Affordable Care Act

Summary

Despite all of the backlash the Patient Protection and Affordable Care Act, or Obamacare, has received for its perceived potential destruction on small businesses, for the most part, small businesses with under 50 full time employees are not greatly affected by the Act. In fact, companies with under 50 employees, which make up a large portion of small businesses, are not penalized at all for not providing comprehensive and affordable health care to their employees. Companies with between 50 to 99 employees are required to provide insurance, but the penalties imposed for not complying with the ACA requirements were delayed until 2016, while the penalty for companies with >99 employees was delayed until 2015.

Although, health care is not a mandatory service for small businesses with under 50 FTE, many small businesses still provide health insurance for their employees. These companies, along with most larger companies, are seeing rising premiums on their insurance due the ACA stipulation that health care companies cannot deny coverage when considering an individual's health. However, there are options to compensate with these increased (non-mandatory operating cost), the most obvious of which, includes stopping the provision of health insurance or increasing the employee contribution to their coverage.

"Four years after President Barack Obama signed the Affordable Care Act (ACA) into law, there is still uncertainty regarding its effects, due to delays and exemptions granted by the Obama administration and challenges still pending in the courts. So far, however, there is plenty of evidence that the ACA, or Obamacare, is raising the cost of health insurance to employers and individuals.

The effects on business vary - by state, firm size and the composition of firms' workforces - but the impact on small businesses is especially acute. Whereas large corporations typically self-insure - paying their employees' medical bills and hiring insurers to administer health benefits - small businesses purchase group health coverage from insurers and face cost-increasing regulations as they go through the annual ritual of renewing their coverage. Over the next few years, as regulations and mandates are finally implemented, Obamacare will affect how businesses operate - including hiring, employee compensation, growth and so forth." NCPA

Obamacare Effects on Small Businesses with 50-99 FTE

Small businesses with fewer than 50 FTE are exempt from the penalties of ACA; however, as soon as a company reaches the 50th employee mark, the hire becomes much more expensive, thus dis-incentivizing small businesses from expanding their labor force. Firms that employ 50 or more workers and don't provide health insurance must pay a tax penalty of $2,000 for each uninsured employee beyond the first 30.Furthermore, firms with 50+ workers are required to contribute at least 60 percent of the cost for individual minimum essential coverage.

"The consequences for employers (and individual workers) who must purchase coverage are already becoming apparent. A 2014 survey of 148 insurance brokers by the investment firm Morgan Stanley found that rates in the small group market have risen substantially. For instance:

Premiums for firms renewing in 2014 jumped 11 percent in the small group market.

For firms with coverage through BlueCross, the year-over-year renewing contract premium hike is nearly 16 percent.

For individuals, the increase was similar - about 12 percent.

However, premium increases were much higher in some states than others. The survey found that since December 2012, rates for small employers grew 588 percent in Washington state, though this astounding increase is likely due to the small sample size and additional state regulations. Premiums rose 66 percent in Pennsylvania, 37 percent in California, 34 percent in Indiana, 30 percent in Kentucky and 29 percent in Colorado.

Some employers are reducing their costs by passing on more of the cost to workers. Some employers are raising copayments for workers; others are boosting costs for dependent coverage, according to Mercer, a benefit consulting firm.

The Affordable Care Act is also affecting personnel decisions. A survey of more than 600 small business owners by the Society for Human Resource Management found that more than four-in-10 small business owners have delayed hiring due to uncertainty about the effects of the ACA. One in five reported they have cut the number of workers they employ. Employers are not required to offer coverage for employees who work less than 30 hours per week. Those employees are eligible for subsidized coverage in the health insurance exchange. Mercer reports that 12 percent of employers nationwide plan to reduce workers' hours as a result of Obamacare." NCPA