Changes

{{McNair ProjectsBlogPost|Project TitleHas title= The Affordable Care Act and Small Business (Blog post),|Topic Area=Entrepreneurship, Social Factors in Entrepreneurship, Health Care,|OwnerHas author=Meghana Gaur,|Start Term=Fall 2016,|End Term=n/a,|Status=Active|Stage=DRAFTED,|DeliverableHas content status=Blog Post,Tabled|AudienceHas Graphics status=General Public,None|Primary BillingHas processing notes=AccMcNair01,Tabled pending further information about possible ACA replacement.

The Patient Protection and Affordable Care Act was passed ==Which Small Businesses Are Affected by Congress and signed into law the ACA?==Whether a small business will be affected by President Obama ACA mandates depends on March 23, 2010its size. Together, While the Health Care and Education Reconciliation Act Small Business Administration's (SBA) Office of 2010 and the Affordable Care Act Advocacy defines a small business as any independent business that employs fewer than 500 employees (ACA) transformed the existing healthcare system in the United States for a more detailed description of SBA’s small business classifications by instituting changes that affected “insurance coverage, affordability industry and accessibility of insurancesector, the financing on medical care, and the operation of the Medicare program.” see [https://www.cbosba.gov/topicscontracting/healthgetting-carestarted-contractor/affordablemake-sure-you-caremeet-actsba-size-standards/summary-size-standards-industry-sector SBA guidelines]), the ACA mandates affects only small businesses with more than 50 full-time employees.

==Which Small Businesses Are Affected by Under the ACA?==Whether a “small business” will be directly penalized by ACA mandates depends strictly on its size. While the Small Business Administration's ACA’s employer shared responsibility provisions, Applicably Large Employers (SBAALE) Office of Advocacy defines a small business as any independent business that employs fewer than 500 employees (for a employing 50 or more detailed description of SBA’s small business classifications by industry and sector see [https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/summary-size-standards-industry-sector SBA guidelines]), the ACA mandates that businesses with greater than 50 full-time equivalent (FTE) employees are required to provide health insurance. Small firms employing fewer than 50 full-time offer “affordable” minimum essential coverage that provides “minimum value” to their employees constitute an overwhelming majority of small businesses and are exempt from the employer mandate (also known as the Employer Shared Responsibility Payment or "Play or Pay" penalty). [http://payroll.intuit.com/support/kb/2001632their dependents.html]

Under the ACA’s employer shared responsibility provisions, these Applicably Large Employers (ALE) employing 50 or more full-time equivalent (FTE) employees are required to offer “affordable” minimum essential coverage that provides “minimum value” to their employees and their dependents. If an ALE a firm fails to provide health insurance to 95 percent of its full-time employees and their dependents, the business must make an employer shared responsibility payment, of $2,000 (indexed for future years) for each full-time employee beyond the first 30 employees, to the IRS. Furthermore, firms that employ more than 50 workers must contribute, at a minimum, 60 percent of the cost for employees' coverage.[https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions]

Employer Shared Responsibility provisions apply to employers that employed 50 or more full-time equivalent FTE employees during the previous calendar year. [http://www.hhs.gov/healthcare/] Full-time FTE employees are considered those who work on average 30 hours or more a week for more than 120 days in a year, while part. Part-time employees are considered those who work on average less than 30 hours per week, but more than 120 days per year. To find the total The number of full-time equivalent FTE employees, can be found by totaling the aggregate aggregated number of hours worked by part-time employees should be divided by 30 and added the with the aggregated number of hours worked by full-time employees. [https://www.healthcare.gov/shop-calculators-fte/]

It is important to note that many Most small businesses are not subject to ACA requirements. Deutsche Bank Global Markets Research Census data from 2010 and 2012 reveals shows that an overwhelming majority of U.S. firms employ fewer than 20 employees, as firm size in the U.S. (number of workers employed by American businesses) follows a fat-tailed skewed distribution. Therefore, most small A majority of businesses are not subject to actually employ fewer employees than the ACA’s employer-sponsored insurance mandateaverage firm size. Firms with over 500 employees, however, employ the greatest share of the workforce and contribute the most toward total employment jobs in our economy. [http://www.businessinsider.com/us-employment-by-firm-size-has-a-fat-tailed-distribution-2015-6%5D]

