The landmark health care case decided recently by the Supreme Court is being discussed and accessed by employers throughout the country. Both sides of the debate agree that the health care bill is the largest income-redistribution program enacted in decades. It collects taxes from the prosperous, offers new Medicaid benefits to the near poor, and provides sliding-scale subsidies to a broad range of families earning below the median income. Last week we talked about the small business benefits of the Patient Protection and Affordable Care Act.
On the other side of the debate, what happens if you own a medium to large business? If you are a business owner who has more than 50 Employees, you will see the largest number of changes in how insurance coverage is addressed. You can either sponsor a health plan for 100% of your employees starting in 2014, even if they receive government subsidized insurance, or pay what’s called a shared responsibility requirement for each worker under your employ.
The hiring of a company’s 50th worker can cost a company an extra $40,000 per year. PPACA raises employment costs by requiring employers to offer qualifying insurance coverage or else pay a penalty. Because this requirement would apply only to firms with more than 49 full-time employees, it will discourage the hiring of full-time workers. Firms with more than 49 workers will have to pay $2,000 a year for each employee without qualifying coverage (the first 30 workers are exempt). This may encourage employers to substitute part-time for full-time workers to avoid the penalty. The National Federation of Independent Business has an informative table, which examines the tax penalties assessed under different scenarios here.
This new requirement may make it more expensive for firms to hire workers in the future. Consequently, it could destroy jobs, and many firms may slow down on hiring in anticipation of its implementation.
The “free-rider” provision. The penalty for not signing up for insurance, $750 a year, is small relative to the cost of health care coverage – about $5,500 a year. Because insurance companies will be required to take all applicants, healthy people (especially the young) would be wise to pay the penalty rather than buy the insurance. This makes the pool of insured individuals sicker and more costly, on average, and will make premiums more expensive. With higher premiums, more people will choose to pay the penalty, and the downward spiral will place an even bigger tax burden on those participating in the program.
Part-Time and Seasonal Employees. Fines to employers under the employer mandate also are imposed on workers who are not full-time employees, where a combination of employees working 120 hours per month (around 30 hours per week) count as one employee. This provision in the bill especially hurts seasonal businesses, where it is frequently not cost effective to provide insurance benefits to an employee who will only be with the firm for a short period of time.
How do you believe the PPACA will affect your business?