Putting Small Business in a Pickle


Is it time to deal with this piece yet?

After navigating through the quiz, answering questions based on what I guessed the government would do, I got a 7 out of 10, despite not being able to explain any of the answers in depth.  While the overall benefits of the plan shocked my preconceived notions of the act, the implementation of an insurance marketplace and plethora of benefits throughout the program changed my opinion and attracted me to the large changes in the healthcare system.  However, one area of the PPACA regarding small business and employee coverage strikes me as flawed, with a slight inconsistency to the detriment of a select group of employers.

The PPACA requires that employers with 50 or more employees provide health insurance to their employees or face a fine, per employee, that grows with insurance premiums over time.  As Tom brought up in his post, there is a grey area for employers who have around 50 employees and have to make a difficult cost decision.  Additionally, smaller employers face a similar decision, as employing 25 or fewer employees and providing health insurance grants a tax credit under the act.  Eligible companies are able to provide health care plans for their employees and pay a set amount towards their coverage on the Small Business Heath Options Program (SHOP) marketplace,  with a number of plans available based on price, coverage and other features.  Incentivizing smaller employers to provide benefits towards health insurance is a great step in providing affordable coverage, and helping employees with the premium for plans and implementing the SHOP marketplace is a great way to expand coverage to as many people as possible and create a robust and more efficient market for insurance plans.  For companies over 25 employees but shy of 50, this creates an interesting dilemma, and, in my opinion, rather glaring hole in the act.

While companies with up to 50 employees may utilize the SHOP marketplace, (with that number set to grow to 100 employees in 2016) only companies with 25 or less employees are eligible for tax credits.  What message does this send to employers with around 30 employees who want to get on board with the new programs and provide coverage for their employees?  While it may not be rational to lay off a portion of your workforce to be able to provide health care for the 25 employees you can keep and remain eligible for tax credits, that is a far more attractive option for a company looking to provide health care without sacrificing the cost, which can be as high as 50% of premiums paid!  Built into this portion of the act is the cap of 35% credit to tax exempt organizations, and it doesn’t seem unreasonable to think that a tiered credit system, allowing less tax credit for mid-size firms as they near the requirement for coverage (or fines) with 50 employees.  While it isn’t necessary for truly small businesses to provide health insurance, the intent remains the same, and the goal of the act is to help provide affordable coverage for more Americans – if your employer can help and receive benefits, why not make sure that opportunity exists for all small business?

I found myself ideologically in the middle of the political quiz taken before the last blog post, and I don’t know how to analyze this gap in the legislation.  Why is there no accountability or incentive for truly mid sized firms?  What incentive is there to grow your firm if your healthcare costs not only rise at 50 employees but at 26 as well if you choose to provide benefits to those working at your company?


6 comments on “Putting Small Business in a Pickle

  1. I agree that this cutoff puts businesses in a sticky situation to make some difficult decisions. Businesses are expected to cut their costs to be efficient and this law adds another cost that must be managed. It will be interesting to see how businesses respond when the mandate goes into effect.

  2. It will be interesting to see the effects on hiring and hours once these numbers are put into action. Businesses are going to be looking for major loopholes in order to save as much money as possible. Smaller companies especially are going to have some serious questions to answer in the upcoming months and years.

  3. I have discussed the exact dilemma you address with my dad multiple times as he used to operate a small business with few employees as an LLC physician. It’s hard to make decisions between your business and your employees when both are very important entities. The tax implication of not providing the insurance are not being as expensive as providing all his employees quality insurance. It is very much so a huge decision that drove my dad to become a partner with a large hospital to make sure his business and his employees would remain stable and health insurance would be a problem for the hospital to solve.

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