Practical Plan for Dealing with Obamacare

How should small-business owners deal with Obamacare?

Well, I believe in doing the math – and I think that’s a wonderful initial step. Run the numbers. See where you come out. You might be surprised.

I also think you have to understand the demographics of your employee population and the competitive landscape before making decisions.

But, one way or another, you’re going to have to grapple and wrestle with a whole new set of problems and solutions – so don’t expect another 11th-hour reprieve. If you have 100 or more full-time equivalent employees, you’ll need to insure at least 70% of your full-time workers and their dependents by 2015 and 95% by 2016. If your small business has less than 50-99 FTE, you get another year but you’ll will need to start insuring full-time workers and their dependents by 2016. Have less than 49 employees? You’re off the hook…

Let me get more specific – so I can be more helpful.

If you’re a small-business owner, and you currently provide insurance to your employees, ask yourself if it now meets the requirements for a qualified health plan under Obamacare. Two key variables that matter are minimum essential coverage and affordability. Ask your broker, and ask your insurance agent. If you’re not meeting the requirements, you need to start shopping now.

If you’re a small-business owner, and you don’t currently provide insurance to your employees, but you want to do so, you really need to understand the micro details and data surrounding your employee demographic population and what the rough costs would be for them to buy insurance on the health exchanges. If you have a large population of employees who are on the low end of the payscale, the insurance you can afford to offer might be less beneficial than having them qualify for subsidies under the exchanges.

Part of this is cost analysis – will your employees be able to get better coverage on the exchanges at a better price than you can give them? If so, you might consider some other ways to reimburse employees for insurance costs. If you decide to reimburse employees for buying their own insurance be sure you do your homework to understand any penalties you might still be hit with and any tax implications to you and your employees for the health insurance coverage.

I also suggest that small-business owners look carefully at the availability of expanded Medicaid in their state as well as the levels at which employees may be able to receive government subsidies.

The health insurance exchanges got off to a rough start when they first launched, but the glitches are mostly worked out now and small-business owners need to browse and understand what’s being offered to their employees in these marketplaces. Some exchanges will also sell to small businesses, and that is well worth exploring for the sake of price comparison. In fact, that would be a good first stop for all employers – spend an hour on the exchange in your state (or on the federal exchange if you live in a state that didn’t launch their own exchange).

What you learn might just surprise you.

I really recommend that small-business owners look into subsidies and tax credits that their companies can receive by providing coverage.

One of the provisions of the Affordable Care Act is the ability for businesses that already provide health insurance to their workers to receive a tax credit. But to qualify for a small- business tax credit of up to 35% (up to 25% for non-profits) of premium contributions, a company must have fewer than 25 full-time equivalent employees; pay average annual wages below $50,000; and contribute 50% or more toward employees’ self-only health insurance premiums. More than 170,000 small businesses have claimed credits to offset the costs of health coverage, but an estimated 1.4 million to 4 million employers could be eligible for the incentive.

I have to be honest, though. Tax credits are probably not going to be a huge sum of money. And, in terms of subsidies, I would say that these are tricky and might not be worth the paperwork, especially because they are only currently funded for two more years.

Finally, small-business owners have to be able to discuss this issue with several key advisors.

Start with a trusted friend or colleague. Have a conversation around your feelings about the moral obligations of providing employees with health coverage in addition to the financial realities of the business. Understanding how you feel about this issue and the tradeoffs you can make in your business to provide health insurance versus other compensation or benefits must be clear so you can make a decision that you can explain and defend to your employees.

Another discussion might involve colleagues and competitors – what are they going to do about employee health care? Keeping your ear to the ground on what your industry, or what other businesses in your town, are planning to do will help guide you – especially when it comes to the talent war and your ongoing ability to attract great employees that will help you compete and win in the marketplace.

Lastly, I can’t emphasize how crucial it is for small-business owners to educate their employees about the new health care dynamic and the decision to provide or not provide coverage.

Good luck! Please let me know how it goes and if you decide to make a change in your decision to provide or not provide coverage for your employees. I believe we are in a time of great change in our country and I am keenly interested in how other small business owners will respond to these challenges.