Small business and the Affordable Care Act: It’s Here! Mike | January 6th, 2014

About six months ago, I wrote in a post here reasons why Obamacare could prove helpful to small businesses and startups. This past summer the Supreme Court determined that the Affordable Care Act of 2010 (dba Obamacare) was indeed constitutional and could proceed to implementation. And, despite the god-awful rollout of the website, last week saw the (almost) full start of the new rules, regulations, and coverage kick in. Millions of people around the country have signed up and are now covered by new insurance policies as dictated by the law. If all goes well, we will be a stronger country, in terms of both our economic and physical well-being.

The ACA requires businesses with more than 50 full-time employees (or the equivalent) to provide health coverage deemed ‘affordable.’ To be considered affordable, the plan offered must cover at least 60% of an employee’s health care costs and they can not be made to pay over 9.5% of their full family income for it. But for smaller businesses there is no such requirement and most of these small companies already  qualified for a tax credit of up to 35% of the costs. This year that credit increases to 50% of the costs if the small business offers insurance through its state’s health insurance exchange.

For small businesses, especially micro-sized businesses with fewer than 10 employees, while the ACA does not carry meaningful legal impacts or obligations,  it will go a long way in helping business owners pay for their own insurance and will be a huge boon to smaller businesses that are committed to providing health benefits to their workers. Although they are not required to do so, many small business owners have historically furnished their employees with insurance coverage and the new marketplaces (once fully operational) should serve to reduce costs and make the process more convenient.

Photo: Obama healthcare signature, Wikimedia

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  • One thing that bothers me about the new Affordable Care Act for small business is that it does not take into consideration the many variables regarding profit for a small business. For instance, one type of business may have a much higher profit margin than another. As an example, my husband just spent 15 years building a franchise into a place that makes an impact on the unemployment rate in our community. He keeps people working and also makes sure his employees can always get their cars fixed, their rent paid, or food on their table by way of free loans. But as a franchise, tens of thousands of dollars, dollars that would go to pay for health insurance, goes instead to the franchise company. If he had to buy health insurance for his employees, he would be out of business in a week. As it stands now, he cannot grow his business. To do so would put him out of business.

  • mike_samson

    Hi Linda and thanks for sharing your thoughts. The ACA is indeed a double-edged sword which may bring some real pain to certain businesses and industries. Franchisees can be impacted by regulatory changes because often they do not set their own pricing and new expenses (in this case health benefits) have to be absorbed by the business without the ability to pass these costs through to customer. As in your husband’s case, this means that the added expense will come straight from the business’s bottom line. Interestingly, the proposals for an increased minimum wage has been hotly debated with many parallels. The Atlantic published a great analysis on the impact on minimum-wage based businesses, using data from Australia where the minimum wage is much higher but where McDonalds has maintained profitability through very modest price increases

    The tradeoff, and in large part why I am a supporter of the ACA, is that as many as 8 million uninsured Americans will receive coverage under the law. The fact is that some businesses and individuals be hurt by this, but our workforce will be healthier and more productive, and, over time, businesses (including franchisees) will adjust their pricing formulas and will benefit from that stronger, healthier population.

    It sounds like your husband truly cares about his workers and does what he can to take good care of them – hopefully he’ll be able to make it work and do even more for them in the form of a new health benefit plan!

  • Mike, thanks for taking the time to write such a thoughtful reply. :o)

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