What you should know about Obamacare for 2016
Is Obamacare Killing Small Business in America? What You Should Know for 2016.
Too dramatic? Killing small business? Maybe. You decide. In any event, it can’t be argued that the Affordable Care Act (ACA or Obamacare) with its Health Insurance Tax, is creating significant challenges for small businesses, challenges that will increase for some in 2016.
Consider these Obamacare-related nuggets:
The Health Insurance Tax will reduce private-sector employment by 152,000-286,000 by 2023, according to research by the National Federation of Independent Business released earlier this year.
Small employers spend an average of 13 hours or $1,274 a month just to keep up with Obamacare compliance, according to a 2014 survey by the National Small Business Association. And the program will be even more complex starting in 2016.
78% of small business owners say increased health insurance costs will force them to make changes to their business; 33% say the increased costs will likely lead to reduced employee health insurance offerings; 32% say they will delay other business investments; and another 32% say they will stop hiring new employees, all according to a 2015 poll taken on behalf of the National Federation of Independent Business and the National Association of Manufacturers.
Additionally, 44% of small business owners that are currently exempt from requirements to establish group plans because they have less than 50 employees, do so anyway guided by moral obligation. 52% of that same group now says they might have to drop healthcare completely to remain financially viable, according to a 2015 eHealthcare poll.
And more bad news. An obscure IRS regulation that went into effect on July 1, 2015 could impose a fine of $100 a day per worker—up to $36,500 each, up to $500,000 annually—for businesses that get caught providing tax-free assistance with their workers’ individual health insurance premiums or medical costs, without explicitly following the new market reforms laid out in the ACA. There is legislation in both houses to remedy this. Pending legislation.
Plus, the cherry on top, now that the law is fully in effect, the costs are not only becoming clearer but are rising, as large Marketplace insurers continue to seek higher rates and narrower plan options for 2016. Highmark Health became the latest of several large insurers, including Blue Cross and Blue Shield (BCBS) of Texas, to announce plans to scale back offerings in Obamacare marketplaces, following financial losses identified as $318 million by the Wall Street Journal. How did that happen?
A sicker pool of subscribers than anticipated, according to the company. BCBS withdrew from the state’s Marketplace in New Mexico entirely after regulators rejected its proposed rate hike of more than 51 percent and North Carolina BCBS is seeking a 35 percent rate hike, is withdrawing 367,000 ACA-related plans and decided to no longer offer its broadest-network plan in three of the state’s most populous cities.
So, Obamacare is Bad for Small Business. But, Is There Any Good News?
Sorry. Not really. Beginning in 2016 the ACA expands the definition of small employers to include those with up to 100 employees. As a result, mid-sized companies with 51-100 employees must start abiding by ACA regulations governing the small group market. That means being subject to the essential health benefits regulations which define the set of health care service categories that must be covered, and being required to satisfy a metallic benefit level raging from bronze to platinum reflecting the actuarial value of the plans’ cost-sharing features.
These new requirements will impose a greater reduction in benefit and cost-sharing flexibility for groups sized 51-100 than currently. Plus, plans likely will need to be changed to meet benefit coverage and actuarial value requirements. Such changes put upward pressure on premiums. And these businesses will still be subject to shared responsibility penalties that businesses sized 1-50 are not. This change could affect over 150,000 businesses, with more than 3 million workers, roughly 30 percent of the employees in groups sized 1-100.
A few more things to consider relating to Obamacare in 2016:
- All employers covered by FLSA (Fair Labor Standards Act) are required to provide employees notice about the availability of the ACA’s Health Insurance Exchanges. Keep in mind that it’s now the requirement for all individuals to have minimum essential coverage, even if it’s not available through work. That includes you and your family.
- If you do offer health benefits:
- you must meet the new standards for plan structure. For example, all group health plans must cover preventive care without cost-sharing and may not place an annual or lifetime limit on essential health benefits.
- you must follow new eligibility and enrollment requirements. For example, the ACA requires a maximum waiting day of 90 days, and new health plan notices are required at enrollment, and throughout the year.
- you must meet the reporting requirements under sections 6055 and 6056 of the Internal Revenue Code, which requires you to file information returns with the IRS and provide statements to your full-time employees about the health insurance coverage you offered.
- and while you want to reduce employee hours to less than 30 per week so as to reduce healthcare costs, keep in mind that you could be violating ERISA 510 (Employee Retirement Income Security Act of 1974) and could therefore be sued, so be certain to handle it in a way that limits your exposure to 510 claims.
- you and your advisers may want to take action now to restructure your health coverage offerings to avoid the coming “Cadillac tax.” Beginning in 2018, employer-sponsored group health plans will be subject to a 40% non-deductible excise tax on the dollar amount of coverage that exceeds certain specified thresholds. Wellness programs, telehealth operations and contracting with providers to improve employee health could improve health overall and, in turn, lower these costs.
And another word of caution. Be careful when evaluating alternatives to traditional plan offerings. While there are legitimate ways to lower costs, there are also an increasing number of plan designs and schemes that could expose you to liability, including employer payment plans, drug importation programs, incentive schemes and employee classification schemes. If it looks and quacks like a duck, it likely is.
Other than raising the white flag, the best solution here for small business owners is to get…and stay…informed. Turn to your health insurance adviser or health benefits company for advice. Or you might consider using new ACA compliance software to understand and implement compliance.
Share the challenges your business is facing relating to Obamacare. Comment below. And, if you’re looking to boost cash flow management through invoice factoring with no hidden fees, we’re here to help. Apply online now.