Are you a U.S. based business with over 50 employees? Have you thought about how you will respond to the requirements of the Affordable Care Act? If not, you better start now, especially if you are not currently providing a robust healthcare offering for your employees. Even if you are offering insurance, and you are faced with diminishing profit margins in this difficult economy, this new law could just add to your pains. The clock is ticking, you have less than a year to decide what to do and get your plan in place.
The Patient Protection and Affordable Care Act (a.k.a. “Obamacare”) was signed into law in March 2010. In June 2012 the U.S. Supreme Court upheld its legality.
As a result, among other things, effective January 1, 2014 the “employer mandate” goes into effect. Employers with 50 or more full time workers must provide an “affordable” government-qualified healthcare plan or pay a fine. The cost of the government required plan is not expected to be cheap. In fact, the Heritage Foundation (James Sherk, October 11, 2011) estimates the government plan will add $1.79 per hour to the cost of each full time employee. Companies have the option to provide insurance or pay the federal government a fine of $2,000 per employee per year, which equates to about $1.00 per hour. If a plan is not “affordable” for the household, and the employee must buy a subsidized policy on an insurance exchange, the company is fined $3,000.
As for “affordability” the employee contribution cannot exceed 9.5% of household income. Hmm… this implies that a company will now need to gather private information and incur additional administrative costs. Are you ready for that?
While I am not an expert on the new healthcare law, I suggest every business get their HR folks working on this now. Small and medium sized businesses that cannot afford their own staff should seek the council of an insurance broker.
Once your insurance coverage options and liabilities are known, then some difficult decisions need to be made. As I see it, employers have the following options:
- Continue to pay for coverage (which could be more expensive) or begin providing healthcare insurance benefits. While this may be costly, if may be the best for your employees and your business, especially if you are in a competitive labor market.
- Look for ways to eliminate the work via automation, process/productivity improvements, reducing service offerings, and so forth.
- Reduce full-time employees and/or increase part-time employees to get under the 50-employee rule.
- Outsource all or part of the work.
- Do not offer insurance and pay the fines.
Clearly, employers have some difficult decisions to make. Most of these options (or combinations of them) take a good deal of time and effort to implement. So, my suggestion is – get started now!