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The Affordable Care Act and Small Business (view source)
Revision as of 17:03, 19 October 2016
, 17:03, 19 October 2016no edit summary
Small firms employing fewer than 50 full-time employees constitute an overwhelming majority of small businesses and are exempt from the employer mandate (also known as the Employer Shared Responsibility Payment or "Play or Pay" penalty). [2]
Under the ACA’s employer shared responsibility provisions, these Applicably Large Employers (ALEsALE) employing 50 or more full-time equivalent (FTE) employees are required to offer “affordable” minimum essential coverage that provides “minimum value” to their employees and their dependents. If an ALE fails to provide health insurance to 95 percent of its full-time employees and their dependents, the business must make an employer shared responsibility payment, of $2,000 (indexed for future years) for each full-time employee beyond the first 30 employees, to the IRS.[3]
Employer Shared Responsibility provisions apply to employers that employed 50 or more full-time equivalent employees during the previous calendar year. HHS Full-time employees are considered those who work on average 30 hours or more a week for more than 120 days in a year, while part-time employees are those who work on average less than 30 hours per week, but more than 120 days per year. To find the total number of full-time equivalent employees, the aggregate number of hours worked by part-time employees should be divided by 30 and added the the number of full-time employees. [4]
The biggest complaint about the ACA concerns the trend of rising premiums. The Congressional Budget Office (CBO) has found that while “premiums for private insurance have grown relatively slowly in recent years, they have usually grown faster than” average income and the economy as a whole. From 2005 to 2014, premiums for employment-based insurance increased by 48 percent for single coverage plans and by 55 percent for family coverage. What’s more, the CBO and Joint Taxation Committee (JCT) forecast premiums to increase at a comparable growth rate for the next ten years, averaging roughly two percentage points faster than per capita GDP annually.
Whether this increase is due primarily to the ACA is another story. The CBO points out while many of the ACA’s regulations increase premiums, the spike has been more apparent in the nongroup market. For example, in selling policies, insurers must now “accept all applicants during specified open-enrollment periods” and limit their reliance on age in determining rates. Additionally, the ACA disallows carriers from evaluating premiums on the basis of health and restricting coverage for preexisting health conditions. Finally, insurers “must cover specified categories of health care services” and pay at least 60 percent of the costs associated with those services. The CBO claims that these aforementioned regulations “increased premiums noticeably in the nongroup non-group market,” while other markets experienced more “limited effects.” [6]
==How can small businesses alleviate the rising costs of healthcare?==
The visible effects of the ACA on small businesses, if any yet, are mostly being felt by employees, as some businesses are slowing or halting their hiring practices and cutting employees’ hours. In 2012, two years after the introduction of the ACA, Gallup and Wells Fargo conducted a survey of 600 small business owners. The survey revealed that 48 percent of small business owners pointed to "potential healthcare costs" as a reason for not hiring more employees.[11] According to another survey conducted by the Society for Human Resource Management of more than 600 small business owners, more than four out of ten small business owners have delayed hiring due to uncertainty about the effects of the ACA, and one in five small business owners reported that they have cut their number of employees.[12]
For small businesses that are nearing the 50th FTE employee mark, the 51st hire presents a large marginal cost to the firm. Firms that employ 50 or more FTEs employees and refuse to provide qualified health insurance coverage must pay a tax penalty of $2,000 for each uninsured employee beyond the first 30 employees. Furthermore, firms that employ more than 50 workers must contribute, at a minimum, 60 percent of the cost for employees' coverage. [13] This increased marginal cost for the 50th employee serves as a reason why many critics of the ACA believe that the ACA is “killing jobs” and also why many small business owners have concerns about expanding their businesses. However, regulators delayed penalties against firms who employ between 50 and 99 employees until 2016 as a transitional relief to small businesses from the employer mandate.
==Link to Google Doc==
==References==
