Inc.’s Adam Bluestein and Julie Weed of The New York Times have come up with an interesting way of covering the business angle of the Affordable Care Act—by profiling several businesses and showing the options they face under its new rules. For that clarifying coverage, they deserve a tip of our hat.
Why is this important? The business community may ultimately decide the fate of Obamacare. Crafters of the health reform law avoided a full-blown employer mandate, the kind of system once contemplated in the dark ages of reform during the Clinton years. They knew business wouldn’t buy it. So instead, they devised complicated rules and penalties to coax businesses to buy insurance for their workers. Think of it as a modified version of the “play or pay” approach to getting everyone covered in a private system that isn’t really universal.
If lots of business don’t play, and thus send their workers to the state exchanges to buy coverage, the fear is there won’t be enough subsidies for everyone. “There wasn’t enough money to give everyone a fair and equitable subsidy,” Randy Hardock, a Washington tax lawyer, told attendees at a December briefing sponsored by the Employee Benefit Research Institute. “One of the assumptions is that employers had to stay in the game. If employers don’t, the ACA fails.”
The Kaiser Family Foundation says that 94 percent of businesses that employ 50 to 199 workers already offer health benefits. The biggest employers do, too. So the rules are aimed at the small guys, a point the media is just beginning to explore. “Small businesses with fewer than 50 workers do not have to provide health insurance, and they are not subject to penalties if they don’t,” Sara Collins, an insurance expert at The Commonwealth Fund told me. “There’s a big misunderstanding they have to offer it, and that’s just wrong.” Workers in these firms will be able to shop in the state exchanges, possibly receiving subsidies to help pay the premiums. There will be no penalty for their employers if they do. (Note: the Fund is a sponsor of The Second Opinion.)
When it comes to businesses with more than 50 workers, it’s a different story, one that both Inc. and the Times have begun to tell. On Jan. 1, 2014, a small business that employs more than 50 full-time workers won’t have to provide insurance either—but if it doesn’t, and a full-time worker goes to a state exchange and is eligible for a tax subsidy to help pay the premiums, the employer must pay a penalty, euphemistically called a “responsibility payment,” of $2,000 per worker. The penalty does not apply to the first 30 workers in a firm. For some employers, making the payment may be cheaper than paying for health insurance.
In a March 20 article, the Times’s Weed told the tale of a small wholesale baker near San Diego choosing among three options: buy insurance for all workers; buy no insurance for workers; or reduce staff and outsource jobs to stay below the 50 employee limit to avoid the penalty. Weed then asked others to weigh in with advice for the bakery—an accountant; the owner of a bakery in Seattle (who recommended offering insurance for full-time workers); and the ubiquitous Jonathan Gruber, an economics professor at MIT and an architect of Obamacare. As far as I know, his expertise is not running a small company, but he’s always available for a quote.
I wish Weed would have picked an adviser with more expertise in small business finances. She did open the “You’re the Boss” blog on the Times’s website for comments and advice, and told readers that she is planning an update on what the bakery decides to do.