The Patient Protection and Affordable Care Act (PPACA) known informally as Obamacare, has owners of small businesses worried about costs and compliance issues. As a result, most are delaying expansion and hiring decisions until after the first of the year. Although PPACA largely goes into effect in 2014, well over a year from now, many employers are already concerned about what they see as a looming financial burden. However, others have found that PPACA may offer advantages for small businesses.
Why are small business employers so worried about PPACA? According to Erin Dostal, one of the chief complaints from restaurant owners is the cutoff threshold mandated by the PPACA. In his September 17, 2012 article for Nation’s Restaurant News titled, “Health care headaches: PPACA concerns mount as industry struggles to plan for compliance with looming regulations,” Dostal explained how the healthcare law will affect restaurant employers.
Citing an official from the International Franchise Association (IFA) in Washington, D.C. Dostal said, “One of the chief complaints the IFA has with the law is that its cutoff threshold — the PPACA applies to businesses with 50 or more employees — is too low. As a result, it unfairly targets too many small-business owners, including franchisees…”
The IFA official also disagreed with the PPACA definition of a full time employee as someone who works at least 30 hours a week rather than the industry standard of 40 hours. As a result of the threshold, Dostal found that restaurateurs will likely change how they hire and schedule workers.
Business owners may reap benefit
Is PPACA all doom and gloom for small businesses? Are there any benefits to be had? The PPACA was created in order to ensure that every American is covered by health insurance. Employers with 50 or more full-time employees or full-time equivalents must offer their employees coverage or they will face potential penalties. Currently, 60 percent of Americans under age 65 have healthcare coverage through their employers. But what about the employers themselves?
A recent study by the Kaiser Family Foundation determined that 25 percent of small business owners are uninsured and only 19 percent obtain insurance through their companies. Nearly half rely on insurance through a family member or they purchase coverage on their own.
In an October 4, 2012 article for Bloomberg Businessweek Small Business titled, “What Obamacare Means for Small Employers in 2013,” Karen E. Klein explained how the PPACA may be of benefit to small business owners.
“Sixty percent of entrepreneurs who buy private insurance have incomes up to 400 percent of the poverty level, qualifying them for tax credits under the Affordable Care Act; 83 percent of the small business owners who are uninsured would be eligible for subsidized coverage under the law,” Klein said.
Moreover, in order to help defray the costs of providing coverage for employees, eligible employers that provide coverage will receive a tax credit of up to 35 percent of their payment for employee’s insurance. The credit, which is based on the average wages paid, increases to 50 percent in 2014.
Boon for new businesses
Rather than stifling business growth, Matthew Yglesias believes that the PPACA will help new businesses startups. He explained his rationale in his July 2, 2012 article for Slate.com titled, “Should Small Businesses Really Fear Obamacare?”
Yglesias reminded his readers that insurance rates are based on the concept of risk pools. A workplace constitutes a risk pool comprised of a large group of people who have nothing in common in relation to their health status. A new business with only a few employees does not constitute a large risk pool and so typically, the business owner will find it hard to secure affordable health coverage for employees.
“That means only people with small health needs or large savings can afford to take the risk of entrepreneurship in America. The Affordable Care Act sets up large state-wide risk pools where anyone, regardless of health status, will be able to buy affordable coverage. That should be a boon to firm formation,” Yglesias concluded.
By mid-November 2012 each state is supposed to declare whether it will operate its own health care exchange or whether it will default to an exchange operated by the federal government. The health care exchanges are scheduled to begin October 2013 and will provide individuals and businesses an online one-stop shop for qualified health insurance coverage.
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