Imagine a World Series where players aren’t allowed to swing their bats and instead strike out just for stepping up to the plate. That’s how American small business owners trying to create jobs will feel in 2014 when a provision of President Barack Obama’s health care law gets underway.
The passage of the Patient Protection and Affordable Care Act (PPACA) was strike one for small business. The health care law’s mandates and provisions hurl speed and curve balls at small business owners at such a rate there’s hardly any time to recover or prepare before the next pitch is thrown in their direction.
Strike two is a nasty curveball known as the “employer mandate” that financially penalizes employers with 50 or more employees based on the affordability of the employee’s health care coverage or lack thereof. Even such businesses with a fluctuating work force as small retailers, restaurants, farms and manufacturers aren’t immune from these financial penalties.
According to the health care law, coverage is deemed not affordable if an employee’s household income is less than
400 percent of the federal poverty level and if that employee’s portion of their health insurance premium exceeds 9.5 percent of household income. So how do employers know this? They don’t.
Should an employer’s health care coverage not fall within the realm of PPACA affordability for just one employee who then decides to take advantage of a federal subsidy for insurance, the employer then must pay a fine to the federal government of upwards of $3,000 a year for that one employee. Should more employees qualify for a federal subsidy, that fine is assessed to the employer for each subsidized employee.
The mandate also financially penalizes employers who don’t offer coverage. If a business doesn’t offer health care coverage and if one of its employees qualifies for a federal subsidy, the employer is on the hook for a $2,000 fine per full-time employee in their company (minus the first 30). A business with just 50 employees will pay $40,000 per year to the federal government for not providing health care coverage.
Confused? So are employers across the country. Strike three.
Employers are left trying to financially prepare for such unknown conditions as the household income of their employees while leaving little certainty for their businesses. What’s more, those employers who are in a position to expand their operations could be inhibited from doing so if they want to avoid the 50 plus one threshold of the employer mandate.
There’s still time for Congress to act before businesses are out of the job creation game entirely. Congress needs to follow the lead of U.S. Sen. Orrin Hatch of Utah and U.S. Reps. Charles Boustany of Louisiana, Pat Tiberi of Ohio and John Barrow of Georgia. They responded to a National Federation of Independent Business plea to repeal the employer mandate before it’s too late. Otherwise, the employer mandate will push the ability to provide health insurance even further away from small businesses.