President Obama’s Affordable Care Act won’t take effect until 2014, but already some small businesses are bracing for the change.
The new law, beginning next year, will impose penalties on businesses with 50 or more employees who work 30 hours a week or more if they don’t provide workers with health insurance that meets the standards of the federal government.
The penalty – $2,000 for each worker excluding the first 30 – will hit companies that have 50 to 200 employees particularly hard since these businesses are large enough to be fined, but too small to negotiate for the best rates with insurers.
While the forecasted effect of the Affordable Care Act looks grim for small businesses, two companies reported to the Wall Street Journal about how they are battening down the hatches.
Ziegler’s NYPD LLC, Phoenix, Arizona
Estimated cost: The local pizza chain estimates that providing health coverage in compliance with the new law will cost up to $250,000 next year.
Options: Ziegler’s president Richard Stark believes the new health care law will ultimately be beneficial, and states that his pizza chain will most likely use automation to boost productivity and purchase cheaper ingredients and supplies to offset some of the healthcare costs.
“At the end of the day, if we take care of our team members, they will take care of the guests,” says Stark. “I philosophically believe people having health care, regardless of age, is positive.”
Future State Inc., Walnut Creek, California
Estimated cost: The expense of supplying employees with health care for this business consulting firm will double, jumping from $200,000 to $400,000.
Options: For Steven Laine, Chief Executive of the firm, the cheapest option would be to drop coverage for his 93 employees and face $94,000 in penalties. While financially this may be the better option, the decision to cut health care is more complicated than that.
Laine is concerned about bad publicity from dropping coverage to almost 100 employees and the difficulty of keeping workers without providing a health plan. Even more, he says that dropping insurance “fundamentally goes against our organization’s values.”
However, when talking to his broker, Laine learned that his premiums could go up by up to 60% when he renews the company’s health plan in 2014.
When asked what his plans are then for next year, Laine replied, “The message is, ‘We really don’t know.'”
For now, these businesses and many more around the country, wait in anticipation to see how the healthcare change will affect their bottom line.
