Small Business Reacts to Obamacare Ruling (Update 1)
Beginning in 2014, the health care law places an owner responsibility on businesses with 50-199 full-time employees to provide health insurance coverage for their workers. Businesses are not federally required to enroll employees in health insurance unless they have 200 or more full-time workers, according to the Kaiser Foundation. Businesses with fewer than 50 employees are exempt from the ruling, but self-employed individuals will be required to purchase insurance, or else pay a tax of as much as 2.5% of household income.
So those employers who fall in the middle are required to either buy insurance for employees or employers pay a penalty if the employee chooses to purchase insurance from the health exchanges. (The first 30 employees who buy insurance in an exchange are exempt, Kaiser notes.)
"What the Affordable Care Act does is create more opportunities for small employers to provide health insurance coverage for their employees by either allowing them to continue offering small group coverage or to send their employees to a public or private health insurance exchange where they can shop for health insurance plans," says Sam Gibbs, President of eHealth Exchange's technology group, a division of eHealth(EHTH) .
The government's intentions may have been to push more small businesses to provide coverage, but given the high costs typically associated with small-group plans, it may be more beneficial for a small firm to take the tax penalty than to provide health insurance coverage.
Employers with 50 to 199 employees can either provide health insurance for employees, or pay a tax penalty of $2,000 per employee (provided that the employee gets subsidized insurance from the government), Gibbs says.
"By way of comparison, the average employer contributes $4,508 per year per individual employee's health insurance," Gibbs says, citing Kaiser data.
So small employers will now be in a bind. They must either provide "affordable" coverage or risk losing talent, since offering health insurance coverage to employees is a critical component to recruit and retain talent.
And business owners that have fewer than 50 employees will be less likely now to hire and expand because of the costs associated with providing healthcare coverage, some say.
But for most small businesses, it will just be another cost they will have to endure.