How ACA costs a Small Business Owner .pdf
Original filename: How ACA costs a Small Business Owner.pdf
Author: Rick Leacock
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The Healthcare cost impact of Affordable Care Act (ACA) to a California
small business owner
November 14, 2013
I am one of the millions of individual or small business owners that have had their health insurance plans cancelled and offered
an ACA compliant plan as an alternative. Since I had a small business plan (3 employees ages 27, 49 and 54 years old) and the
business requirement was delayed until 2014, I assumed that the impact to our company’s overall healthcare cost was going to
be relatively benign.
Our company covers all cost for employee healthcare. Currently, the 27 year old obtains single person insurance thru Anthem
Blue Cross PPO for a total cost to the company of $191 per month. The 49 year old obtains health insurance thru their spouse.
The 54 year old obtains family health insurance for themselves, a 54 year old spouse, a 24 year old dependent and a 21 year old
dependent thru Anthem Blue Cross PPO for a total cost to the company of $847 per month. Copies of the current PPO plan
expenses are attached. Our current plan has a $1500 deductible, covers items very similar to the Platinum ACA plans. This is
not a junk plan.
We received a cancellation notice for our plan towards the end of October 2013 but only now received the cost the new
comparable ACA approved plan on 11/12/2013 (mailed from Anthem Blue Cross on 11/8/2013). Copies of the letter are
attached. When I opened the letter, I was at first shocked and then irate. The new ACA approved plan for basically the same
coverage and a higher deductible cost $2593.28 for the 54 year old family of four. This is a 206% increase. I knew this couldn’t
be right so I decided to check out on the Covered California exchange. The 54 year old lives in the Santa Cruz County is in good
health and doesn’t smoke. The 27 year old lives in Los Angeles County and is in good health and doesn’t smoke. I used the
shop and compare section of the Covered California website and also used another shop and compare site
(www.thehealthsherpa.com) to compare rates. For comparison, I used the Anthem PPO Platinum plan since that was the
closest match to our plan for 2013. The Covered California rate for the Anthem Platinum PPO offering was $2638.22, which is
1.7% higher than what I was quoted for the corporate plan. The two quotes matched quite closely and all where greater than
three (3) times what I currently pay for! This is ludicrous and obscene especially from Legislation that has the word Affordable
in its title! How could the Affordable Care Act be so UNAFFORDABLE!
Since the cost of the plans for the same family and location only changed based on income level and subsidies, I decided to
compare effective rates (Actual cost less the subsidies provided by the government) of the plans to the consumer and then
calculate the effective healthcare tax as a function of income. The effective tax is calculated by taking the yearly increase in
healthcare rate (2014 rate-2013 rate) and dividing this by the taxpayer’s income. Whether it is called a tax or not, having a plan
forced cancelled due to legislation and the corresponding new plan showing an increase of 206% sure feels like a tax! I had
data from my current health insurance plan for a single 27 year old and a single 54 year old. I also had data for a family of four
with the two oldest adults being 54 years old. Actual quotes based on age were gathered from the Covered California website.
The chart below shows the effective tax rate versus income and age for a single person.
Since income subsidies are phased out for a single person around $50,000 of income, this is where the biggest effective tax hit
is felt. At this income, health insurance costs the most and the tax payer has the least amount of income to pay for the increase
in health care. The effective health care tax for a single person earning $50,000 a year ranges from 7% for a 27 year old to 17%
for a 54 year old. This healthcare tax hits the middle class extremely hard and I can see most users will either have to severely
reduce coverage or forgo healthcare coverage all together and pay a $500 (1% of income) penalty.
A similar analysis was done for a family of four with equally dismal results. The income subsidies for a family of four start to
phase completely out around $90,000. For family coverage, the biggest healthcare tax impact is felt between $90,000 and
$100,000. At these income levels, taxpayers are hit with an astronomical tax increase of up to 21% at age 54. This healthcare
tax hits the middle class extremely hard and I can see most families in this situation will either have to severely reduce coverage
or forgo healthcare coverage all together and pay a $1,000 (1% of income) penalty.
As a business owner, in order to keep the same coverage, doctors and plans which we are extremely happy with (The
President’s Promise), I will have to triple my healthcare expenditure from $12,456 per year to $35,557 per year. I don’t have
$23,000 to spare and will most likely cancel our business plan since the ACA has made healthcare so expensive. Please change
the law to allow us to perpetually keep our coverage and reduce this age related tax increase. If we just allow this grandfather
clause for 1 year it only delays this issue til 2014. I have seen what that will be and it is not pretty, astronomical health care
Existing Plan from Anthem 2013
New Plan from Anthem for 2014
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