The 2010 Affordable Care Act Will Benefit Small Businesses

Introduction

Americans have always possessed a high level health protection that many other nations. The sphere of healthcare is one of the most crucial issues for the US citizens, and lately an important change has been implemented. This research highlights the positive impact of the Affordable Care Act on small businesses. Different evidences are investigated. Various questions are outlined and discussed.

It is known as the Affordable Care act, initiated by the president Obama in 2010. This meant conducting a reform in medical insurance that presupposed the heading role of the government in the health insurance programs. The act aims at providing the country’s population with state medical care. Consequently, every citizen is obliged to purchase the insurance themselves. The purpose is to reduce Medicare costs in medical services in accordance to the age of the patients.

Thus, the Affordable act remains controversial in regard to people’s abilities of health insurance receiving, workers’ health care requirements, treatment prescription due to the governmental demands and other points.

The Situation around Small Business in the USA

When speaking about small business it is important to define it as a privately operated structure with not many employees who receive relatively low salaries. However, a number of loopholes in modern business law allow combining several small companies into one big group. In this case the number of employees can each to 99 full-timers who overrun the size of a small business. Still, technically the companies are classified as small ones even if their profit exceeds $7.5 million. The details of business classification depend on business laws, industry sphere and the interest of connected companies.    

The reason why the Americans get their medical insurance from the employer takes its origin from the Second World War. When the salaries were frozen, many companies began to offer health insurance as an alternative way to compensate their employees work. As far as after the war the attempts to create a universal health care system were unsuccessful, the Congress offered tax incentives to companies to provide insurance. This system was perfect for big corporations because they could afford the risk that occurs on health insurance market. On the contrary, small business has faced with a problem when personnel with many women or older employees faced high premiums. Very often a single worker running medical insurance can be a disaster for a business.

For instance, in a company of Arensmeyer one employee has a child with diabetes. As a result, their premiums turned to be skyrockets because of this case. Before small companies spent18% more on health insurance than their larger colleagues did. Arensmeyer noted: “Companies live in fear that if one or two employees get sick their whole cost structure will radically change” (The New Yorker, n.d.). That is why about half of the small businesses could afford providing their employees with health insurance. The other half was uninsured. In addition, about 25% of small business owners were also uninsured.    

The Unites States make everything possible to create a friendly environment to small business. However, five years ago the economists Nathan Lane and John Schmitt have revealed that the US small business belongs to the group of the smallest ones in the developed world. In addition, self-employment is on the lowest level here. This fact can be explained by the lack of a national health insurance program that would satisfy the needs of employees from small companies as well.

During the previous years the system of health insurance was rather a source of gaining benefit for insurance companies than protecting employees when needed. For this reason, a reform known as the Affordable Care Act was worked out in order to provide hard-workers the security and confidence they deserve. The rules it contains are a real help to the party of small business.

The General Benefits of Obamacare

With regard to the insurance policy that existed in the USA for a long time it is worth saying that in fact many workaholics have paid unreasonable high price to insurance companies. Those policies were building obstacles between the employees and the doctors when they needed medical help the most. Still, the benefits of this reform are evident:

• Better coordination of patient care

• Higher level of accuracy and timeliness in payments

• Hassle factor and administrative cost for small businesses is minimized

• Transparent payments (whitehouse.gov).

The main reason why the Republicans do not accept the Affordable Care Act consists in a belief that this reform can make an untold damage to economy by destroying small business. The experts and representatives of the National Federation of Independent Businesses had the common ideas of Obamacare in relation to small companies. Thus, Ted Cruz and Orrin Hatch recognized this reform as job-killing, devastating to small business, and just terrible (The New Yorker, n.d.).

First of all, as far as health insurance is an integral part of any social package, making it affordable was a primary task for new reform creators. Previously, it was really hard for small business to find health insurance they could afford with regard to the level of their profit. For this reason many people hesitated to open and run their own business.

For instance, John Arensmeyer, the head of small advocacy company pointed out: “In the U.S., we pride ourselves on our entrepreneurial spirit, but we’ve had this bizarre disincentive in the system that’s kept people from starting new businesses.” (The New Yorker, n.d.).

