This article is an excerpt from “Understanding Obamacare: POLITICO’s Guide to the Affordable Care Act,” a new, comprehensive guide to help POLITICO’s readers cut through the spin and learn how the law really works – and what may not work the way Congress planned. The complete series of articles will be available Tuesday.
When Congress was writing Obamacare, its biggest backers said the new law would help small businesses. Instead, they’re complaining about it.
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It was also supposed to take the cost pressure off businesses in general. Instead, they say it’s just adding more pressure.
It’s one of the biggest political ironies of the health care law: Some of the loudest gripes are coming from the employers who were meant to benefit from it. But the reality is, from the smallest startups to the largest corporations, employers have a lot of new rules and reporting requirements to keep track of. And in some cases, there are new costs, too.
It’s the only way to make the law work — but it’s also a headache for many employers.
Obamacare was sold as a way to give small businesses new, cheaper sources of insurance through their own health exchanges. But most of those small-business exchanges won’t be able to offer workers a choice of health plans in 2014 — which undermines one of the main purposes of having them. And it’s harder for small-business owners to follow the new rules and requirements than it is for bigger businesses, since they don’t have big human resources departments to help them out.
“It’s very difficult for small-business owners to keep up when the rules of the game keep changing,” said Kevin Kuhlman, a lobbyist for the National Federation of Independent Business.
For large employers, Obamacare was sold as a way to rein in those runaway health care costs. But it also created compliance burdens for many employers — new reporting requirements, notices that all employers have to give to their workers and new costs through taxes and fees that help pay for different parts of the law. They’re also starting to worry about a big future penalty for especially generous health plans — the so-called Cadillac tax — that could have a far wider impact than the law’s authors originally thought.
By the time you factor it all in, business groups say, Obamacare will hurt their costs more than it will help.
“They are adding to employers’ costs. So the case can’t be made on money,” said Helen Darling, president of the National Business Group on Health, which represents large businesses and public-sector employers.
The Obama administration has won praise from employer groups for delaying the requirements for businesses to report the details of their coverage to the federal government, as well as the fines employers with 50 or more full-time workers will have to pay if they don’t provide health coverage. But they’ll still be an issue for businesses starting in 2015.
Obama administration officials say they’re doing their best to get the word out to businesses so they don’t run into any nasty surprises. There’s a new “health care changes wizard” website to walk all employers through the new requirements. And the Small Business Administration is holding Obamacare events with small-business owners across the country, conducting weekly webinars to teach them about upcoming requirements, and posting news and guides on its website.
“We know folks are busy,” an SBA official said — which is why the administration is conducting the educational events and trying to make the rules easier.
There are loud voices in the business community that depict Obamacare as the biggest threat employers face today — notably the U.S. Chamber of Commerce and the NFIB, two of the most powerful interest groups in Washington.
But there are also employer groups that solidly back the law — like Small Business Majority, an advocacy group that’s conducting the webinars with the SBA to tout the law’s benefits, like the health exchanges and tax credits for small businesses.
“The benefits far outweigh the costs,” said John Arensmeyer, the group’s founder and CEO who previously was the founder of an international e-commerce company. “There’s been a lot of confusion. … There’s been more heat than light on the subject.”
And not all of the alleged dangers to businesses hold up to scrutiny. Is Obamacare a “job killer,” as many Republicans charge? Economists say it’s just not showing that kind of impact — at least so far. And is it going to cause employers everywhere to slash their workers’ benefits? Even UPS, which got national attention for cutting its health coverage for spouses who can get their coverage elsewhere, now says it can’t really blame Obamacare for that one.
“I wouldn’t characterize it as, ‘We did this because of Obamacare,’” UPS spokeswoman Kara Ross told POLITICO — even though its memo to employees was full of references to the law.
Other leading business groups say Obamacare is just part of a bigger picture of rising health care costs that has been going on for years. Yes, they say, employers are trying to find ways to trim their health benefits so their spending rises more slowly. But to pin it all on Obamacare, they say, misses the larger trends in businesses’ health care costs.
“Not at all. Everything that’s happening now was going to happen anyway, and it’s just a matter of how fast and how much,” Darling said.
The small-business exchanges
Supporters of the law insist that small-business owners may just not know enough about the law to realize the good things they can get out of it. Case in point: the small-business health exchanges.