The biggest complaint about Whether the ACA concerns the trend of rising premiumsis to blame for premium hikes is another story. The Congressional Budget Office (CBO) has found points out that while “premiums for private insurance have grown relatively slowly many of the ACA’s regulations increase costs, the spike has been more apparent in recent years, they have usually grown faster than” average income and the economy as a wholenon-group market. From 2005 to 2014For example, in selling policies, premiums for employmentinsurers must now “accept all applicants during specified open-based insurance increased by 48 percent for single coverage plans enrollment periods” and by 55 percent for family coveragelimit their reliance on age in determining rates. What’s moreAdditionally, the CBO ACA disallows carriers from evaluating premiums on the basis of health and Joint Taxation Committee (JCT) forecast restricting coverage for preexisting health conditions.The CBO’s report claims that these regulations increased premiums to increase at a comparable growth rate for in the next ten yearsnon-group market, averaging roughly two percentage points faster than per capita GDP annuallybut effects on other markets were more limited. [https://www.cbo.gov/publication/51130]

Whether this increase is due primarily ==How can small businesses alleviate the rising costs of healthcare?==Although small businesses that employ fewer than 50 full-time employees are not required to provide health insurance to their employees under the ACA is another story, many do. The CBO points out while many These firms find themselves paying higher premiums as the cost of health insurance continues to rise. If small employers are unable or unwilling to pay the ACA’s regulations increase health premiums, the spike has been more apparent in the nonthey may be forced to discontinue their employer-group market. For examplesponsored healthcare coverage, in selling policies, insurers must now “accept all applicants during specified open-enrollment periods” and limit their reliance on age in determining rates. Additionallyconsequently, the ACA disallows carriers from evaluating premiums on the basis of some workers might seek alternative employment to gain access to health and restricting coverage for preexisting health conditions. Finally Small businesses that employ greater than 50 employees can mitigate increased costs by increasing employees’ deductibles, insurers “must cover specified categories of health care services” and pay at least 60 percent of the costs associated with those services. The CBO claims that these aforementioned regulations “increased premiums noticeably in the nonnegotiating private insurance plan prices, or switching from a group plan to individual employer-group marketsponsored options, such as Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA),” while other markets experienced more “limited effectsor direct primary care.” [httpshttp://www.cbocnbc.govcom/2015/01/publication08/511305-smart-ways-small-firms-can-slash-health-care-costs.html]

==How can The exchange grants small businesses alleviate with increased buying power in the rising costs group-plan market - an advantage usually enjoyed by larger firms - and provides a simple mechanism for small businesses to compare the price, coverage, and quality of plans. Small businesses that purchase insurance through the SHOP exchange and employ fewer than 25 FTE employees may also be eligible for the Small Business Healthcare Tax Credit. [https://www.healthcare?==.gov/small-businesses/provide-shop-coverage/shop-marketplace-overview/]

Although The requirements for a small business to qualify for the small business tax credit can be found [https://www.healthcare.gov/small-businesses that employ fewer than /provide-shop-coverage/small-business-tax-credits/ here]. The tax credit can be worth up to 50 full-time percent of a business’s contribution toward its employees are not required ' premium costs (up to provide health insurance to their employees under the ACA35 percent for tax-exempt employers), many do. These firms will find themselves paying higher premiums as depending on the cost firm’s number of health insurance continues to riseemployees and wages. If The tax credit is highest for small employers are unable businesses that employ fewer than 10 employees, with average annual salaries of $25,000 or unwilling to pay less; as Healthcare.gov states, the “smaller the health premiumsbusiness, they may be forced to discontinue their employerthe bigger the credit.” [https://www.healthcare.gov/small-businesses/provide-shop-sponsored healthcare coverage, and consequently, some workers might seek other employment to gain access to health coverage./small-business-tax-credits/]

Small ==How has the ACA affected small business hiring practices?==The more readily available effects of the ACA on small businesses that employ greater than 50 are on employees can avoid paying . Some small businesses report slowing or halting their hiring practices and cutting employees’ hours. In 2012, two years after the increased costs introduction of insurance coverage. Alternatives include increasing employees’ deductiblesthe ACA, negotiating private insurance plan prices or switching from Gallup and Wells Fargo conducted a group plan survey of 600 small business owners. The survey revealed that 48 percent of small business owners pointed to individual employer-sponsored options, such "potential healthcare costs" as Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA), or direct primary carea reason for not hiring more employees. [http://www.cnbcgallup.com/2015poll/01152654/08/5health-smart-wayscosts-smallgov-firmsregulations-cancurb-slashsmall-healthbusiness-care-costshiring.htmlaspx]

