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Is Obamacare the bogeyman of small business hiring?

Posted by on Sep. 29, 2013 at 11:40 PM
  • 6 Replies

Is Obamacare the bogeyman of small business hiring?

Sep. 27, 2013 at 12:27 PM ET

US President Barack Obama speaks about the Affordable Care Act at Prince Georges Community College on September 26, 2013 in Largo, Maryland.
MANDEL NGAN / AFP - Getty Images
US President Barack Obama speaks about the Affordable Care Act at Prince Georges Community College on September 26, 2013 in Largo, Maryland.

With millions of uninsured Americans soon eligible for employer-sponsored health coverage, many small business owners fear the new law will crush their profits and make it too costly to hire new workers.

Jim Houser, owner of Hawthorne Auto Clinic in Portland, Ore., isn't one of them.

"The biggest factor in hiring is consumer demand," he said. "We recently expanded (our staff) in part because now we know what to expect with our health-care premiums."

Complying with the law's extensive red tape and forms—another major headache cited by small business owners—also hasn't proven onerous, said Houser, an ardent supporter of the law who has testified before Congress in support of it.

"You can turn it all over to your insurance agent or your broker—just like my accountant handles my taxes every year," he said "They're the ones who are going to have to do it."

Houser, who has been offering his employees health insurance since he and his wife opened their auto repair business 30 years ago, said the new law isn't hurting his bottom line either. In fact, after nearly doubling from 2001 to 2009, his health insurance premiums began falling two years ago. And last year he got a tax credit for $12,900 to help defray those costs.

More than three years after the Affordable Care Act was enacted, employers on Tuesday face the first key deadline under the new law, when they're required to notify employees what kind of coverage, if any, they plan to offer. Companies then have until 2015 to implement those plans or face penalties if they don't offer affordable coverage to all full-time workers. That coverage mandate was supposed to take effect Jan. 1, but the administration delayed it in response to employer complaints.

(Read more:Obamacare: CNBC Explains)

When the law was passed, many small business owners initially feared it spelled financial ruin, said Gary Levy, head of the hospitality industry practice at CohnReznick, an accounting firm.

Video: Rep. Debbie Wasserman-Schultz, (D-FL); Bob Shrum, Democratic strategist, and Joe Watkins, Republican strategist, discuss the likely fallout from a government shutdown and delaying the Affordable Care Act.

"When it first came out, everyone said, 'Oh my God it's going to kill our cash flow; it's not going to work,'" he said. "The knee jerk was this is a very bad thing for our business."

But after taking a closer look, many businesses have found their initial fears were overblown, said Levy, who has been advising clients on how to minimize the impact. For most, the new law "doesn't have to be painful," he said.

For starters, very small businesses—those with fewer than 50 full time workers—are exempt. That means some 96 percent of all U.S. businesses are off the hook.

Those with 50 or more full timers are required to offer insurance, but they're allowed to pass along all or part of the cost of the premium—up to 9.5 percent of a covered worker's household income—to their employees. Lower-income workers may also qualify for tax credits or subsidies to help offset the cost.

Many employers will also find their financial burden diminished by workers who don't sign up for coverage. Some employees may already be covered by Medicare or Medicaid. Others may balk at paying their share of the premiums.

Employees who decline coverage that costs less than 8 percent of their household income will have to pay a penalty of as little as $95, for example. That may seem like a better option than paying several thousand dollars a year in premiums, said Levy.

"The 30-year-old guy who feels he doesn't really need health care is probably going to pay the $95," he said.

That math changes next year, when penalties rise to $325 (or 2 percent of income, whichever is greater) and $695 (or 2.5 percent of income) in 2016.

Business owners who are new to the health insurance market are also fearful of unpredictable, rising insurance premiums. No one knows how fast insurance premiums will rise. But there are recent signs that rapid increases in health-care costs have slowed dramatically—whether or not because of the new law.

"We're actually having some success at controlling health-care costs over the last several years," said Josh Gordon, policy director at the Concord Coalition, a budget watchdog group. "All of that is happening underneath the surface of the policy debate over Obamacare."

Some opponents of the law speculate that employers who are close to the 50-worker threshold may hold back on hiring—or even lay off workers, if they're just over the limit—to duck the coverage requirement. But companies with payrolls of between 40 and 75 employees account for just 3 percent of all U.S. businesses and about 5 percent of the labor force, according to the latest Census data.

To be sure, some of the roughly 200,000 small businesses affected by the law are going to feel a serious profit squeeze. Those include restaurants, which typically operate on thin profit margins that can vary widely throughout the year. Many have little or no cash cushion to fall back on during slow times of the year.

(Read more: Americans blame Obamacare already for higher costs)

"I agree with the concept of the law, but I'm a small business that struggles with so many other costs and regulations — especially in New York City," said Michael Glick, owner of Parlor Steakhouse in Manhattan's Upper East Side. "This is a killer for the profits in the restaurant industry, and I do believe it's a jobs killer."

Employers with lower-income workers will have a harder time passing along coverage costs because the law caps a worker's contribution at 9.5 percent of household income. If the employee is asked to pay more, and gets a better deal on one of the new insurance exchanges, the employer is on the hook for a penalty.

And there's no doubt the rules make it difficult — if not impossible — for businesses to anticipate their final cost until they know how many workers are going to accept or decline coverage. For example, the process of estimating the impact of a household income cap on a given worker's contribution gets complicated when the employee has a working spouse or another source of income.

(Read more: What's in a name? Lots when it comes to Obamacare/ACA)

That's one reason all companies are required to notify workers of their coverage plans by Tuesday and begin figuring out who wants to opt in or out of coverage.

