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Obamacare Gives Businesses a Break but Leaves You on the Hook

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With a growing number of Obamacare's provisions taking effect, both supporters and opponents of the health care law are bracing for the impacts that Obamacare will have on the health care industry and the way millions of Americans get health-insurance coverage. But yesterday's decision from the Obama administration to put off implementation of potential fines on large employers that choose not to provide health insurance for their employees puts a new wrinkle in the controversial provisions, especially since the move appears to favor large businesses at the expense of ordinary individuals who'll still face penalties of their own come Jan. 1.

Understanding the penalty provisions
Until yesterday, the various Obamacare penalty provisions for those who attempted to bypass the law's insurance-coverage requirements had an attractive symmetry to them. For individuals, penalties of $95 per adult and $47.50 per child, up to a family maximum of $285 or 1% of income above the tax-filing threshold, apply to individuals who don't have eligible insurance and who don't qualify for one of the exemptions to the provisions. Low-income families would likely be exempt, and others would have to compare the costs of an Obamacare-compliant policy against their income to find out whether the availability of what the law calls affordable coverage would result in a penalty.

Meanwhile, the employer fines would apply to employers with 50 or more employees working at least 30 hours a week, with companies paying annual penalties of $2,000 per uninsured worker. The law exempts companies from paying fines on the first 30 uninsured employees, but other provisions impose potentially higher fines if employers provide coverage that's too expensive and therefore triggers federal tax-credit subsidies to help employees cover their costs.

Furthering the symmetry, both of these provisions were slated to take effect at the beginning of 2014. Now, though, that has changed, and an uproar is likely to result as those with differing political views come to their own conclusions about the reasoning behind the move.

What happened yesterday?
In yesterday's announcement, the administration set back the date for employer fines to take effect until the beginning of 2015. Cynics have noted that the new date is comfortably after the midterm elections, although the administration argued that it was merely responding to calls from employers who argued that making changes to benefits to take the 30-hour-a-week threshold into account was more complicated than it would seem to ordinary workers.

The delay isn't the first for Obamacare. Back in April, the administration had to delay the planned national insurance marketplace known as the Small Business Health Options Program until 2015, benefiting insurance carriers Aetna (NYSE: AET  ) , UnitedHealth (NYSE: UNH  ) , and WellPoint (NYSE: WLP  ) by giving them more time to figure out how to comply with the small-business provisions of the health care law. The move also has ramifications for employer fines, as the program was narrowed to allow employers to choose only a single plan rather than a broader set of plan choices. As Fool contributor Keith Speights observed at the time, that might lead some midsize employers to drop their coverage rather than getting shunted into a single and potentially inadequate plan.

Will Congress object?
Interestingly, as the Washington Post's Ezra Klein noted last night, the administration's decision not to enforce Obamacare's penalty provisions doesn't change the fact that they remain on the books as law. The situation puts Congress in the strange position of having the president challenge its law-making ability on a law that the president supported and that a substantial portion of Congress would prefer to see repealed.

The biggest fallout, though, might well come from individuals who supported the law but who counted on equal treatment of businesses and employees. Without a similar one-year break from individual penalties, you'll find plenty of penalty-payers next year arguing about the unfairness of giving employers a break from fines.

The real test for Obamacare
In any event, the biggest challenge that Obamacare faces is getting its Health Insurance Marketplace up and running by Oct. 1. Although private exchanges from Marsh & McLennan (NYSE: MMC  ) subsidiary Mercer as well as Towers Watson (NYSE: TW  ) have done a good job of getting Aetna, UnitedHealth, and other popular insurers to participate in their programs, the reception that public exchanges have gotten has been far less favorable. Without a smooth launch in less than three months, Obamacare could find itself facing much greater criticism than it is today.

Still uncertain about how Obamacare might affect your personal finances and your portfolio? The Motley Fool's special report, "Everything You Need to Know About Obamacare," takes a 360-degree look at how the law may impact your taxes, health insurance, and investments. Click here to grab your free copy today.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance. You can follow him on Twitter @DanCaplinger.


Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 03, 2013, at 10:32 AM, Paladin63 wrote:

    We have to pass this bill before we know what's in it.

    Now infamous words from Nancy Pelosi.

    Well now we know what is in it and it cannot be enacted as promised.

    We are moving towards a complete one payer socialist system exactly where liberals want us to be.

    Look at other countries.. we model ourselves after Europe, but they are abandoning their systems in droves.

    Obama and his administration has had THREE YEARS to establish the rules for implementation.

    Now they are suspending enactment for another year.

    Why... pure politics as it always has been.

    By suspending enactment... they basically take the issue off the table for the 2014 mid-term elections.

  • Report this Comment On July 03, 2013, at 10:38 AM, ANGIEOT wrote:

    In light of the recent Death of Pierce Bronson's daughter who died from Ovarian Cancer, the same cancer that killed her mother, I am growing increasingly worrisome over the management of health in regards to the insurance companies, which could lead to death. I recently experienced abdominal pain and other symptoms that could have very well been related to colon cancer, possible ovarian issues as well a plethora of other causes. Therefore, my doctor ordered basic imaging to rule out certain things to correctly proceed with other work up. A rather cost efficient plan which is now being questioned my insurance company. This imaging, ultrasounds, made it clear whether there were structural concerns - potential tumors, cysts that were not there, yet at my current age of 43, could have very well been there and may have been potential ovarian tumors, colon and abdominal tumors. It is not as if my doctor ordered the more costly imaging such as CT scans and MRI. There are too many causes of death that can be easily detected early and treated to minimize illness and potential death. Yet, insurance companies already have been causing doctors to do the least and will often make a patient wait until approval, months down the road for tests to be allowed and the trend with my recent experience shows this will only worsen. Until what? It will become the cost of the family to bury someone from something that can be prevented rather than the costs to insurance companies, who are paid premiums by the patient, for their care. I am all for healthcare for everyone and it should not just be celebrities and the wealthy that can avoid limitations to their care because they can pay out of pocket to receive life saving care. We should all have what we need to make the most out of our lives. But obviously, for those of us who do take preventable measures and are proactive about our health, our longevity is now dependent on the all mighty dollar. What is a Life worth these days???

  • Report this Comment On July 04, 2013, at 10:01 AM, skypilot2005 wrote:

    ANGIEOT has been a "Fool" all of ONE DAY.

    Hmmm....

    Couldn't be a Democrat "operative" could they?

    This is getting real "old".

    Sky

  • Report this Comment On July 06, 2013, at 11:55 AM, ronboltp wrote:

    I don't think Obama delayed the employer mandate until after the mid term elections to give business a break. He knows that if it goes into effect now, unemployment and the economy would be a disaster by next year and possibly stopping the democrats from re-taking the House and holding the Senate. He needs total control of congress to fully implement his agenda and I sure would hate to see that happen.

  • Report this Comment On July 07, 2013, at 10:55 AM, skypilot2005 wrote:

    Related article by Dan:

    http://www.fool.com/retirement/general/2013/07/07/obamacare-...

    Obamacare Explained: What It Means for Those Who Already Have Health-Insurance Coverage

    By Dan Caplinger

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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