New policy makes health insurance easy and affordable for different layers of business and erases the problem of job block. Researches revealed that with Obamacare people stopped to be afraid of being fired. Instead, about 1.5 million people became entrepreneurs and are happy to be self-employed.

Tax Credit for Small Business

It is not a secret that small business has been paid 18% more for health insurance than large companies. The Affordable Care Act provides a tax credit for businesses if they have 25 or fewer employees and average salaries up to $50,000. It is estimated that these tax credits are enough to cover health insurance for 2 million employees who work for about   360,000 small companies like it was in 2011. Three years later tax credits and affordable health insurance will provide more relief to a bigger number of small businesses in every state of the USA. This step is foreseen to provide an opportunity for small business to enlarge and expand that stipulates economic growth.  

It goes without saying that small business owners have particular fears as their bigger colleagues and competitors have faced with several negative conditions including fines and penalties for non-providing health insurance for their employees. However, the overwhelming majority of American small business has no more than 50 employees.

For this reason they are not touched with the employer mandate and appropriate penalties. In addition, more than 90% of small business has already provided health insurance for their employees. Thus, only 3% of the companies have 40-75 employees (The New Yorker, n.d.). It means that even if they will be more cautious about hiring new workers, their instability would slightly impact of the economy.

New Insurance Options

New health insurance reform includes very important innovations essential for small companies. Thus, they have an opportunity to research insurance options and choose the most appropriate ones particularly for their business. Every option has its own price and offers particular coverage that depends on one’s needs. Starting from 2014 the procedure of buying Affordable Insurance will be easy. Small companies receive an opportunity to provide their employees with various offers from different insurance companies like big companies do. At the mean time they will receive a single bill and will write a single check. In addition, they can choose the amount of insurance costs for their workers they are able to cover. In this case small business owners will not be afraid of the illnesses of few employees and will not be vulnerable to their rates which usually depend on employees’ health.

The algorithm of tax credit in Obamacare is the following: those owners of small businesses, who had any debt on tax during a year, have an option either to have the credit back or to save it to the next years. Regarding the fact that the amount of premiums for health insurance is usually bigger than the tax credit, small companies can have a claim on deduction the premium costs in excess of the credit. 

Tax-exempt companies have also their benefit from this medical insurance reform: “The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability” (ObamaCare Small Business Facts, n.d.). In order to receive the tax credit, the owner should calculate the credit by using a Form 8941. This form was to apply in 2013. Starting from 2014 tax credit for small business can be claimed via Small Business Health Options Marketplace aka SHOP. Another way to return tax credit is to include the amount to a general business credit.

The Congressional Budget Office (CBO) pointed out that SHOP will eliminate costs and increase competitive conditions insurers so they could provide higher level of services. Accordingly, premiums are reduced for 4 percent for small companies. Moreover, web portals now should contain easy-to-understand information that would facilitate the understanding the whole system of health insurance and the process of purchasing the insurance.    

Building on Employer-Based Insurance Market

The economists have valuated that both an average family and their employer in the U.S. spend $1,000 more per year in order to cover expenses for the uninsured people. The new reform involves uninsured employees into the system and makes health insurance more affordable for small businesses.

Furthermore, the Affordable Care Act implies particular responsibilities for employers that force them to pay for their workers’ health insurance. According to Jenemarie Mulvey “to avoid a potential penalty, employers who do provide health insurance coverage must provide affordable and adequate coverage to employees and their dependents” (11). Consequently, employees are known to be provided with health insurance on the cost of their employers.

However, not all employers follow the rules properly. The thing is that if the employer does not offer health insurance to the employees, he pays tax in the amount of $ 2,000 per worker. According to the Kaiser Family Foundation, insurance cost for the employer per year is in average $4,664 per employee and $11,429 per family. Definitely, many companies consider the opportunity to pay this tax and do not offer insurance to their employees.

Besides, relatively small companies choose another way to get rid of the responsibilities due to the health care act. They change full-time employment into part-time one or reduce the total number of employees up to 50 people. Moreover, due to the act implementation many employers resort to neglecting their duties of health care provision for their workers.

