Changes

{{BlogPost|Has title=The Affordable Care Act and Small Business|Has author=Meghana Gaur|Has content status=Tabled|Has Graphics status=None|Has processing notes=Tabled pending further information about possible ACA replacement.}}The Patient Protection and Affordable Care Act was passed by Congress and signed into law by President Obama on March 23, 2010. Together, the Health Care and Education Reconciliation Act of 2010 and the Affordable Care Act (ACA) transformed the existing healthcare system in the United States by instituting changes that affected “insurance coveragereforms to increase the quality, affordability , and accessibility of insurance, the financing on medical care, coverage and the operation of the Medicare programexpand Medicaid.” [1https://www.cbo.gov/topics/health-care/affordable-care-act]

Whether a “small business” small business will be directly penalized affected by ACA mandates depends strictly on its size. While the Small Business Administration's (SBA) Office of Advocacy defines a small business as any independent business that employs fewer than 500 employees (for a more detailed description of SBA’s small business classifications by industry and sector , see [https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/summary-size-standards-industry-sector SBA guidelines]), the ACA mandates that affects only small businesses with greater more than 50 full-time employees to provide health insurance. 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 (ALE) 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 If a firm fails to provide health insurance to employers that employed 50 or more 95 percent of its full-time equivalent employees during and their dependents, the previous calendar year. HHS Fullbusiness must make an employer shared responsibility payment of $2,000 (indexed for future years) for each full-time employees are considered those who work on average employee beyond the first 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 weekto the IRS. Furthermore, but firms that employ more than 120 days per year. To find the total number of full-time equivalent employees50 workers must contribute, at a minimum, the aggregate number 60 percent of hours worked by part-time employees should be divided by 30 and added the the number of full-time cost for employees' coverage. [4https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions]

It is important Employer Shared Responsibility provisions apply to note employers that many employed 50 or more FTE employees during the previous calendar year. [http://www.hhs.gov/healthcare/] FTE employees are those who work on average 30 hours or more a week for more than 120 days in a year. Part-time employees are considered those who work on average less than 30 hours per week, but more than 120 days per year. The number of FTE employees can be found by totaling the aggregated number of hours worked by part-time employees divided by 30 with the aggregated number of hours worked by full-time employees. [https://www.healthcare.gov/shop-calculators-fte/] Most small businesses are not subject to ACA requirements. Deutsche Bank Global Markets Research Census data from 2010 and 2012 reveals shows that an overwhelming majority of U.S. firms employ fewer than 20 employees, as firm size in the U.S. (number of workers employed by American businesses) follows a fat-tailed skewed distribution. Therefore, most small A majority of businesses are not subject to actually employ fewer employees than the ACA’s employer-sponsored insurance mandateaverage firm size. Firms with over 500 employees, however, employ the greatest share of the workforce and contribute the most toward total employment jobs in our economy. [5http://www.businessinsider.com/us-employment-by-firm-size-has-a-fat-tailed-distribution-2015-6%5D]

The biggest complaint about Whether 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 is to 2014, premiums blame 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 premium hikes is another story. The CBO points out that while many of the ACA’s regulations increase premiumscosts, the spike has been more apparent in the nongroup non-group 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 CBO’s report claims that these aforementioned regulations “increased increased premiums noticeably in the non-group market,” while but effects on other markets experienced were more “limited effectslimited.” [6https://www.cbo.gov/publication/51130]

Although The SHOP (Small Business Health Options Program) Exchange, created by the ACA, provides another option for small businesses that employ with fewer than 50 full-time employees are not required to provide health insurance to their FTE employees under the ACA, many do. These firms will find themselves paying higher premiums as the cost of health insurance continues SHOP utilizes group plans and tax credits to rise. If small employers are unable or unwilling to pay the health premiums, they may be forced to discontinue their employer-sponsored offer lower healthcare coverage, costs and consequentlyincreased employer choice functions, some workers might seek other employment by enabling employers to gain access to health choose from a larger pool of available coverageoptions. [http://digital.library.unt.edu/ark:/67531/metadc501935/m1/1/high_res_d/R43181_2015Jan15.pdf]