The SHOP (Small Business Health Options Program) Exchange, created According to another survey conducted by the ACA, provides another option Society for Human Resource Management of more than 600 small businesses with fewer business owners, more than 50 employees four out of ten small business owners have delayed hiring due to purchase more affordable insuranceuncertainty about the effects of the ACA. SHOP utilizes group plans and tax credits to offer lower healthcare costs and increased employer choice functions, by enabling employers to choose from a larger pool One in five small business owners reported that they have cut their number of available coverage optionsemployees. [http://digital.librarywww.untncpa.edu/ark:/67531org/metadc501935pub/m1/1/high_res_d/R43181_2015Jan15.pdf] The exchange grants small businesses with increased buying power in the group-plan market - an advantage usually enjoyed by larger firms - and provides a simple mechanism for small businesses to compare the price, coverage, and quality of plans.[9st356] Small businesses that purchase insurance through the SHOP exchange and employ fewer than 25 employees may also be eligible for the Small Business Healthcare Tax Credit.

The requirements for For small businesses that are nearing the 50th FTE mark, the 51st hire evidently presents a small business large marginal cost to qualify for the small business tax credit can be found [https://wwwfirm.healthcare.gov/small-businesses/Specifically, firms that employ 50 or more FTEs and refuse to provide-shop-qualified health insurance coverage/small-business-must pay a tax-credits/ here]. The tax credit can be worth up to 50 percent penalty of a business’s contribution toward its employees' premium costs (up to 35 percent $2,000 for tax-exempt employers), depending on each uninsured employee beyond the firm’s number of first 30 employees and wages. The tax credit This increased marginal cost serves as a reason for why many critics believe that the ACA is “killing jobs.” However, the highest government delayed penalties for small businesses that employ fewer than 10 employed between 50 and 99 employeesuntil 2016, with average annual salaries of $25as a transitional relief from the employer mandate. In 2016,000 or less. “The smaller these small businesses will be for the business, first time subjected to the bigger burden of the credit.” [https://wwwACA’s employer mandates.healthcare.gov/small-businesses/provide-shop-coverage/small-business-tax-credits/]

==How has the ACA affected small business hiring practices?==The visible effects of the ACA on small businessesGoing forward, if any yet, are mostly being felt by employees, as some businesses are slowing or halting their hiring practices and cutting employees’ hours. In 2012, two years after the introduction of the ACA, Gallup and Wells Fargo conducted a survey of 600 small business owners. The survey revealed that 48 percent of these small business owners pointed may be forced to "potential healthcare costs" as a reason purchase insurance coverage for not hiring more employees.[http://www.gallup.com/poll/152654/health-costs-gov-regulations-curb-small-business-hiring.aspx] According to another survey conducted by the Society for Human Resource Management of more than 600 small business owners, more than four out of ten small business owners have delayed hiring due to uncertainty about the effects of the ACA, and one in five small business owners reported that they have cut their number of employees.[http://www.ncpa.org/pub/st356] For small businesses that are nearing 50th employee mark, the 51st hire presents from a large marginal cost to the firm. Firms market that employ 50 or employees and refuse continues to provide qualified health insurance coverage must pay a tax penalty of $2,000 for each uninsured employee beyond the first 30 employees. Furthermore, firms that employ more than 50 workers must contribute, at a minimum, 60 percent of the cost for employees' coveragehike up premium rates. [http://www.ncpa.org/pub/st356] This increased marginal cost for While the 50th employee serves as a reason why many critics long-term effects of the ACA believe that the ACA is “killing jobs” and also why many Affordable Care Act on small business owners have concerns about expanding their businesses. Howeverremain largely unknown, regulators delayed penalties against firms who employ between 50 policymakers should adopt prudent and 99 employees until 2016 as a transitional relief necessary measures in order to mitigate increased healthcare costs for small businesses from the employer mandate.

2. http://payroll.intuit.com/support/kb/2001632.html 3. https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions

43. http://www.hhs.gov/healthcare/

54. https://www.healthcare.gov/shop-calculators-fte/

65. http://www.businessinsider.com/us-employment-by-firm-size-has-a-fat-tailed-distribution-2015-6%5D

6/7. https://www.cbo.gov/publication/51130