Individual Health Mandate Goes Into Effect

April 2, 2014

pic-healthThe day following the March 31 deadline for individuals to purchase health insurance to avoid the penalty assessed under the Patient Protection and Affordable Care Act (PPACA), President Barack Obama announced that 7.1 million Americans had enrolled in the state and federal exchanges. Despite the Small Business Health Options Program (SHOP) exchanges being delayed by one year, many self-employed individuals without employees are considered part of the individual mandate and therefore had to enroll by the March 31 deadline.

While the high rate of enrollment was touted as a positive by the White House, it remains to be seen what the ultimate cost of these plans will be given that it largely will be determined by the make-up of the pool. PPACA has imposed a number of rating rule changes, including: tighter “age bands” which limits the allowable variation between the oldest and youngest individuals; prohibition against using health status when establishing a price for the insurance product; guaranteed issue which requires insurers to accept all applicants regardless of health status; and a minimum benefit package which may be greater than what some states previously required.

These changes, while aimed at providing a more uniform and fair market, could result in much higher costs if younger and healthier individuals opt to pay the penalty versus purchasing health insurance – which is a likely result if the end-product cost far outweighs the penalty.

According to NSBA’s recent Health Care Survey of Small Business, 91 percent of businesses reported increases in their health plan premiums at their most recent health insurance renewal, with one in four being hit with increases exceeding 20 percent. To address those costs, one-third of small businesses said they held off on hiring a new employee and more than half say they held off on salary increases for employees.