Opinion: How is a Small Business Affected by the Affordable Care Act?

Submitted by gsbaird on July 30, 2013 - 1:13pm

From discussions with individuals in our local community and reading articles and letters to editors, it appears to me that many people do not understand how the Affordable Care Act affects small business owners.

Many believe they will have to provide a health care plan for their employees or be forced to pay substantial penalty fees. This is not true for 96% of businesses, according to the White House (see www.whitehouse.gov). That is the percentage of businesses in the U.S. that employ fewer than 50 full time workers.

If you are in this 96% group, you are not required to set up a health care plan for your employees and you will not be assessed any penalty fee.

What about the roughly 200,000 firms in the United States that do employ 50 or more full time workers? Many of those companies offer very good group health insurance plans that will easily be in compliance with the minimum health insurance standards that, under the Affordable Care Act, will be established by each state.

Approximately 8000 companies with at least 50 employees offer no health insurance. These companies, together with those companies that offer health insurance plans that offer only minimal coverage, will have to spend more on health care.

Their choices are to either pay a $2,000 penalty for each employee beyond 30 or to set up a health insurance group plan that offers benefits that comply with their state’s minimum policy standards. This requirement, under the new law, was originally scheduled to take effect in 2014 but has been delayed by Health and Human Services by one year to give affected businesses more time to consider their options.

Today, approximately 1.5 million employees of fast food companies, discount retailers and other firms with large numbers of low hourly-pay positions are offered health insurance plans that are often referred to as ‘mini-med’ plans. These plans are similar to dental policies in that you pay a smallish premium but get very little coverage. These policies will not meet the minimum coverage standards that will be dictated by the states.

Examples of mini-med plans from an article from the Kaiser Family Foundation:

"McDonald’s “McCrew Care” (in Montana) requires employees to pay $56 per month for basic coverage that provides up to $2,000 in benefits in a year and $97 per month for a “Mid 5” plan that provides up to $5,000 in benefits. Ruby Tuesday charges workers $18.43 per week (going down to $7 after six months of service) for coverage that provides up to $1,250 in outpatient care per year and $3,000 in inpatient hospital care."

Companies with 50 or more employees that offer mini-med plans are likely to drop them and pay the $2,000 penalty per employee. Is this fair? I think it is if you consider that a substantial percentage of the workers with these companies are in households that qualify for Medicaid because their wages are so low.

We taxpayers are paying for their health care. Workers who purchase the mini-med policies often exceed the maximum health care payments allowed by the plan and may need visits to an emergency room. We indirectly pay for their visits through increased hospital costs that are passed along to us through our co-payments.

The Center for American Progress Action Fund has updated a 2005 analysis by Kenneth Thorpe for Families USA and found that, on average, 8 percent of families’ 2009 health care premiums—approximately $1,100 a year—is due to our broken system that fails to cover the uninsured. They did a state by state analysis to come up with the overall figures. In Texas, they estimated the premium increase to be $1,800 yearly.

Beginning in 2014, employees of companies that do not provide health care and self- employed individuals will be able to purchase health insurance in the Affordable Care Act’s Health Insurance Exchanges.