Small business owners trying to decide whether to offer healthcare coverage to their employees can be forgiven if they’re feeling a bit confused. The Patient Protection and Affordable Care Act — widely known simply as Obamacare — is an extraordinarily complex piece of legislation.
Its interpretation is made even more difficult by changes currently under consideration in Congress, postponement of effective dates for key provisions, and uncertainties about the ultimate cost of providing health coverage as an employee benefit.
Employee Benefits Survey
In the face of all this confusion, small business owners must still weigh carefully the value of the healthcare benefit in attracting high-quality employees.
In its 2012 survey on employee benefits, Monster Insights, a subsidiary of Monster.com, asked a cross-section of nearly 1,700 employees which employee benefits were most important to them.
To no one’s surprise, healthcare coverage was the number-one choice of roughly one-third of respondents to the survey. Vacation time, performance benefits (bonuses), and retirement plans were ranked first by 25, 9, and 8 percent of respondents, respectively.
Good Salary Top Goal
Further muddying the waters was a survey of job seekers conducted in October 2013 by Beyond.com, an online career placement firm.
Beyond’s survey, which polled 5,000 job seekers, roughly half of whom were 49 to 67 years old, showed that most — 61 percent — are concerned primarily about getting a decent salary whether or not healthcare coverage is provided.
Of those who said that salary is their top priority, 31 percent revealed that they don’t currently have health insurance.
Although Beyond’s survey didn’t directly address the question, it’s possible that some job seekers were planning to sign up for individual healthcare coverage, which is now easier and sometimes less expensive to obtain under Obamacare.
Impact of Life Changes
Beyond’s survey doesn’t look at how life changes impact health insurance, which is nevertheless an important — and sometimes decisive — factor for employees who are facing such life changes as marriage, pregnancy, legal separation, or divorce.
Owners of small businesses with less than 50 employees are exempt from the so-called Employer Mandate, which requires companies to provide healthcare coverage for their employees or to pay a fine for failure to provide coverage.
However, although they’re exempted from providing coverage, small businesses still have a number of obligations to fulfill under Obamacare. They must provide notification to their employees that a Health Insurance Marketplace exists and that employees are eligible for a tax credit if they do purchase such coverage.
Employers Must Supply SBC
If employers opt to provide coverage, they must supply employees with a Summary of Benefits and Coverage, which explains what the plan covers and what it costs. Employer-sponsored health plans cannot mandate waiting periods in excess of 90 days before employees are eligible for coverage. Employers must increase Medicare tax withholding for single taxpayers who make $200,000 or more and taxpayers who are married and filing jointly who make $250,000 or more.
Incentives to Offer Coverage
In addition to the obligations it imposes on small business owners, Obamacare also provides a number of incentives designed to motivate more businesses to provide employer-sponsored coverage. At the top of the incentives list is the Small Business Health Options Program, or SHOP, which allows small companies to pool their risks together in order to gain access to lower costs, more insurers, and a broader range of options.
Another incentive, available only to small businesses with less than 25 full-time employees, is a tax credit of up to 50 percent of the amount the employer pays toward insuring employees. To qualify for this credit, businesses must pay for at least 50 percent of the cost of health coverage for a single full-time employee who earns less than $50,000 a year. And such coverage must be purchased through SHOP.
NSBA Health Care Survey
Perhaps emblematic of the confusion that surrounds Obamacare — and its impact on small businesses — are the results of a survey that was conducted in November and December 2013 by the National Small Business Association.
The online survey drew responses from roughly 780 small business owners, 88 percent of whom have less than 50 full-time employees. Of the 30 percent of respondents who don’t currently provide health coverage to employees, 11 percent said they planned to offer such coverage over the next 12 months, while 67 percent said they had no plans to begin providing health coverage. Twenty-two percent of respondents said they have not yet decided what to do.
Asked how important they felt it was to offer healthcare coverage as an employee benefit to attract and retain high-quality employees, 67 percent of respondents to the NSBA survey said it was “very important.”
Another 20 percent characterized it as “somewhat important.” Six percent said they felt it had “a little” impact on attracting and retaining top-flight personnel, while 7 percent said it had no effect at all. Asked how well they thought they understood Obamacare’s impact on their businesses, 42 percent told NSBA they felt they had a “clear understanding” of the matter. Lastly, 46 percent of respondents characterized their understanding of the issues involved as “limited,” and 12 percent said they had “no understanding” at all.
As a small business owner, where do you rank health insurance benefits for your employees on your list of importance?
About the Author: Don Amerman is a freelance author who writes extensively about a wide array of business and personal finance topics.