Healthcare Reform - What's at Stake for Small Business?

The noise is deafening as the Affordable Care Act or "Obamacare" takes hold in the US and begins to effect small business owners and managers. I am totally on board with free speech and the political process and with the changes in Washington now we are hearing a lot of rhetoric from both sides of the aisle on how the healthcare law should be modified, restricted, or even repealed. We are a democracy and everyone should be heard.

But I’m not okay if the noise prevents small businesses from truly understanding this landmark in health care coverage. And I’m definitely not okay if the noise drowns out rational and well-thought-out business decisions that could affect small companies and their employees as they try to choose the right health care options and benefits.

So there’s a lot at stake in this regard with Obamacare, which will dramatically change how Americans receive health care.

The change will be especially pronounced for those working in small enterprises.

And it’s the owners and employees of these businesses that I want to help.

From my perspective, the best way I can do this is by being a neutral voice of reason, a helpful guide who assists small-business owners and their employees as they navigate this significant transition, and a fact-based purveyor of much-needed information.

Having said this, let’s get educated with some background.

In the past, small businesses were able to make a free-market decision about whether they wanted to provide health insurance benefits to their workers.

If they did provide these benefits to their workers, they were able to partially deduct the cost of the benefits from their taxes.

Businesses that did not provide insurance to their employees probably did not do so because of economic reality, lack of value placed on the benefit by employees, or because it was too administratively difficult to shop for insurance for their workers. Maybe the time was better spent running the business, and any employer penalty for not providing insurance to employees was emotional – not financial.

Based on the numbers, there’s been a lot of emotion out there.

Only 49 percent of firms with 3 to 9 workers, and 78 percent of firms with 10 to 24 workers, offered any type of health insurance to their employees in 2008. In contrast, 99 percent of firms with more than 200 workers offered health insurance.

Workers at small firms that offered health insurance also tended to have less generous plans than workers at large firms.

One of the reasons for this problem is that small businesses have been struggling with the rising cost of health insurance more than other employers. They have been paying about 18 percent more than other employers for the same kind of health insurance, and their struggles are a big reason why people have been losing coverage. In 2008, fewer than four of 10 small businesses provided health insurance, compared with six out of 10 in 1993.

Under Obamacare – which will require small businesses to consider the question of providing insurance to their workers – it’s likely that the wide gap between what small business pays for insurance and what big business pays for insurance will narrow, because smaller employers will be grouped with other buyers in a health exchange that will increase the insurance pool.

Still, we don’t know how this is going to turn out, despite a research survey from Deloitte, which tells us that about one in 10 employers in the United States will drop health coverage for employees in the next few years as the major provisions of Obamacare take effect.

Fortunately, however, the delay of Obamacare’s employer mandate for a year means that employers with 50 or more full-time employees don’t have to immediately confront the dreaded and complex "pay-or-play" decision – either provide insurance for employees, or pay into a system to subsidize the uninsured worker.

And that’s a good thing.

Pay-or-Play was going to be a difficult decision for employers, because it just wasn’t clear how to Play.

The delay gives employers time to do some research and take a hard (and more informed) look at Playing before they decide on Paying.

My blog will attempt to provide some guidance to employers as they consider the road ahead. I hope to hear from you on what questions you have and how I can help you with your decision making.