By Nicholas E. Vlattas, AIA, with Deborah Marquardt
Janet Bloomberg was a sole proprietor for five years before incorporating as KUBE in Washington, D.C., with partner Richard Ortega-Loosle, and hiring three employees. Why? She wanted to be in a financial position to offer health care and 401K benefits.
The new Patient Protection and Affordable Care Act, signed into law by President Barack Obama on March 23, might have shortened her timeline. Bloomberg, who once lived in Canada under a socialized system before starting KUBE in 2005, supports the law. She doesn’t understand how anyone could argue with its provisions, which call for a ban on lifetime limits of coverage and forbid exclusion for pre-existing conditions.
Yet, questions remain. Few of us have a clear idea of the new legislation’s impact on our businesses.
Technically, no employer is required to provide health insurance to employees. No employer is required to contribute toward premiums if insurance coverage is offered.
In 2009, the American Institute of Architects published an “Issue Brief” stating it believed its members, together with all American workers, deserved affordable health care coverage. It noted the cost of job-based health insurance had increased by 59 percent since 2000 and reported, “Many architects are reluctant to start their own firms because of the prohibitive costs of health insurance as a small or solo practitioner.” The AIA urged Congress “to pass legislation to make health care more affordable.”
Congress has obliged, but will it ease the health-care burden for architecture firms? Will it encourage architects to start firms?
“Before much of the bill takes effect in 2014, significant work will have to be done by the government on turning the law into rules and regulations,” says Tom Bergan, the AIA’s manager of Federal Legislative Reforms. The legislation must also survive legal challenges, such as the recent suit filed by Virginia’s Attorney General Ken Cuccinelli that questions the bill’s constitutionality.
Who will benefit from the bill in question? Small firms like Bloomberg’s fare better, it seems, than medium- and large-size firms.
Beginning immediately and lasting through 2013, small businesses with fewer than 25 employees are eligible for a tax credit to offset 35 percent of health insurance costs if they contribute half of their employees’ premiums. By 2014, once new health insurance exchanges are established, the tax credits increase to 50 percent for two years. This should please Bloomberg, as KUBE contributes an annual amount equating to more than half of employees’ premium costs.
However, sole proprietors or freelance architects have no employees and, therefore, cannot take advantage of the credit unless they make so little money as to fall in the category of “making less than four times the federal poverty level.” In that case, they could apply for an insurance subsidy. The new law also doesn’t extend COBRA (bridge) coverage beyond the current 18 months, which is significant for architects who were laid off in the current recession.
If your firm is larger than 50 full-time employees (at 30 or more hours per week), you are neither eligible for tax credits to offset employee health insurance, nor are you immune from penalties for providing no insurance at all. This leaves employees to find their own coverage or apply for a federal subsidy if your program is not affordable.
The Treasury Department has not decided how the penalty rule will apply to salaried workers or company owners. Firms with shareholders: stay tuned.
There’s actually some good news for architects in the bill’s proposed Small Business Health Options Programs or Exchanges, which must be operable in each state by 2014. These “SHOPS” will allow small and medium-size businesses (100 employees or less) and solo practitioners to pool together, spread risks, and thus, reduce premium costs.
Why hasn’t the AIA organized an insurance pool that might have helped its membership with more affordable rates?
“It hasn’t been possible to create pools across state lines,” Bergan says. But this could change as details of the new law are hammered out by legislators and regulators. A March 31 blog post in The New York Times entitled “You’re the Boss,” implied that states might be able to band together to create regional exchanges. But, that’s only speculation now.
Anne Durkin, a principal with BAM Architects in Richmond, has scheduled an informational session with the agent who helps her firm evaluate policy options. BAM provides insurance for its six employees. “But, if individual policies are affordable, since we’re not required because of our size, we might reconsider,” she said.
Our own firm, Hanbury Evans Wright Vlattas + Company, which has seen annual premium increases ranging from four to 20 percent in the last five years, provides 100 percent of employee health care premiums—although, admittedly, 10 years ago we did not make such a contribution. Happily, our current size of 75 qualifies us to purchase insurance through the SHOPS.
For the immediate future, however, the insurance marketplace won’t be changing much. Experts predict it will be business as usual, including rate increases.
Nicholas E. Vlattas, AIA, is the Chief Operations Officer for Hanbury Evans Wright Vlattas + Company.
Deborah Marquardt does public relations for Hanbury Evans. Her writing has appeared in national magazines.