Obamacare Fix Means Significant Impact for Small Business Owners
For many people, the Affordable Care Act (ACA) means choosing an individual health insurance policy through a state or federally-administered exchange. But the ACA also mandates businesses with more than 50 full-time equivalent employees to offer insurance to their employees that fulfills federal guidelines beginning January 1, 2016. However, business owners can obtain group coverage, which carries lower premiums for employees than similar individual insurance plans.
Before President Obama signed a change in the law in October 2015, a provision within the ACA had expanded the definition of small businesses as companies with 100 or fewer employees. This provision put business owners with 51 to 100 employees in a bind – not only would they be required to provide insurance for their workers, they would also have to go comply with regulations that translate to more limited coverage options at higher costs for employers. The provision would have had the knock on effect of increasing premiums for impacted workers by as much as 18 percent, according to estimates provided by consulting firm Oliver Wyman.
Adverse Consequences Averted
While the change in the law comes too late to adjust premiums for January 1, affected firms can re-adjust their premiums beginning on April 1. Nonetheless, the provision change was widely welcomed by small business owners with 51 to 99 employees. Indeed, there would have been significant adverse effects on the entire economy had the provision not been changed, , according to David Lewis, President and CEO of Operations, Inc., a human resources consulting firm based in Norwalk, Connecticut.
“The prevailing wisdom when employers are forced to spend more money is that it would have to come from somewhere,” Lewis said.
Specifically, salary increases would potentially have been reduced, overtime hours for hourly workers would possibly have been slashed and salaries for new hires could have been lowered. The unemployment rate could have increased as well, according to Lewis.
Impact of the Provision Change
What the provision doesn’t change is the obligation for all companies with at least 50 full-time equivalent employees to provide insurance for their workers – something that many small business owners are not prepared for, according to Lewis
“The impact it’s (the change in the provision) having for the 50 to 99 market is minimal because it prevents something that could have happened. This is just a few pieces of straw off the camel’s back,” Lewis said.
According to Lewis, the additional paperwork associated with complying with the ACA requires between 10 and 30 hours for each business to complete, at a time of the year when companies are already super busy with calculating bonuses, raises and other end-of-year matters. Many companies that can afford to do so are paying third-party providers to generate and process the additional forms along with their regular payrolls.
“Most but not all the data (required for ACA-related paperwork) is in payroll systems. But payroll companies are using the additional form as an opportunity to charge more,” he explained.
Comply, or What?
Companies have until the end of January 2016 to submit the necessary paperwork to remain in compliance with ACA regulations. Many white papers suggest that the IRS is prepared to cut small business owners some slack, at least initially, according to Lewis, although he expressed skepticism. He also said that conscientious business owners would make their best effort to comply regardless of the IRS’s position.
“The idea that you would put the IRS and ‘take pity’ in the same sentence is counterintuitive . . . any good business that dots their “i’s” and crosses their “t’s” can’t understand how to ‘do their best’ versus actually complying (with the law),” he said.
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