The exchange grants small businesses with increased buying power in the group-plan market - an advantage usually enjoyed by larger firms - and provides a simple mechanism for small businesses to compare the price, coverage, and quality of plans. Small businesses that purchase insurance through the SHOP exchange and employ greater fewer than 50 25 FTE employees can avoid paying may also be eligible for the increased costs of insurance Small Business Healthcare Tax Credit. [https://www.healthcare.gov/small-businesses/provide-shop-coverage. Alternatives include increasing employees’ deductibles, negotiating private insurance plan prices or switching from a group plan to individual employer/shop-marketplace-sponsored options, such as Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA), or direct primary care. [7overview/]

The SHOP (Small Business Health Options Program) Exchange, created by the ACA, provides another option requirements for a small businesses with fewer than 50 FTE employees business to purchase more affordable insurancequalify for the small business tax credit can be found [https://www. SHOP utilizes group plans and tax credits to offer lower healthcare costs and increased employer choice functions, by enabling employers to choose from a larger pool of available coverage options. [8] The exchange grants gov/small -businesses with increased buying power in the group/provide-shop-coverage/small-plan market business- an advantage usually enjoyed by larger firms tax- and provides credits/ here]. The tax credit can be worth up to 50 percent of a simple mechanism business’s contribution toward its employees' premium costs (up to 35 percent for small businesses to compare tax-exempt employers), depending on the price, coverage, firm’s number of employees and quality of planswages.[9] Small The tax credit is highest for small businesses that purchase insurance through the SHOP exchange and employ fewer than 10 employees, with average annual salaries of $25 FTE employees may also be eligible for ,000 or less; as Healthcare.gov states, the “smaller the business, the bigger the Small Business Healthcare Tax Creditcredit.” [https://www.healthcare. gov/small-businesses/provide-shop-coverage/small-business-tax-credits/]

The requirements for a small business to qualify for ==How has the ACA affected small business tax credit can be found here. hiring practices?==The tax credit can be worth up to 50 percent more readily available effects of a business’s contribution toward its the ACA on small businesses are on employees' premium costs (up to 35 percent for tax-exempt employers). Some small businesses report slowing or halting their hiring practices and cutting employees’ hours. In 2012, depending on two years after the firm’s number introduction of employees the ACA, Gallup and wagesWells Fargo conducted a survey of 600 small business owners. The tax credit is the highest survey revealed that 48 percent of small business owners pointed to "potential healthcare costs" as a reason for small businesses that employ fewer than 10 not hiring more employees, with average annual salaries of $25,000 or less. “The smaller the [http://www.gallup.com/poll/152654/health-costs-gov-regulations-curb-small-business, the bigger the credit-hiring.” [10aspx]

==How has the ACA affected small business hiring practices?==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 . One in five small business owners reported that they have cut their number of employees.[12http://www.ncpa.org/pub/st356] For small businesses that are nearing the 50th FTE mark, the 51st hire evidently presents a large marginal cost to the firm. Specifically, firms that employ 50 or more FTEs 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. This increased marginal cost serves as a reason for why many critics believe that the ACA is “killing jobs.” However, the government delayed penalties for small businesses that employed between 50 and 99 employees until 2016, as a transitional relief from the employer mandate. In 2016, these small businesses will be for the first time subjected to the burden of the ACA’s employer mandates.

For Going forward, these small businesses that are nearing 50th employee mark, the 51st hire presents a large marginal cost to the firm. Firms that employ 50 or employees and refuse business owners may be forced to provide qualified health purchase insurance coverage must pay a tax penalty of $2,000 for each uninsured employee beyond the first 30 their employees. Furthermore, firms from a market that employ more than 50 workers must contribute, at a minimum, 60 percent of the cost for employees' coveragecontinues to hike up premium rates. [13] This increased marginal cost for While the 50th employee serves as a reason why many critics long-term effects of the ACA believe that the ACA is “killing jobs” and also why many Affordable Care Act on small business owners have concerns about expanding their businesses. Howeverremain largely unknown, regulators delayed penalties against firms who employ between 50 policymakers should adopt prudent and 99 employees until 2016 as a transitional relief necessary measures in order to mitigate increased healthcare costs for small businesses from the employer mandate.

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