What does Obamacare mean for small businesses?

Andy Anderson

small business obamacareAs we approach the beginning of the last year before full implementation of Obamacare, it's obvious that small business owners are getting nervous. They're hearing about large restaurant franchises like Applebee's and Papa John's Pizza who expect to lay off workers because of fines. Perhaps their own group health plan has changed its coverage and raised premiums already. Never before has there been this much uncertainty about a single topic that affects small business, but is all this worry really necessary? The reality is that the Affordable Care Act is actually a lot less complicated than you think.

Fact vs. Fiction on the Affordable Care Act

Thanks to the recent election and all the discussion of the fiscal cliff, small business owners have enjoyed more attention than usual from the media lately. Instead of being a far-off issue to be dealt with in the future, CEOs and business managers are learning as much as they can about subsidies, penalties, healthcare exchanges and all the other jargon related to the Affordable Care Act.

In a recent article that was published in the Daily Kos, "What Obamacare means for businesses: Facts vs. fiction," the author explores some of the recent publicity that small businesses have received, particularly regarding their threats to lay off workers. By publicly threatening their employees with job cuts simply because they are unwilling to cooperate with the new healthcare laws, these companies have started educating the public about what will be changing in 2014.
Thanks to these companies' outspoken views about the Affordable Care Act, many small business owners believe that the law will cripple their business with burdensome fees, or force their employees to buy an expensive healthcare plan. The truth is, there are some pretty good deals out there for employees of small businesses, and not every business will be subjected to penalties.

What can small businesses expect with Obamacare?

The answer to this question depends on how you define small business. The nation's smallest employers are not only exempt from any fines associated with not providing insurance; they also would receive tax credit to help them pay for it if they choose to. For employers with fewer than 25 full-time workers earning $50,000 per year or less, the law currently provides tax credits of up to 35 percent of the contributions they make. The only stipulation is that the employer pays for at least half of the monthly premium. In 2014, the tax credit will go up to 50 percent if the business purchases coverage through a state-based insurance exchange.

Will every business that doesn't provide insurance pay a fine?

As long as a company has fewer than 50 full-time employees, they will not incur a fine for not providing healthcare coverage. However, if companies with more than 50 employees cannot provide insurance, they fines they pay will be used to subsidize employee health plans purchased through state exchanges.

How many small business owners are insured right now?

Surprisingly few entrepreneurs are able to afford the high cost of an individual insurance policy for themselves, which is another reason the new healthcare laws make so much sense. According to the Kaiser Family Foundation's survey on employer health benefits, the findings on small business owners were shocking.

  • According the survey, only 25 percent of small business owners are uninsured.
  • Only 40 percent of small business owners receive insurance from an employer, whether it is their own job or one that is held through a family member.
  • Small business operators rely heavily on the individual insurance market, with nearly one third of them buying "other private insurance," which is most commonly purchased in the individual market.

What is most remarkable about these statistics is that these are the "small business owners" that conservatives so often laud as the "job creators" and they don't have insurance themselves. Those who do have insurance are struggling to pay for expensive policies with bare-minimum coverage. In fact, the reality of paying for their own insurance is what often deters people from quitting their day job to pursue a startup company.

It is important to remember that most of the small businesses in the United States today will benefit from the full implementation of the Affordable Care Act. The benefits of healthcare reform extend beyond the employee to include the employer, and in most cases will offer better insurance at a lower cost.

Photo Courtesy of ImageryMajestic / FreeDigitalPhotos.net

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