others salivate at the prospect of a wider insured pool that spurs demand for everything from broader hospital services to more mobile health apps.
Some small businesses even love the so-called individual mandate—the one the NFIB warned in a statement after the ruling will lead to “an onslaught of taxes and mandates, resulting in job loss and closed businesses.” The reason: It frees them from the shackles of having to compete in a world that revolves around employer-based coverage. (Does innovation really thrive in an environment where job applicants aspire to be coffee baristas mainly so they can get health-care coverage?)
Now that the high court has spoken, businesses of all sizes are grappling with how to adjust. Even opponents of the legislation can’t cross their fingers and hope that a President Romney will repeal the whole thing. With 18 months before the provisions go into effect, and much less time before companies must design new plans and offer them to their employees, they have to now treat the law as a business reality.
The changes are large. In January 2014, employers will have to either pony up a plan that meets the requirements of Washington or opt out and pay a penalty in terms of both costs and employee morale. In large corporations, there’s probably not that much to be done. Most may already offer a broad menu of benefits through their existing health plans. They’ve already been pushing more costs onto their employees and cajoling higher-risk ones into wellness programs to keep those costs down. If anything, the fierce debate around health care has offered large companies cover to make these shifts by drawing attention to soaring health costs and the burden employers bear.
What such companies now need to assess is how many of those employees may be covered under their plans, thanks to automatic enrollment provisions for businesses with more than 200 employees. In everything from e-mail marketing to pension plans, adopting an “opt in” or “opt out” strategy can make a critical difference. Inertia is a powerful force, especially for busy employees who don’t always take action. Defaulting to automatic coverage means a higher percentage of those workers could end up on their companies’ plans.
Another potential hurdle is the non-discrimination requirements of the act. Employers can no longer slice and dice their offerings to design gold-plated plans with lucrative benefits for the most-valued employees at the top of the wage pyramid, while tossing some scraps of basic coverage to the proletariat. As a result, warns Sheldon J. Blumling, an attorney in the employment benefits practice of Fisher & Phillips, “they’ll either have to bring up the lower-subsidized segments to the highest common denominator or bring everyone down to the lowest common denominator.” With talent scarce in some categories and plentiful in others, that’s not an easy decision.
Still, the really tough choices lie with smaller employers. Those with health programs may have designed them in such a way to offer basic, lower-cost coverage. Faced with the prospect of higher costs to comply with the law, they may choose to stop offering coverage altogether if they decide the penalties are cheaper than the administrative costs of running a broader plan. Even that assessment isn’t an easy one, says Blumling. You could just send everyone—including yourself—out into the open market to buy coverage on a health insurance exchange. “Nobody really knows yet what kind of coverage you’ll get there for your money.”
Workers could end up paying more than if premiums are negotiated as part of group coverage. Or they could end up paying less as insurers compete for business. Employees could be happy to get a bigger paycheck or resentful at being forced to foot the bill for their own coverage. Many more people may even feel comfortable working on a contract or freelance basis because they no longer feel the lingering insecurity of being uncovered in the event of an illness or accident.
So, even with the act essentially upheld, plenty of uncertainty remains. Critics fret that consumers may spend less on other goods and services in reaction to new costs, but others argue they’ll spend more as their out-of-pocket medical costs fall. Job growth may be curbed by new costs, or helped as a higher proportion of the population flows into a modernized and more efficient health-care system. What is clear: Obamacare is a reality that every business leader has to confront now.