Guest Columnist - Dan Danner
Posted: November 4, 2011
Imagine a World Series where players aren't allowed to swing their bats, and instead strike out just for stepping up to the plate. That's how American small business owners, trying to create jobs, will feel in 2014 when a provision of President Obama's health care law gets underway.
The passage of the Patient Protection and Affordable Care Act (PPACA) was strike one for small business. The health care law's onerous mandates and provisions are hurling curve balls at small business owners at such a rate that there is hardly any time to recover or prepare before the next pitch is thrown.
Strike two is a nasty curveball officially known as the "employer mandate" which financially penalizes employers with 50 or more employees based on affordability of the employer's health care coverage, or lack thereof. Even businesses with a fluctuating workforce such as small retailers, restaurants, farms and manufacturers, are not immune from these financial penalties. Keep in mind, these are in fact penalties, not tax-deductible expenses.
According to the health care law, coverage is deemed not affordable if an employer's household income is less than 400 percent of the federal poverty level and if that employee's portion of their health insurance premium exceeds 9.5 percent of household income. How does an employer know this?
Should an employer's health care coverage not fall within the realm of PPACA affordability for just one employee who then decides to take advantage of a federal subsidy for insurance, then the employer must pay a fine to the federal government upwards of $3,000 a year for that one employee. Should more qualify for a federal subsidy, then that fine is assessed to the employer for each subsidized employee.
The mandate also financially penalizes employers who do not offer coverage. If a business does not offer health care coverage and if one of its employees qualifies for a federal subsidy, the employer is on the hook for a $2,000 fine per full-time employee in their company (minus the first 30); a business with just 50 employees will pay $40,000 per year to the federal government for not providing health care coverage.
Confused? So are employers across the county. Strike three.
Employers are left trying to financially prepare for unknown conditions such as the household income of their employees leaving little certainty for their business. What's more, those employers who are in a position to expand their operations may be inhibited from doing so if they want to avoid the 50-plus-one threshold of the employer mandate.
There is still time for Congress to act. However, if the act cannot be repealed, the employer mandate will push the ability to provide health insurance even further away from small businesses.