Just over a week after the Supreme Court’s landmark decision to uphold the Affordable Care Act (ACA) (aka Obamacare), the opinions on both sides of the debate as to how the new law might impact small business owners are all over the map. Calling it a “historic win for the nation’s six million small businesses and their 54 million employees,” the White House claims the ACA will ensure small business owners endure “fewer administrative headaches, pay lower premiums and receive help to make the cost of covering employees more affordable.”
By way of quick summary, the new law requires all businesses with 50 or more employees to provide them with “affordable” health-care benefits by 2014. While these small businesses can buy insurance from health insurers directly or opt into professional employer organizations that also provide coverage as they always have, the ACA now also allows for the creation of health-insurances exchanges. These exchanges will operate on the standard insurer’s principle of diffuse risk, much the same way a large corporation does. In other words, the more consumers of all ages who join a particular plan or who use a certain provider affiliated with an exchange, the lower their premiums. At least that’s the intention.
While there are many small business owners who agree with this approach and think it will work, as evidenced in both the popular and trade press of late, there seem to be just as many who do not. In fact, opponents of the ACA have been very vocal in their belief that it will present small businesses with an onslaught of complex compliance challenges as well as a host of new taxes and financial burdens that will ultimately result in closed businesses and job losses. Given the fact that the economy is still struggling to recover, this is not a pretty scenario.
One thing is for sure, keeping track of the potential pros and cons of the ACA can be every bit if not more complicated than the legislation itself. So in an effort to make some sense of it all, we’ve culled together a brief overview of just a few of its more specific advantages and disadvantages as they have been put forth by pundits on both sides of the debate over the past week or so. And here they are:
ACA’s Potential Advantages:
• The new legislation limits how much small business owners’ premiums can go up each year. Some company’s premiums may actually be lower than they are now once the law takes full effect. It eliminates the surcharges that insurers are now allowed to impose on companies who have patients with serious medical problems, and businesses will get tax credits for six years for providing coverage.
• Because anyone and everyone will have access to affordable insurance options, smaller companies will now be able to lure the best and the brightest talent away from larger companies.
• Some are speculating that the ACA will actually fuel a bit of an entrepreneurship boom in the coming years as aspiring business owners who were once held captive by the need to have health insurance benefits will be free to explore other options.
• Many small business owners say they are relishing the thought of having a clean conscience when it comes to health insurance. Now their employees with pre-existing conditions will have other options if for some reason they can no longer provide them with insurance. Furthermore, small business owners are saying they will enjoy the peace of mind that comes with knowing they too can find insurance should something happen to their business.
ACA’s Potential Disadvantages:
• Small businesses with more than 50 employees but that are not much larger will continue to have trouble paying for health insurance, so much so that they may let some employees go and will feel compelled to keep hiring to a minimum to escape any threshold penalties.
• Small businesses that currently offer insurance to their employees may simply stop doing so if they find the resultant penalties are less costly. Many small business owners are already saying they would rather give their employees a raise and have them shop for their own insurance than continue on as they have in recent years.
• The ACA impedes potential small business growth at a time when we need it the most. Because it involves multiple locations, each with 50 or fewer employees and oftentimes across state lines, the franchise industry may be particularly hard hit by the new law’s requirements.
• Many small business owners will shift their full-time work force to part-time to escape the new mandate and its associated penalties, or they will raise prices on consumer goods to offset any impact on potential profits.
While dissention in the ranks as to how the ACA will ultimately impact small businesses’ bottom line is sure to continue, both sides do seem to agree on one thing. The current legislation as it is written does virtually nothing to address the real root of the problem at hand―the skyrocketing cost of health care. In fact, according to the World Health Organization, the United States spends a higher portion of its gross domestic product on health care every year than any other industrialized nation. Something must change and soon.
While working toward affordable access for all if not most and agreeing on what that looks like is admirable and must continue, serious health care cost containment needs to be every bit if not more important. To put all of our energy into one aspect of this very complicated issue at the expense of all others would be short-sighted and will ultimately get us nowhere.
For more great insight on the ACA debate, we recommend you click on the following articles of interest:
The Wall Street Journal (WSJ)
Mixed Small Business Reaction (WSJ)
Franchise Industry Concerns (The Washington Post)
Inc. (on the potential entrepreneurship boom)