The Torch, Spring/Summer 2010

Spring–Summer 2010 | TORCH 9 new law spends $2.6 trillion in just the first 10 years. Republicans opposed the new spending citing the unprecedented $1.4 trillion federal budget deficits; the $12 trillion national debt, which is already threatening the nation’s credit rating; and the inability of the government to afford its existing health care programs, Medicare and Medicaid. Republicans were also concerned about the requirement that cash- strapped states spend additional money on their Medicaid programs, which will cost the state of Texas, for example, an additional $27 billion. The offsets in the new law, nearly $500 billion in cuts to the Medicare program and more than $500 billion in tax increases, were also contentious. The Medicare Trustees estimate Washington has promised $38 trillion in benefits that it does not have the resources to pay for; and rather than creating a new entitlement, Republicans wanted savings from Medicare to be used to extend Medicare’s solvency. Many were also concerned about raising taxes, especially during tough economic times. Finally, many opposed the new law because of its mandate on employers to provide health care. While well-intended, this will ultimately hurt the very employees it is designed to help. There is near universal agreement among economists, including President Obama’s budget director, Peter Orszag, that forcing employers to provide health benefits will result in lower wages and job loss. How will reform affect those who already have health insurance? The new law includes regulations on employer- provided health benefits and those offered in the individual market. While these regulations generally protect individuals with pre-existing conditions and require a richer benefit package, they also drive up the costs of health benefits. The Congressional Budget Office has stated that the $60 billion new health insurance tax, the $20 billion new medical device tax, and the new prescription drug tax will all be passed on to consumers in the form of higher prices. Beginning in 2018, there will also be a new health benefits tax of 40 percent on “Cadillac” health plans costing more than $10,200 for individuals and $27,500 for families. This will directly affect those who already have coverage and substantially increase taxes on those making less than $250,000 a year. How will reform affect those who don’t have health insurance? The bill expands subsidies for those making up to 400 percent of the federal poverty level (FPL), which is about $88,000 a year for a family of four. Depending on income, Americans will either be eligible for Medicaid (up to 133 percent of FPL) or be eligible for new tax credits with which to purchase private insurance (133 to 400 percent of FPL). Half of the newly insured (16 of 32 million) will be covered by Medicaid, which is plagued with restricted access to care. Finally, the bill contains nearly $10 billion to expand community health centers as additional service access points. Individuals without access to employer- sponsored health benefits will be able to purchase coverage through new state-based insurance exchanges modeled after Expedia or Travelocity used in the travel industry. There will be four available benefit arrangements — platinum, gold, silver, and bronze — all of which must offer a standard benefit package. How will reform affect small businesses? Many small businesses have expressed concerns about the new law’s higher costs, increased paperwork burden, and regulatory uncertainty. Small businesses with fewer than 25 employees and with average annual wages of less than $50,000 will be eligible for small- business tax credits. While the credit will cover 35 to 50 percent of the costs of expenses, the Congressional Budget Office indicates that only 12 percent of small businesses will benefit from the new credit. Small businesses with more than 50 employees will be subject to the employer mandate and penalized $2,000 per employee for non-compliance. Small-business employees will be subject to the individual mandate and