CaliforniaIt has been difficult to turn on the news over the past several months without hearing reports about the various pitfalls and obstacles surrounding the implementation of the Patient Protection and Affordable Care Act ("ACA") - aka Obamacare. The new healthcare law in the United States has been discussed and debated at length, especially in terms of its impact on individuals. Not as common though, are reports regarding the ACA's impact on employers. How does America's new healthcare system affect businesses?

obamacare-logoThe ACA, signed into law on March 23, 2010 by President Obama, represents the largest healthcare overhaul since 1965 when Medicare and Medicaid were enacted. The ACA's goal is to increase the quality and affordability of healthcare by reducing costs for individuals and the government. Individuals are now required to have health insurance, or alternatively, pay a fine come tax time. Individuals may either obtain coverage through their employer, or independently through health insurance marketplaces or exchanges. As part of the new law, health insurance companies are required to cover all applicants, and offer the same rates regardless of pre-existing conditions. In 2011, the average employer contributed $4,508 towards single coverage according to a survey conducted by the Kaiser Family Foundation. In 2014, this figure is expected to increase to $5,100. (Conover, Chris. "Obamacare Employer Mandate Delayed One Year: Why Not The Whole Law?" Forbes. Forbes.com, 3 July 2013. Web. 4 January 2014.)

The ACA includes an employer mandate called the Employer Shared Responsibility Payment which imposes a penalty of $2,000 per every full-time employee per year on employers with more than fifty employees who do not offer health insurance to their full-time employees within ninety days of employment. This penalty is not tax deductible. There are some potential negative consequences of this mandate, which is currently not scheduled to be implemented until 2015.

The employer mandate is likely to result in higher costs to certain companies. Traditionally, employers who have waited more than ninety days to offer coverage to employees, willdollar_man now be forced to incur the added expense of providing health insurance sooner. This will adversely impact employers with high turnover rates, such as retail stores and restaurants. There are increased reporting and administration costs that are expected to arise as well, in connection with the employer mandate.

Due to the rising costs of providing coverage, employers have begun shifting some of the healthcare costs to their employees, resulting in higher deductibles. There are also some who have stopped providing coverage for spouses, or who now offer incentives to employees who do not request spousal coverage. Some employers who have traditionally offered part-time workers coverage, such as Trader Joe's and Home Depot, have dropped it.

Additionally, some claim that the mandate may stunt business growth. Concerns have been expressed that this will disincentivize employers to hire more employees if they are near the fifty-employee threshold, limiting expansion. It also may result in companies employing a greater number of part-time workers rather than full-time workers. Under the ACA, full-time workers are classified as working more than thirty hours per week.

Proponents of the ACA, argue that offering healthcare as part of a benefits package (which more employers will be required to do pursuant to the mandate) has been shown to increase workplace satisfaction and productivity, in addition to attracting qualified workers.

Additionally, employers with less than fifty full-time employees (which constitute 96% of all firms in the United States) are expected to benefit from the new law.

For example, businesses with twenty-five or less full-time employees can apply for tax breaks of up to 50% of their contribution of their employees' premiums, assuming they meet certain requirements.

The foregoing projected consequences of America's new healthcare law are at this juncture, largely speculation. Over the next few years, its practical impact on businesses, whether positive or negative, will become more clear.

 


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