By: Bill Murphy, Jr., INC
Medical care accounts for 18 percent of the U.S. gross domestic product — and it is taking up at least as much of the mindshare of plenty of American entrepreneurs and business owners.
At this very moment, the economic basis of the entire health-care system is up in the air, as a result of the imminent U.S. Supreme Court opinion in the health care reform law cases. Court observers expect the decision any day now, and most likely before the end of June.
"This is going to be one of the biggest decisions to come down in our lifetime," said Robert Litan, vice president for research and policy at the Kauffman Foundation. "The economic impact could be tremendous."
For American entrepreneurs and employees so far, the waiting has been the hardest part. That's because the decision is likely to have so many ramifications and third-order effects that it's nearly impossible for business owners to forecast all the possible outcomes.
"As the person responsible for setting up health care for our 70-employee company, what I want most is some certainty," said Josh King, vice president of business development and general counsel at Avvo.com, a company for which health care is the second-largest expense after salaries.
"While the [law] has its issues, at least it's a step toward more predictability in health care," King said. "If the court starts tearing it apart, I fear we'll have to spend more time thinking about health care and less trying to run and grow our business."
Here's how most observers expect the decision to play out — and what that means for this country's small and fast-growing companies.
Businesses With Fewer Than 50 Employees
First, an important caveat: Most of the employer provisions of the health care reform law apply only to businesses with 50 or more employees. So, if your business is smaller than that, you're mostly off the hook — and you won't be required to provide health insurance to your employees regardless of what the court decides.
But if your company is larger — or if you're already growing and expect to someday employ more than 50 people — there's a lot of unsettled business. Bigger firms that fail to offer their employees insurance could wind up paying government fees, which would kick in when employees obtain insurance independently. At the same time, the law would create exchanges and subsidies for individuals who buy insurance on the open market, and would also expand the Medicaid program.
Of course, there are many other provisions and exceptions. For example, even though companies with more than 50 employees would be required to provide insurance, they would also be allowed to skip paying the $2,000-per-employee government fee for the first 30 employees who didn't have health insurance. (If you're having trouble with that exception, rest assured that we had to think it through a dozen times before it made sense, too.) The truth is that once you get deep in the regulations —many of which haven't even been written yet —nobody really knows how things will settle out.
The Individual Mandate
Most of the legal attention has been focused on the so-called "individual mandate," which requires people to purchase health insurance, either through their employers or on the market. It was this provision that garnered the most pointed questions from the justices at oral argument in March.
"Can you create commerce in order to regulate it?" Associate Justice Anthony Kennedy asked at the time, apparently trying to figure out how the United States could justify requiring people to buy health insurance under the Commerce Clause of the U.S. Constitution. He later added that he believed the government faced "a heavy burden of justification," and was "changing the relationship of the individual to the government."
Under the mandate, individuals who fail to acquire insurance would be subject to government fees — although the exact nature of those fees, and whether they would amount to taxes, penalties or something else — is one of the more esoteric but important issues in the case before the court.
Despite the 2,400-page law's complexity, the possible outcomes really fall into three categories. The court could strike down the law, uphold the law, or strike down some provisions. If that happens, it's most likely that the court would get rid of the individual mandate will while upholding the rest of the law.
What Happens if the Court Kills Obamacare?
Most experts don't seem to think the court will strike down the health-care law in its entirety. But it could happen.