Strategies for Coping with Obamacare

Some small-businesses are thinking of splitting their firms or taking other steps to avoid the associated costs and regulatory burdens of the Affordable Care Act. Most owners have other less-radical options for maneuvering around the law's provisions such as transforming their workforce to part-timers, reducing their workers' hours or even lay off staff in order to remain below the thresholds established under the act. Under the law, firms with 50 or more full-time-equivalent employees will have to provide "minimum essential" and "affordable" coverage, or pay a penalty for each employee in excess of 30 full-time employees.

A recent Deloitte spot survey of employers shows that while an overwhelming 53 percent of mid-sized and smaller companies are choosing to comply with the law’s mandates by providing employer-sponsored coverage, 54 percent of executives say that the enactment of the ACA will slow their bottom line. Further, to offset costs, 17 percent of the companies surveyed plan on reducing hiring and 14 percent will reduce employee hours. (See a full survey infographic here.)

(Another surprise package delivered by Obamacare came in the form of a UPS announcement that the Atlanta logistics company plans to cut off health benefits for working spouses starting in 2014. A chief reason for the change? The added costs ACA is imposing, including the mandate that plans cover children up to age 26, its ban on lifetime spending limits, and the $65 in ObamaCare fees that will be imposed on every enrollee starting next year.)

Exploring far-reaching strategies to dodge the employer mandate isn’t uncommon, according to reports from The Wall Street Journal and elsewhere. Katie Mahoney, executive director of health-care policy at the U.S. Chamber of Commerce, because, for some business owners, “it’s a matter of dollars and cents and they don’t have it. They find a way around it or they close their business.” Average premiums for family health-insurance plans have increased 97% since 2002, according to a September study conducted by nonprofits Kaiser Family Foundation and Health Research & Educational Trust.

Carl Schanstra, owner of Automation Systems, a $1.6 million parts assembly factory outside Chicago is thinking that he might split his manufacturing business in two according to a WSJ report

This is because his plant currently employs 40 full-time workers, mostly low-paid employees who monitor the factory equipment. If sales were to continue to rise, the plant could, conceivably, employ 50 full-time workers in 2014. Under the Affordable Care Act, businesses with 50 or more full-time equivalent employees will be required, starting in that year, to offer workers health insurance or potentially pay a penalty.

Employers are in a bind. Keeping your head count below 50 full-time employee is a good way to avoid the cost of health insurance. For example, if you have 52 qualifying employees, you could lop a few heads and get to 48. Bingo! You’re not required to provide health insurance. On the other hand, you’ve probably ticked off your workers and likely damaged the business’ reputation. On the other hand, if you’re under 50 but close, and if your business is on a growth path that likely will require additional staff, think about offering health coverage anyway. You’ll be required to take that step when your head count hits 50, and continued growth may be more important than a relatively few additional insurance dollars.

Inc ran the numbers for four companies–of different sizes, in different industries, and in different parts of the country–to see how each company plans to deal with the changes brought by the new law. They’ve also put together a decision tree to help you learn which mandates, penalties, and incentives you might encounter, as well as a glossary of the ACA’s key terms and concepts.



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