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The Cost of Doing Business Under the Affordable Care Act

Access to healthcare is a right of every citizen. Healthcare is expensive. Healthcare reform will destroy access to affordable care. The many sides of healthcare in America have opened a debate, among other things, about who should pay for health insurance. While the debate about healthcare continues, the Affordable Care Act is the law of the land and will affect your business one way or the other.

Analysts believe that some businesses will stop providing health insurance for employees once the full law goes into effect January 1, 2014. They have made the financial decision to simply pay the less expensive penalties for not offering insurance. However, employers were beginning to either shift more costs to employees or stop offering the benefit many years prior to the passage of the ACA.

In fact, some would argue that the benefits of the ACA to employers outweigh the costs. The structure of the law was intended to reduce healthcare costs to Americans and their employers over time. Reviewing some finer points of the new healthcare law can help you determine the costs to your business.

The Employer Mandate

Mandate is an ugly word in America when connected to any policy or law from the government. For most Americans, a mandate infringes upon the civil liberties that have made this country great. For employers, the mandate is the reason they will cut hours to less than 30 a week. Essentially, the mandate requires employers with 50 or more full-time employees offer healthcare coverage. The penalty for not offering insurance is $2,000 per employee (minus 30 employees) when one employee qualifies for and receives a federal subsidy to pay for coverage.

For example, let's say you employ 200 full-time workers and one employee receives the federal subsidy. To calculate your penalty cost, subtract 30 from 200 and multiply the remaining by $2,000. You must pay $340,000 for not offering health insurance to employees.

A June Gallup poll of 603 businesses found that 38 percent plan to curtail growth because of the ACA despite some estimates that the healthcare law will not hurt revenues. Some economists believe that this will create a greater financial hardship for workers than employers with 50 or more employees.

If you have fewer than 50 full-time employees, the employer mandate does not apply. Nearly 96 percent of U.S. small businesses fit this category, which should result in minimum impact to the businesses. Further, businesses that offer healthcare coverage with less than 25 employees will receive a tax credit to offset the cost of providing insurance.

Employer Mandate Delay

Responding to concerns within the business community, the Obama administration decided to delay the employer mandate by one year. Therefore, employers are not required to comply with filing information reports until January 1, 2015. Penalties for not offering health insurance during 2014 are waived. In addition, penalties will apply to unaffordable insurance, which is more than 9.5 percent of an employee's annual household income.

Looking Ahead

In general, the effects of the law will differ based on the size of a business. Even with federal subsidies, some small businesses may face a huge barrier to providing healthcare insurance. Businesses with up to 100 employees may benefit from low-cost health insurance in employer-only exchanges that each state sets up. Smaller firms might realize some savings by adding employees to a larger insurance pool.

The mixture of benefits and new rules can seem challenging on the surface for businesses already struggling to stay afloat in a slow-growing economy. Perhaps once the dust settles, small business owners will relinquish the fears of hiring and expanding.