Small Employers Divided Over New Health Care Insurance Provision

The mandatory employee healthcare provision under the Patient Protection and Affordable Care Act (PPACA) is causing mixed reactions from small business employers.

Commonly referred to as “Obamacare,” PPACA requires that employers with 50 or more full-time workers offer healthcare coverage to each employee by 2014. Employers who choose not to provide coverage risk paying a penalty of $2,000 per worker, outside of their first 30 employees.

Opponents of the new law believe that it will have negative consequences on business, including effects on small business owners’ ability to expand or to hire new workers. Employers forced to offer health insurance may lay off workers or shift more people to part-time status to compensate for additional costs. They may also choose to pass costs on to customers by raising prices.

Texas-based Robert U. Mayfield owns five Dairy Queens but has put the brakes on a plan to acquire a sixth DQ franchise until he sees how the new healthcare law will affect his business. “I’m scared to death of [the new law],” he says. “I’m one of the ones sitting on the sidelines to see what’s really going to happen.”

Firehouse Sub’s chief executive Don Fox is another employer who fears the new law will curtail business expansion. “Any dollar that gets diverted,” says Fox, “whether it’s through Obamacare or increased tax rates, puts franchisees one dollar further away from being able to expand their businesses.”

Although for some companies it may be cheaper to pay tax penalties rather than offer individual health coverage, others say offering coverage is essential to attracting top employees. Small business owner Lisa Goodbee offered healthcare coverage this year to her 15 employees for the first time in her firm’s history. She says, “We’re an engineering company and we need to hire the best of the best.”

Tax credits are another reason for businesses with fewer than 25 employees to offer coverage, an incentive of which Ron Nelsen, owner of a garage door installation business in Las Vegas, has already taken advantage. “They’re in the bank,” says Nelsen of his tax credits.

However, business owners still have many unanswered questions concerning the highly complex new law, such as exactly how the law defines a 30-hour week and the precise level of coverage an employer must provide. Employers are waiting for the administration to issue final rules on some key aspects of the healthcare law. In the meantime, they are researching how the law will affect their businesses and are devising their strategies accordingly.

According to a recent survey by the benefits consultant company Mercer, almost half or retail and hospitality employers do not offer coverage to all their full-time employees. Low-wage industries like restaurants and hotels are likely to be hardest hit by the new law.

Resource:

Abelson, Reed and Steven Greenhouse. “Small Employers Weigh Impact of Providing Health Insurance.” The New York Times. November 30, 2012.

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