If you run a small business, you've probably been paying attention to the progress of the Patient Protection and Affordable Care Act as it came before the U.S. Supreme Court. The Supreme Court's ruling affects how small businesses approach employee health care.
The act, originally signed into law by President Barack Obama in March 2010, represents a major overhaul of health care oversight and regulations in the United States. Among many other items, the act greatly affects how businesses will provide health care to employees in the future.
Then, in June 2012, the Supreme Court upheld much of the act as constitutional, meaning the efforts of opponents to rescind enacted portions — and to prevent the portions not yet enacted from taking effect — hit a major roadblock.
In short, small business owners and operators need to start planning for a health care future that is far different from the recent past. Joe Berardo, the president and CEO of self-insured health plan provider MagnaCare Inc., says that future will look markedly different depending on the state in which your business is located. Each state will determine whether it is going to introduce a health-insurance exchange of its own or look to the federal government to provide one.
Berardo says businesses with 30 or fewer employees need to be especially careful regarding how they provide — or don't provide — health care benefits. The favor you think you're doing for yourself and your employees could end up becoming a significant hindrance, especially for those employees who don't possess a great deal of disposable income to pay for health care costs up front.
"If you're an employer of fewer than 30, you really have no penalties in the process if you should decide to not provide coverage once the exchanges are introduced," Berardo says. "There are a lot of employers of fewer than 30 who currently do provide coverage, and you might have an employer who thinks he's doing a good thing by saying he's not going to provide coverage and give everyone a little bit of a raise instead. Then they can go out to the health care exchanges, and some employees will maybe get subsidies, and they'll get insurance."
But the people who are eligible for subsidies might not have the financial resources to pay for insurance up front.
"They're not really going to have the disposable income to pay insurance premiums and then wait to file the income taxes to actually get the credit," Berardo says. "I think most of the middle class, and particularly the lower-middle class, will struggle to pay those premiums in advance. So we do run the risk of having more uninsured people."
Each small business owner is going to face a judgment call on whether to provide benefits or allow employees to seek their own benefits. In most cases, it's going to come down to a cost-benefit analysis.
"If you employ more than 50 people, you'll have to decide whether it's better from a practical perspective to pay a $2,000-per-employee penalty for not providing health insurance or the contribution toward an insurance plan," Berardo says. "You are going to have some employers who say ‘Look, I'm just out of this game. I'm going to look to the exchanges the government has set up and let people go buy their insurance.'"
However, benefits packages are still a large part of attracting and retaining top talent, so it might be in your best interest to continue providing them. "Ultimately, you're going to have to meet with your insurance broker, consultant, accountant or lawyer," Berardo says. "They're going to have to make sure that once all the guidelines are fully vetted, the plan they're offering to employees is good for the business."
Berardo says a meeting with your insurance broker is the first step in discovering the plan of action that will work best for your business. Once you understand how the national law plus the specific laws of your state affect your business, you'll be able to construct the best possible plan of action.
This information is general in nature, is provided for educational purposes only, and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. Regions neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.