Health Care Blog

Donuts, Health Insurance, and Big Businesses

Today’s New York Times takes a look at the Affordable Care Act’s provisions regarding the shared responsibility of health care between taxpayers and employers.   The story claims part of the law will saddle employers with new hidden penalties.   That is not that case.   What it will do is help bring down health care costs and give more Americans the insurance they need and deserve.

Here are the facts:

The Affordable Care Act will strengthen our current system in which most people get their insurance at work. Under the new law, employers with more than 50 fulltime workers will not be required to offer health insurance to their workers.  However, the employer will have to pay a shared responsibility fee if their employee purchases coverage through a new exchange with the help of a premium tax credit targeted toward middle to low income families.  In other words, employers can’t be “free riders” and let the taxpayers pay for the cost of covering their workers.

If the insurance provided by an employer would cost workers more than 9.5 percent of their household income, that insurance is considered unaffordable and workers have a new option: purchase affordable coverage on the new health insurance exchanges, and receive a tax credit to make it easier to get the coverage they need.

Under this scenario, employers would no longer be paying to provide benefits to their employee. Instead, they would contribute up to $3,000 to help support the cost of the tax credit provided by the government.

If the employer provides no insurance at all, and any employee obtains premium tax credits through the new exchanges, the employer would pay a maximum of $2,000 per full time employee.  

Whether a large business provides affordable coverage to their employees or their employees purchase coverage in the exchange, employers will make one – and only one – contribution to the cost of their employees’ health care.  It’s an important provision and it ensures large employers aren’t off the hook if taxpayers are subsidizing health insurance coverage for their employees.

A good way to understand this part of the law is to think about…donuts. When the Commonwealth of Massachusetts passed its version of health insurance reform, many businesses began offering insurance to their workers. Unfortunately, employees at a chain donut shop found that they couldn’t afford the insurance they were offered. But under the Massachusetts law, they could not purchase affordable coverage in the state’s version of the exchange because their employer offered coverage. 

This catch-22 left some without the affordable, quality care they need. So when it came time to pass the Affordable Care Act, we took steps to ensure that this problem would not be repeated in donut shops and other businesses nationwide by making sure workers can get care they can afford and by making sure that employers aren’t relying on taxpayers to subsidize coverage for their employees.
 
The bottom line is that this provision is a common-sense way to ensure more Americans have high-quality care and it’s just one of the many ways the Affordable Care Act will strengthen the health care system for all of us.

Stephanie Cutter is Assistant to the President for Special Projects

New Tax Credit Will Support Groundbreaking Research, Create Jobs, and Bring Down Costs

As a former Governor, I know that economic growth often starts with small businesses that have big ideas.  As Secretary of Health and Human Services, I’ve seen how a breakthrough in a lab can lead to a life-saving medication in medicine chests across America.

Today, my colleagues Treasury Secretary Timothy Geithner and National Institutes of Health Director Francis Collins made an announcement that brings these forces together.  As part of the Affordable Care Act, we’re creating a new tax credit for biotechnology research that will create jobs, save lives, and bring down health care costs.

The tax credit will be available to the small biotech firms around the country whose research has been judged by our NIH experts to hold great promise to lead to new therapies and medical innovation.  Our goal is to make targeted investments so that encouraging leads that otherwise might have been set aside can now be vigorously pursued by some of our best scientists.

Over the last few decades, breakthroughs in biotechnology have improved the health of millions of Americans – dramatically reducing the mortality rates for many diseases and health conditions.  At the same time, the biotech industry has become a key driver of our high-tech economy, supporting 1.3 million high-quality jobs. 

Put simply, today’s announcement equals more cures and more jobs.

To learn more about how this announcement achieves some of the Affordable Care Act’s key goals like supporting American businesses, promoting health care innovation, and helping Americans live healthier lives, you can read a fact sheet here and the full IRS Notice on the tax credit here.

Kathleen Sebelius is Secretary of Health and Human Services