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Supreme Court Health Care Decision Will Impact Small Business

health . / Credit: Health care reform image via Shutterstock

Politicians won't be the only ones awaiting the Supreme Court's ruling on the Patient Protection and Affordable Care Act this week. Small business owners will also be interested in the outcome because of the implications it may have on the way they run their businesses. 

The bill, signed into law by President Barack Obama in March 2010,  changed the health-care system for all Americans. In particular, it meant that small businesses with 50 or more employees were required to provide health benefits deemed "affordable" under the law, according to the Associated Press.

If businesses do not comply by 2014 they could face penalties. Under the law, businesses that do comply will receive tax credits.  Businesses will also be able to buy insurance from a variety of sources, including health insurance exchanges that will be created with the law. These exchanges provide a more affordable source of insurance to business owners. 

This spring, the Supreme Court heard a case brought by the several states that challenged the constitutionality of the law. The decision by the Supreme Court is expected this week. Regardless of the outcome, small businesses will be affected.  Here are some potential outcomes: 

What happens if the law is upheld in its entirety?

First and foremost, businesses with 50 or more full-time employees will be required to offer affordable insurance to employees.

"The first thing you need to do is find out if you qualify," Darshan Kulkarni, registered pharmacist and principal attorney at the Kulkarni Law Firm, said. "Then you want to look at how it affects you, if you need to provide insurance, or engage in exchanges. If you do qualify, you should also talk to your accountants and lawyers and determine whether or not to offer insurance. In certain cases that may end up with you paying penalties or fines or you may lose certain tax deductions. However, some businesses may find this to be a more acceptable solution. Businesses that decide to provide insurance or have its employees engage in exchanges may incur additional expenses because they may need to have some money that would be paid towards the health insurance."

Those penalties can be up to $2,000 for each employee. 

What happens if it is repealed in its entirety?

Small business owners may be looking at greater premium increases than they would otherwise, but they will have no legal obligation to provide health insurance," said William Maruca, health care partner with the law firm Fox Rothschild. "Striking down the entire Affordable Care Act would put small business owners back where they were two years ago. Most of this law affected health insurance carriers more than small employers." 

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"Small businesses would benefit if the whole act stays in place because they will be able to buy insurance through state exchanges and other more affordable sources of insurance, but those aren't around today in most states yet anyway," Maruca said. "Those are a year and a half away. If the whole law gets knocked out it is business as usual for small businesses. It may not be great but it is not catastrophic."

What happens if the individual mandate is thrown out?

One of the biggest sources of controversy in the law is the individual mandate, which requires all people to buy insurance or face a penalty.  Critics call this part of the law unconstitutional because it forces people to buy health insurance. On the other hand, supporters say by forcing younger candidates to buy insurance the cost for all people will be lowered.

"Look for insurance availability to dry up if the individual mandate is thrown out," Maruca said. "Insurers may not be willing to wait for political fixes to their revenue shortfalls and simply drop out of the market. Exchanges may still be developed, but their ability to offer coverage may be hampered by negative selection and the failure to capture premium dollars from healthy populations who chose to remain uninsured.  Companies may drop their coverage out of economic necessity and face whatever consequences may remain under a stripped-down Affordable Care Act." 

What should business do next?

"Start planning as to how to respond to the decision," Kulkarni said. "Keep a close eye on what is going on at the state level. This varies greatly from state to state. State legislatures and governors are as polarized as the country at large. If the law is repealed some states may say they will do it on their own, while others will go the other direction. This is not the end of health reform once the law comes out."

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