WASHINGTON – Joe Olivo is a small business owner who finds the new health care law costly and confusing, particularly next year’s employer mandate. Mark Hodesh is a small business owner who finds the law to be a boon to his business.
Some business owners like Hodesh, the owner of Downtown Home and Garden in Ann Arbor, Mich., qualify for the tax credit, which is available to businesses with fewer than 25 employees to offer health insurance, and do not worry about the mandate, which only kicks in at the 50-employee mark.
Others like Olivo, who is a co-owner of Perfect Printing in Morristown, N.J., do not qualify for the credit and say the requirement that businesses with more than 50 employees must provide health insurance or face fines prevents them from growing.
The mandate and eligibility
Starting next year, employers that have 50 or more workers that are full-time, defined in the law as those working more than 30 hours a week, are required to provide coverage for their workers. For those with fewer than 25 employees, they receive a tax credit now of 35 percent of the cost of their employee health insurance costs, and that will increase to 50 percent next year. According to the Congressional Research Service, more than 90 percent of businesses had fewer than 50 employees.
Olivo’s business has 40 full-time employees and offers health insurance. With that number of full-time workers, he will not be subject to the mandate, but it gives him pause when deciding whether to expand the business.
In fact, Olivo is purposely avoiding hitting the 50-employee mark. Any new employees he hires work on a part-time basis. This decision is rooted in the uncertainty surrounding health care costs.
“If I see premiums are not going through the roof,” he said, “and I see there is a stable known situation where I can reasonably expect what will happen, I will have a better incentive to take the risk with my money and grow.”
What he has seen so far is not promising though, he said.
“(What) we’ve already started to see is how the regulation, the amount of work, for a company just under 50 employees,” Olivo said, “that we have to decide to make sure we’re in compliance — start looking at our employee’s hours, making sure we don’t go over the 50 mark because of the severe ramifications,” referring to law’s penalty of $2,000 per employee for any companies with 50 or more employees that don’t provide health insurance. The penalty would not apply to the first 30 employees.
Olivo also said the lack of finality in the IRS’s rules further confuses employers as 2014 draws closer. The agency will hold a public hearing on this provision Tuesday.
Research on job loss, loss of coverage
However, research on similar employer requirements in San Francisco and Massachusetts by the Urban Institute, National Bureau of Economic Research and the National Opinion Research Center found that the notion the requirement to provide insurance would lead to job loss or could lead to fewer employers offering health insurance was overstated.
In fact, the National Opinion Research Center found in its 2008 study that businesses with three or more employees offering health insurance in Massachusetts increased from 73 percent to 79 percent, though employers were less inclined to consider terminating coverage than national companies.
A study sponsored by the National Bureau of Economic Research found that, based on San Francisco’s efforts, employers nationwide will be less likely to choose the penalty option of this requirement because the Affordable Care Act lacks a public option. San Francisco does offer the equivalent of a public option, which some employers may find preferable.
Elise Gould, a health care economist at the Economic Policy Institute, said she expects the effects of the employer mandate to be minimal.
“I don’t think that it is going to lead to much job loss,” she said. “There may be some shifting in hours to avoid the mandate. I think that would be small though.”
Gould also added that she expects employers to take many different factors into account when considering expansion, with the insurance requirement being just one small factor.
Tax Credits for Small Businesses
The law attempts to aid small businesses with tax credits as well, though several restrictions come with them: firms must have fewer than 25 employees and pay them less than $50,000 in wages each year, meaning Olivo’s business is ineligible for a credit while Hodesh’s business qualifies.
He met the requirements and received a tax credit, allowing him to hire another employee.
Hodesh has 12 employees so he doesn’t need to worry about crossing the mandate’s 50-employee threshold soon.
“There are pluses and minuses to all issues,” Hodesh said. “And I think that people are focusing on the minus side of the requirements of the Affordable Care Act. They are missing out on all the positives of the law.”
Offering health insurance to his employees is also an important strategy for his store.
“We provide health care as a business tool,” Hodesh said. “We attract and keep good long-term employees, and we don’t have high turnover and we don’t have to train a lot.”
Starting around 2000, though, his company’s health care costs tripled, but the tax credit eased that cost.
“(The credit) gave us the confidence to hire a new person,” he said. “It’s a good deal for me.”