Data: Impact of health insurance employer mandate minimal

Devastation and the end of life as we know it are headed for the small-business world as a result of the Patient Protection and Affordable Care Act. That, at least, is the narrative one hears from foes of Obamacare. Data, however, shows that the impact, at least in Northern Colorado, may not be so great.

In Larimer and Weld counties combined, there are 683 companies with 50 employees or more, compared with 14,976 establishments with 49 employees or fewer, according to the Colorado Department of Labor and Employment.

The 50-employee threshold is an important benchmark because of an employer mandate set forth under the Affordable Care Act.

Beginning in 2014, businesses with more than 50 full-time employees will be subject to financial penalties if they do not provide health insurance to their employees.

The law counts every 120 hours of labor per month as one full-time employee, so part-time employees are counted as well, by combining the hours worked by multiple part-time employees.

If a business with more than 50 full-time employees fails to provide health insurance and if at least one of its employees receives federal insurance subsidies from the new health insurance exchange, the business will be made to pay $2,000 per employee, after the first 30 employees, according to the National Federation of Independent Business.

So, for those businesses who don’t offer insurance and that exceed the 50-employee threshold, the mandate will certainly be costly. For those companies that sit right at the 50-employee mark, the mandate means an annual penalty of $40,000.

Many have argued that this mandate will mean a significant expense for these companies. Indeed, the mandate may keep some companies from hiring that 50th employee or may cause them to cut hours of part-time employees to avoid crossing the threshold.

However, when the numbers are more closely considered, it seems that the actual number of businesses that will be impacted by this change is relatively small.

On average, 96 percent of firms with 50 or more employees nationwide already provide health insurance, according to Tim Gaudette, western outreach manager for the Small Business Majority office in Denver.

If this statistic is applied to the businesses in Northern Colorado, that means just 28 of the 15,659 establishments in Northern Colorado would be impacted — and that is only if they employ a person who qualifies for a government subsidy through the Colorado Health Benefits Exchange.

In order to qualify for the subsidy, an employee must have household income below 400 percent of the federal poverty level, or $89,400 for a family of four, and the employee’s portion of the insurance premium purchased on the insurance exchange must exceed 9.5 percent of household income, according to the NFIB.

Certainly, for the 28 businesses that the mandate impacts, there is cause for concern. These companies face important decisions about how to grow their business and how to approach the changes the mandate will impose.

Most of these companies have high employee counts and offer lower wages; they include retail establishments and restaurants, according to Gaudette.

On the other hand, for the thousands of Northern Colorado companies with fewer than 49 employees, there are aspects of the Affordable Care Act that will give them a boost, according to Gaudette.

One of these is a tax credit for businesses with up to 25 employees that make an average of $50,000 per year or less. To receive the tax credit, these businesses must offer their employees health insurance and must pay 50 percent of the premium, Gaudette said.

The 35-percent tax credit has been available since 2010 and is intended to help the smallest of companies offset the costs of providing insurance for their employees. On Jan. 1, 2014, the credit will increase to 50 percent for for-profit companies.

For nonprofits, the tax credit will increase to 35 percent from the current 25 percent.

Right now, the Small Business Majority is working to get the word out about the tax credit, because there are many companies that qualify but are not aware of their eligibility.

Time is of the essence for companies to apply, Gaudette said, because once the health insurance exchanges open in October, the tax credit will no longer be available for policies purchased in the open market.

Instead, the credit will be available only through those plans purchased on the Small Business Health Options Program, which is an insurance exchange designed specifically for small businesses.

Meanwhile, the rate review process that was instituted as part of the legislation is meant to keep premiums down, something that would be a welcome change to many employers.

A provision of the law directs the state to set up a process by which premium increases of 10 percent or more will be reviewed every year before they go into effect.

“Because of rate review, the 20 percent and 30 percent increases we’ve been seeing may not be happening as much,” Gaudette said.

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Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, marmbrister@ncbr.com or twitter.com/MArmbristerNCBR
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