Looming ACA Law Poses Challenges to Small Businesses with 50+ FTEs

Beginning in January 2016, the Affordable Care Act (ACA) will require those small businesses with 50 or more full-time employees to offer health insurance for workers. Otherwise, they will be subject to penalties that can exceed $2,000 per employee. The goal of this employer mandate is to boost the availability of affordable health insurance across the country by requiring employers to shoulder some of the financial burden. But many small business owners are claiming that the requirement will cut deeply into their profits, restrict business expansion efforts, and even threaten their business solvency. According to Philip P. Noftsinger (payroll unit president at financial service provider CBIZ), “[Companies are] really trying to assess how much the 50^th employee is going to cost.”

Particularly for smaller businesses, paying even a portion of the cost is expensive, with the average annual premium for workers over $6,100 and up to $16,600 for family coverage. Although this premium is shared between employer and employee, written into the law is that the insurance must be “affordable”: in other words, it must cost less than 9.5 percent of the employee’s entire household income. This can in turn really drive up cost for employees.

There are other complications accompanying this law that are weighing heavily on small businesses. For instance, starting in January 2016, any company with 50 or more full-time workers must file new tax forms with the IRS that provide a great deal of detail on employee head count, health insurance offered, and the like. Complying with this new rule requires meticulous record-keeping throughout the year and often a complete reconfiguration of human resources and financial systems, which in turn is driving up administrative costs for small businesses as well. In addition, for those businesses that use seasonal and temporary workers, figuring out how many qualifying employees they have can be quite time consuming and challenging.

Mandated health insurance for businesses with 100 or more workers went into effect in January of this year. Companies with 50 to 99 employees were granted an extra year before compliance was mandatory. As of now, those small businesses with fewer than 50 worker are exempt from the employer mandate. According to a recent study conducted by the Kaiser Family Foundation, only 54 percent of businesses with 3 to 49 workers offered coverage in 2015.