Over the past two weeks, we’ve looked at the specifics of the employer coverage mandate of Health Care Reform. This week I want to share with you some revealing information on the impact the mandate is having on businesses in 2013 even though the mandate doesn’t come into play until 2015.
Under the Patient Protection and Affordable Care Act (PPACA), the mandate requires groups with 50 or more full time equivalent (FTE) employees to offer minimum essential coverage (MEC) or pay an annual penalty. The penalty is $2,000 per employee over the 30-employee mark.
We have heard and read report after report of what employers are being forced to do to avoid the penalty. Cutting hours, laying off employees and freezing hiring are just some of the real issues employers have to deal with in tough economic times like we are in now. Lay on top of that another level of government regulation, and the news gets worse.
Now, there are some reading this who may be thinking that these multi-billion dollar companies deserve to get hit and get hit hard because they are hoarding their profits. It’s easy to attack some giant conglomerate up on Wall Street.
But, those are not the companies I’m talking about today.
Instead, I’m talking about local companies that have tight profit margins. I’m talking about local owners who care about their workers, but who understand much better than Washington that you cannot just print more money when your current stack of money runs low.
I have a client who currently has 48 employees. Despite being in an industry that has been hit harder by the economic downturn than some industries, she is starting to see signs of improvement. She needs to hire three employees. However, if she does that, it will put her over the 50-employee mark and open her to an estimated $42,000 in penalties under the employer mandate.
That’s someone’s salary.
The U.S. Chamber of Commerce recently released the results of its latest quarterly survey of small business. Here are some interesting findings: 71 percent of small businesses say the health care law makes it harder to hire and 61 percent of small businesses do not have plans to hire next year. The only thing that scares small businesses more than what Washington has already done (23 percent) is what the federal government will do next (63 percent).
That last point scares a lot of people who were not part of the survey.
Please don’t think for a minute that my client or other clients we work with are a bunch of Ebenezer Scrooges who force their Bob Cratchits to work on Christmas Day. These are employers who sometimes sacrifice their paychecks to make payroll for their employees. They believe in offering their employees a quality plan of medical coverage at affordable rates.
But these also are employers who understand there is a limit, and they understand we all are very near — and many would suggest beyond — the cracking point with these mandates from Washington.
These employers simply cannot walk outside and pull money from the money tree that grows along the Potomac or borrow more money from China. These employers have to make hard decisions — a task our elected officials on both sides of the aisle in Washington seem to avoid.
Next week we will begin our review of the individual mandate, which comes into play Jan. 1 — and how many people aren’t even aware of this requirement.
Tony L. Wilson is a principal with NUVISION Financial Corporation.