April 2, 2015

What the Health Care Law Has Meant for SBO’s

Since the Affordable Care Act went into effect, there have been both tales of joy and stories of woe as the nation adapts to the new regulations.
I have a part time job at a restaurant so I decided to do some research and share what I have learned. For the small business owner, much of the outcome of the new legislation has been that of increased cost, hassle, and misery. That’s because the ACA places a tremendous burden on SBO’s, particularly in the area of record-keeping. In case you weren’t aware of this, here’s a short summary of the new rules for all companies with at least 50 employees.

ACA Compliance for SBOs

Business owners must now keep meticulous records on their employees’ work habits. In particular, they must now track the following and keep it all on file:

  • how many hours worked
  • absences
  • how much they spend on health insurance

What this means is a mountain of paperwork, for which many SBO’s don’t have the resources. Either they don’t have a large Human Resources department to handle all the extra work, or they have a hard time coming up with the funds to outsource the work.

The Cost of Compliance

In fact, compliance with the ACA has meant more than $15,000 per year, plus a whole lot of headaches. The reason for all the tracking requirements? Any worker with an average of 30 hours per week is supposed to be offered health insurance for them and for their dependents. If they’re not, the employer will be penalized.

The other reason for all the new paperwork is cost-tracking. The employer must now track how many months an employee is covered by health insurance, and how much it cost. That’s so the government can tell whether the premiums are actually affordable.

One survey conducted by the National Small Business Association cites that a shocking 91% of small businesses saw an increase in how much they paid out per employee on health insurance premiums. About one quarter of them said the increase was more than 20% more than pre-ACA days.

Sadly, the survey also revealed that about on third of the small businesses would stop their growth because of Affordable Care Act.

How SBOs Recover Those Costs

It’s not unusual for businesses incurring these extra costs to recover those costs from their employees. In most cases, that means reducing full-time employees down to less than 30 hours, or cutting raises and bonuses.

A Legal Battle

There’s another dimension to this, particularly relevant to the legal community. It’s the PPACA Complaint filed by small business owners who suddenly incurred employer mandates because of how the IRS is interpreting the ACA.

Originally, SBO’s in states who opted out of forming their own health insurance exchanges weren’t subject to the employer mandate of the ACA. Federal tax subsidies were originally meant only for people residing in states where the exchanges were set up. For the rest, they didn’t get a subsidy and therefore their employers were not subject to mandates and penalties for not offering insurance.

Now the IRS is offering the subsidies to those individuals, triggering employer mandates for those small business organizations. Currently in the courts, this case should prove to be pivotal in the state of affairs of the Affordable Care Act and small business owners everywhere.