Many on Capitol Hill touted the Affordable Care Act (ACA) as a way to effectively solve the American health care crisis; just as many decried it as ineffective, inordinately complex legislation. However, sweeping political arguments don't improve small businesses' bottom line. Instead, it's worth examining the specific risks of Affordable Care Act policies and how small businesses can mitigate their impact.
While large enterprises are often able to self-insure and meet ACA standards, most small businesses must turn to outsourced providers, as noted by the National Center for Policy Analysis. With a wide variation in plan offerings and costs, it's critical for companies to evaluate prospective providers. First, ask for a detailed breakdown of costs — not just for the first year but for subsequent years under multiple scenarios. Some providers use a flat-rate increase model per year, while others operate based on claims processed or introduce other metrics to determine the total price. Due to recent and significant changes in health care legislation, it's also critical to determine that a potential provider meets all compliance and regulatory standards. Work with a trusted adviser to ensure your choices meet minimum requirements and provide competitive benefits to your employees.
Fewer Hours to Go Around
Workers' hours may be another concern for employers required to provide health benefits, according to the Society for Human Resources Management (SHRM). SHRM's report states that "14 percent of HR professionals said their organizations had already reduced part-time hours, and an additional 6 percent said they plan to do so, as a result of the ACA employer mandate." By reducing part-time hours, the organizations risk not having enough staff to perform the vital functions of the business. The report goes on to say, however, that, for most organizations, full-time hours will not be affected.
Less for More
When changing providers to meet ACA requirements, small business owners might discover a double-edged sword: increased monthly costs for employees coupled with service reductions. One aspect of the ACA is risk adjustment, which redistributes premiums paid by healthy members to sicker members on their roster to help avoid denial of coverage for those with preexisting conditions, according to the Boston Business Journal. Many insurers now charge more to make up lost ground and offer fewer services to keep internal costs down. As a result, companies must be prepared to invest time and money to find a plan both approved by the ACA and well-received by employees.
Companies with fewer than 50 employees may not be required to provide ACA benefits but, in the past, some have chosen to assist employees by reimbursing employees for part or all of their premiums each month. However, according to SHRM, the IRS has made it clear that such contributions could result in fines of up to $100 per day, or $36,500 per year per employee subsidized — even if companies aren't required by law to provide health care benefits. The rationale behind this regulation is that by offering reimbursement, also known as employer payment plans, employers are essentially creating "group health plans" that must, therefore, comply with ACA-mandated coverage requirements. Noncompliance could trigger the fine, but as SHRM notes, employers who want to help employees pay for coverage can simply increase salaries without directing the employee as to how the increase should be used.
Along with worries over the future of American health care, small businesses face unique risks of Affordable Care Act policies. Knowledge and preparation, however, can help companies address these issues.
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