How should small-business owners deal with the Affordable Care Act?
Well, I believe in doing the math – and I think that’s a wonderful initial step. Run the numbers. See where you come out. You might be surprised.
I also think you have to understand the demographics and the competitive landscape before making decisions.
But, one way or another, you’re going to have to grapple and wrestle with a whole new set of problems and solutions – so don’t expect an 11th-hour reprieve.
Let me get more specific – so I can be more helpful.
If you’re a small-business owner, and you currently provide insurance to your employees, ask yourself if it now meets the requirements for a qualified health plan under the Affordable Care Act. Two key variables that matter are minimum essential coverage and affordability. Ask your broker, and ask your insurance agent. If you’re not meeting the requirements, you need to start shopping now.
If you’re a small-business owner, and you don’t currently provide insurance to your employees, but you want to do so, you really need to understand the micro details and data surrounding your employee demographic population and what the rough costs will be for buying insurance on the new health exchanges.
Part of this is cost analysis – will your employees be able to get better coverage on the exchanges at a better price than you can give them? If so, you might consider some other ways to reimburse employees for insurance costs. Unfortunately, if you have a wide range of incomes in your workforce, the individual benefit or burden can vary widely.
I also suggest that small-business owners look carefully at the availability of expanded Medicaid in their state as well as the levels at which employees may be able to receive government subsidies. We discussed the pet food retailer earlier, and the take-away from that story was that just getting a handle on the options for employees can bring remarkable clarity to the picture.
The exchanges have been gummed up a bit since they launched, but the glitches will be worked out and small-business owners need to browse and understand what’s being offered to their employees in these marketplaces. Some state exchanges will also sell to small businesses, and that is well worth exploring for the sake of price comparison.
I really recommend that small-business owners look into subsidies and tax credits that their companies can receive by providing coverage.
One of the provisions of the Affordable Care Act is the ability for businesses that already provide health insurance to their workers to receive a tax credit. But to qualify for a small- business tax credit of up to 35% (up to 25% for non-profits) of premium contributions through 2013, a company must have fewer than 25 full-time equivalent employees; pay average annual wages below $50,000; and contribute 50% or more toward employees’ self-only health insurance premiums. More than 170,000 small businesses have claimed credits to offset the costs of health coverage, but an estimated 1.4 million to 4 million employers could be eligible for the incentive.
I have to be honest, though. This is probably not going to be a huge sum of money. And, in terms of subsidies, I would say that these are tricky and might not be worth the paperwork, especially because they are only funded for two years.
Finally, small-business owners have to be able to discuss this issue with several key audiences.
Start with a trusted advisor. The conversation has to revolve around the moral obligations of providing employees with health coverage in addition to the financial realties of the business.
Another discussion might involve colleagues and competitors – what are they going to do about employee health care?
Keeping your ear to the ground on what your industry, or what other businesses in your town, are planning to do will help guide you – especially when it comes to the talent war and your ongoing ability to attract great employees that will help you compete and win in the marketplace.
Lastly, I can’t emphasize how crucial it is for small-business owners to educate their employees about the new health care dynamic and the decision to provide or not provide coverage.
Image credit: PathDoc/Shutterstock