The Affordable Care Act was passed by Congress in 2010. However, small businesses are feeling the biggest punch by the legislation now as 2013 begins to come to a close. Under the new law any business with more than 49 employees has to have health insurance in place for its workers. That major new requirement has many small business owners struggling with potential costs as well as potential ethical problems.
First off, small businesses are seeing their rates rise as a result of the law changes. Insurance providers aren’t oblivious, and as their costs go up to cover more risks, they are passing those costs in higher premiums to the businesses already paying. Some of the rate increases are so much; small business owners are facing the very real challenge that a tax penalty for no coverage may be cheaper than providing coverage.
Second, the law pings on those with more than 49 employees as of 2015. As a result, a small business with less than that threshold is left alone, while a business with 55 employees either has to face higher costs or penalties. A number of companies on the edge are simply figuring it may be easier to get work done with 6 less employees. The result ends up being no new insurance cost and no tax penalty either. It also means 6 people lose their jobs in the example.
ExchangesThird, even smaller companies with 25 or less employees get to take advantage of tax credits, essentially subsidies, to begin providing insurance to workers. Again, while the intent of the law was to help workers gain health coverage, in reality the law may stifle business growth or cause people to be terminated. In some cases, small organizations can realize as much as 35 percent in rebates through the tax credits, even non-profits that don’t pay taxes at all. There is one hitch though – the employees need to secure their health coverage through a state operated health exchange. Doing so, small businesses working through exchanges can see as much as 50 percent in rebates. Working through an agent of an insurance company or a broker will not work.
There is nothing seemingly fair for small companies that exceed the 50 workers figure. Even with workers that only work part-time, these companies now have to purchase insurance, in many cases for the first time and adding major new costs to operating margins. In other cases, the plan currently in place doesn’t meet the minimum requirements under the new federal law, and the company has to upgrade, again paying a new cost that eats into profits. The only real brake companies are realizing is a remaining one-year respite before the coverage requirement kicks in.
At first, tax penalties may seem the cheaper way to go, at least in the first year. The new law requires a lower penalty in the first year of coverage requirement, and then increases with subsequent years. As a result, many companies are calculating their options, including doing nothing, before committing to anything. Workers in the meantime have to wait until their employers make their own decisions before realizing coverage or seeking it on their own through state exchanges. The confusion has everyone involved frustrated, which is why it is best to consult with someone who has a masters in human resources for expert advice on what the right choice is for your small business.
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