Restaurants and other seasonal businesses whose workers put in variable hours could also face staffing headaches as employees fall above or below the 30-hour a week definition of "full time." That could prompt some businesses to try to cap hours — or even split ful-ltime jobs into part-time positions — to get around the law.

But for most businesses, those strategies are likely more trouble than they're worth, said Levy.

"Some people do some pretty crazy things to try to avoid (the law)," he said.

By CNBC's John W. Schoen. Follow him on Twitter@johnwschoen.

National Woman's Party


by on Sep. 29, 2013 at 11:40 PM
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Replies (1-6):
yourspecialkid
by Platinum Member on Sep. 30, 2013 at 8:01 AM

 As an employer, I would offer a pension plan before I would offer insurance.  There is no way I would wade into this mess.

 

yourspecialkid
by Platinum Member on Sep. 30, 2013 at 8:05 AM

A lot of businesses don't have a wide enough profit margin to cover it.  They will do what they have to in order to keep the business open.

A family of 4 making $50,000 a year will spend $1274 mo for a mid level fed exchange policy here in Wyoming. 

WritingMom777
by Member on Oct. 1, 2013 at 8:13 AM

Um . . .where are you getting that information from?  When I went on the Kaiser Family Foundation, and entered Cheyenne, Wyoming with a family making adjusted gross income of $50,000 this is what pops up for an estimate of the silver plan:

Household income in 2014:
212% of poverty level
Unsubsidized annual health insurance premium in 2014:
$12,115
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
6.73%
Amount you pay for the premium:
$3,365 per year
(which equals 6.73% of your household income and covers 28% of the overall premium)
You could receive a government tax credit subsidy of up to:
$8,750
(which covers 72% of the overall premium)




Quoting yourspecialkid:

A lot of businesses don't have a wide enough profit margin to cover it.  They will do what they have to in order to keep the business open.

A family of 4 making $50,000 a year will spend $1274 mo for a mid level fed exchange policy here in Wyoming. 



NWP
by guerrilla girl on Oct. 1, 2013 at 9:11 AM
People just don't understand how it works. The roll out is going to help that.

Quoting WritingMom777:

Um . . .where are you getting that information from?  When I went on the Kaiser Family Foundation, and entered Cheyenne, Wyoming with a family making adjusted gross income of $50,000 this is what pops up for an estimate of the silver plan:

Household income in 2014:
212% of poverty level
Unsubsidized annual health insurance premium in 2014:
$12,115
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
6.73%
Amount you pay for the premium:
$3,365 per year
(which equals 6.73% of your household income and covers 28% of the overall premium)
You could receive a government tax credit subsidy of up to:
$8,750
(which covers 72% of the overall premium)





Quoting yourspecialkid:

A lot of businesses don't have a wide enough profit margin to cover it.  They will do what they have to in order to keep the business open.


A family of 4 making $50,000 a year will spend $1274 mo for a mid level fed exchange policy here in Wyoming. 




yourspecialkid
by Platinum Member on Oct. 1, 2013 at 9:48 AM

 

Quoting WritingMom777:

Um . . .where are you getting that information from?  When I went on the Kaiser Family Foundation, and entered Cheyenne, Wyoming with a family making adjusted gross income of $50,000 this is what pops up for an estimate of the silver plan:

Household income in 2014:
212% of poverty level
Unsubsidized annual health insurance premium in 2014:
$12,115
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
6.73%
Amount you pay for the premium:
$3,365 per year
(which equals 6.73% of your household income and covers 28% of the overall premium)
You could receive a government tax credit subsidy of up to:
$8,750
(which covers 72% of the overall premium)



 

Quoting yourspecialkid:

A lot of businesses don't have a wide enough profit margin to cover it.  They will do what they have to in order to keep the business open.

A family of 4 making $50,000 a year will spend $1274 mo for a mid level fed exchange policy here in Wyoming. 

 

 

 It came from an AP article featured on the front page of the Wyoming Tribune Eagle.  There was also a chart.  You can google additional articles from different sources.

You don't show what level of coverage you chose...you also chose Cheyenne which has a larger population..not everyone will qualify for a subsidy.  Without the subsidy the ins you listed is $1000 a month.

Some variables......what are you getting with that policy?  A lot of the low cost premiums in the exchanges have high deductibles.  I think the WSJ has an article on this.

yourspecialkid
by Platinum Member on Oct. 1, 2013 at 9:51 AM

 

Quoting NWP:

People just don't understand how it works. The roll out is going to help that.

Quoting WritingMom777:

Um . . .where are you getting that information from?  When I went on the Kaiser Family Foundation, and entered Cheyenne, Wyoming with a family making adjusted gross income of $50,000 this is what pops up for an estimate of the silver plan:

Household income in 2014:
212% of poverty level
Unsubsidized annual health insurance premium in 2014:
$12,115
Maximum % of income you have to pay for the non-tobacco premium, if eligible for a subsidy:
6.73%
Amount you pay for the premium:
$3,365 per year
(which equals 6.73% of your household income and covers 28% of the overall premium)
You could receive a government tax credit subsidy of up to:
$8,750
(which covers 72% of the overall premium)



 


Quoting yourspecialkid:

A lot of businesses don't have a wide enough profit margin to cover it.  They will do what they have to in order to keep the business open.


A family of 4 making $50,000 a year will spend $1274 mo for a mid level fed exchange policy here in Wyoming. 

 


 

 I guess then that you have read the fine print and know exactly what everyone is going to be able to get for their money.  Right?

My numbers came from the newspaper and were sourced.

 

 

 

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