Most residents of the United States have heard of the Patient Protection and Affordable Care Act (PPACA), popularly known as ‘Obamacare.’ This legislation mandates that all U.S. citizens be covered by health insurance, including the 46 million Americans who currently lack coverage. To the delight of some and the dismay of others, the Supreme Court upheld this act as constitutional on Thursday, June 28. With all the recent talk about the PPACA, it is important to know: What does this mean for nonprofits?
1. Health Insurance for Employees
The PPACA will mandate whether or not businesses must provide health insurance relative to their number of employees. Depending on the size of your organization, your nonprofit business will be required to provide:
|No. of Employees||Requirements for Health Insurance|
|<25||Business not required to provide health insurance.BUTIf business offers health insurance and employees earn less than $50,000 on average, a business gets tax credit to defray 25% of the cost of the insurance for nonprofits (35% for for-profits). In 2014, this will rise to 35% for nonprofits and 50% for for-profits.|
|<50||Business not required to provide health insurance to employees. All individuals who don’t receive insurance from their employer or Medicare/Medicaid must buy their own.|
|50-199||Provide employees with health insuranceORPay a $2,000 fine per employee uninsured by the business(Past federal law only required businesses with 200 or more employees to provide coverage)|
|200 +||Business federally required to provide health insurance to all employees.|
2. The Supreme Court’s Ruling and Your Tax-Exempt Status
The Supreme Court’s recent decision to uphold the health care law was lauded by foundations and charities that hope the law will help the nation’s vulnerable citizens. However, an article in the Chronicle of Philanthropy by columnist Leslie Lenkowski, a professor of public affairs and philanthropic studies at Indiana University, suggests that the Court’s reasoning for justifying the law should cause some nonprofits to be wary.
The Obama administration attempted to argue that the PPACA can rightfully require individuals to buy health insurance on the basis of the constitutional authority to regulate commerce. Chief Justice Roberts, however, ruled that the requirement to buy health insurance is justified under Congress’s right to impose taxes.
This ruling asserts the government’s rightful authority to regulate taxes, not just for health insurance, but for many areas – including for nonprofits. Most nonprofits rely heavily on their tax-exempt status or tax breaks to incentivize donors to contribute.
In the past, lawmakers have placed very few restrictions on charities and nonprofits and what causes they support. Recently, though, some lawmakers have argued that tax deductibility should be exclusively available for contributions that directly benefit the poor and minorities. Although these ideas have not yet gained much momentum, Lenkowski suggests that budget deficits might push more people to consider the idea. And the recent Court ruling will make it much harder for nonprofits to appeal any new limits lawmakers place on their tax exemptions or tax breaks.
What constitutes a “direct” benefit to the poor and minorities? Many organizations provide aid and assistance in diverse ways, which may not be seen as directly benefitting the poor, but undoubtedly benefit society. What might this mean for them?
There is no doubt that this law is controversial, not to mention complicated. (Even CNN and Fox News embarrassingly reported misinformation about the Court ruling.) Hopefully this quick glimpse has provided insight into one aspect of the law: what the PPACA means for nonprofits.
By Corinne Gentile