They’re called “SHOP exchanges,” and like the ones for individuals, they’re supposed to provide a place to compare health plans and buy them at competitive prices. They’ll also designed to give small businesses with 50 or fewer workers an important advantage: the ability to spread their risk of big medical expenses, since they’ll be part of larger groups, and use their combined purchasing power to get better rates from insurers.
And like the health exchanges for individuals, open enrollment for the SHOP exchanges starts on Oct. 1 — although some enrollment is being delayed in the ones run by the feds.
“It’s giving small businesses the kind of bargaining clout that big businesses always had,” Arensmeyer said. “It creates one-stop shopping for the small-business owner.”
There’s just one problem: For the first year, employees won’t actually have choices in most of the SHOP exchanges.
In all of the ones run by the feds — and remember, these are the ones that are stretched pretty thin — the Obama administration delayed the feature where small-business workers will be able to choose their health plans. So if you’re a small-business worker and you live in one of those states in 2014, your employer will just say, “Here’s your health plan” — like they do now.
If you live in one of the states that are running their own health exchanges, you’re more likely to have a choice of health plans — most of them will have employee choice in 2014. And you may get that choice in the federally run exchanges starting in 2015, but only if the Obama administration is able to get those marketplaces running more smoothly. The Department of Health and Human Services has a website where you can look up what kind of exchange your state has.
There’s also another feature of the law that was supposed to help small businesses: a tax credit to help the smallest ones buy health insurance. It has been around since 2010 on a smaller scale, but starting in 2014, they’ll be able to get a credit for up to 50 percent of their health care premium costs if they buy insurance through one of the SHOP exchanges.
It’s only for really small businesses, though — those that have fewer than 25 employees (or their “equivalents,” again), pay less than $ 50,000 a year in average wages and pay for at least half of the premiums themselves. And they only get the full credit if they have 10 or fewer full-time workers and their average wages are less than $ 25,000 a year.
That’s why the tax credits haven’t gotten a lot of use so far — they just haven’t been very helpful to small businesses, and many of the businesses at that level don’t offer health coverage anyway (and they wouldn’t be required to under Obamacare). Kuhlman of the NFIB calls it “underwhelming.”
But even if small-business owners aren’t sure they would qualify for the credit, Arensmeyer says they should at least talk to their accountant to check it out.
Who has to cover their workers
The issue that most people know about is the “employer mandate” — a loose term for a set of fines for businesses that don’t cover their workers. That’s a big issue for small businesses that might be right on the edge of 50 workers.
Starting in 2015, any employer with the equivalent of 50 or more full-time workers will have to pay a $ 2,000 annual fine for each worker — not counting the first 30 — if they don’t offer health coverage.
And if they do offer health coverage, it has to meet the law’s “affordability test.” A worker shouldn’t have to pay more than 9.5 percent of his or her income for self-only coverage, and the plan shouldn’t cover less than 60 percent of the costs. If the coverage fails either of those tests, the employer will have to pay a $ 3,000 annual fine for each worker that goes to a health exchange for coverage and gets a subsidy for it.
The catch, though, is that it’s not just businesses with 50 actual full-time workers. It also applies to any business that has the equivalent of 50 full-time workers. In other words, when they add in their part-time or seasonal employees, their hours will add up to at least a few more full-time people.
Who counts as a full-timer? Anyone who worked at least 30 hours. That’s one of the biggest complaints restaurants and retailers have about the law — 30 hours just isn’t a standard anyone uses. But it’s in the law now, and it’s leading to the creation of complicated formulas — like the one the National Restaurant Association lays out in its own Obamacare primer — to help businesses figure out whether they meet the 50-worker threshold.
It’s a particular problem for the retail and restaurant industries, and that what’s leading to all the stories about pizza chains warning that they’ll have to charge more for their pizzas. But Neil Trautwein, vice president and employee benefits policy counsel at National Retail Federation, calls the employer penalty issue “a relatively discrete problem for a certain number of smaller employers.”
Obama administration officials say 96 percent of businesses in the United States are too small to be hit by the coverage requirements, and of the ones that are big enough to fall under the mandate, more than 90 percent already offer health coverage.
That doesn’t mean businesses won’t try to get that 30-hour standard changed, though — some lawmakers have introduced bills to raise the bar to 40 hours a week, and Trautwein says he “could see that issue catching legs.” The only problem, though, will be getting even such a small tweak through Congress, since many Republicans don’t want to do anything to help Obamacare work better.
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