Big Business vs. Small Business

It is a well-known fact that “any employer with more than 50 full-time employees that does not offer coverage and has at least one full-time employee receiving the premium assistance tax credit will make a payment of $750 per full-time employee” (The Patient Protection and Affordable Care Act 3). This provokes employers to act rather doubly. According to the consulting company Deloitte, one of the ten employers is going to refuse health insurance of their employees. Another 10% of employers are going to follow their example. Consulting company McKinsey & Co has announced that about 30% of employers will terminate providing insurance to their employees.

Such reaction of business had immediate consequences. President Obama waived the employer mandate until 2015 which means that companies hiring more than 50 employees and not offering them health insurance are released from paying penalties. However, such step failed to convince the members of the U.S. Chamber of Commerce in safety of Obamacare. More than half of members insisted on cutting working hours and full-time employment. 23% of companies announced about hiring part-time workers of freelancers to avoid triggering of fines. Tucker suggests:

“Employers have learned that they can make money and be profitable with fewer workers and fewer workers working full-time with full-time benefits. The health care law has just given these companies a convenient excuse to continue to pare back staff when they can and reduce hours and benefits, which was something they were already planning to do” (2013).

One more important issue concerns the peculiarities of the treatment prescription procedure. It goes without saying that the cat results into lowering the health care costs for patients, especially for those who cannot afford an appropriate treatment. Still, this fact is not proper to say that patients begin to be treated more professionally and effectively. The question is, whether the physicians can provide their patients with the full value treatment, for their authorities as medical workers are limited by the government.

According to the article by Tevi Troy, the former the former Deputy Secretary of United States Department of Health and Human Services, “physicians also worry that the new law will interfere with their practice of medicine by shifting decision-making authority from doctors to government officials. The establishment of strict guidelines that prevent doctors from making decisions based on their personal interactions with patients, known as “uniformity of practice,” is a long-standing concern” (How The Affordable Care Act 2014).

Cabinet Committee has the right to determine the methods and means of disease treatment such as tests, procedures, medicines, etc. The supervisor of the Committee prescribes a specific method of treatment with regard to the age of a patient and determines terms of a therapy including acute period. The patient does not have the right to choose method and means of treatment by himself. Any complaint of the patient should be delivered to the Committee for consideration.

Thus, the problem is that the physician is incompetent to decide independently which of the existing methods and drugs are appropriate to apply. Even in the most severe cases, he is obliged to follow the instructions from the Center of the Federal Monitoring System. When a patient is on life support line, the final decision on its use or turning off oxygen, food, medicine, etc. will be accepted not by hospital staff with regard to the condition of seriously ill patient, but by the center according to the elaborated plan. Besides, the fact that in 2014 Medicaid should accept additional 19.6 million Americans, adds weight to the complicity of the issue.

Chelsea Foster writes about the American society the following: “In our society, no one is absolutely denied healthcare, but care is provided in the wrong manner” (2013). Still, when there are people who get benefit from Obamacare, there will be arguing about this medical law and no influence on massive layoffs. In spite of the fact that denialism is quite a serious tool of convincing, investigations reveal that Obamacare is actually a culprit of negative employment conditions. The facts prove that “Obamacare is accelerating a disturbing trend towards “a nation of part-timers” (Conover, 2013). Actually, it is a bad news for America.

In comparison with the conditions for larger employers, conditions for small businesses are much favorable. For instance, if the company has up to 25 employees, it receives a tax credit which covers 35% of health insurance cost. In 2014 this figure can reach 50%. The useconomy.about.com also reveals that in case if an employer receives tax credit via an exchange, his employer should not pay fines. This measure is reasonable as it helps to save money for small business and provide employees with affordable health insurance.

In addition, it saves small business from cutting the number of employees as it happens in big companies because of the following rule: companies with 50 or more workes are obliged to provide the insurance otherwise it must pay a tax of $2,000 per the first 30 employees. This case is supposed to be implemented in January 2015.

Moreover, small business should not shop for insurance or search for cheaper alternatives to healthcare protection like companies with less than 100 employees do. Of course, they can get Federal financial assistance in case of providing early retirees with medical insurance. Still, this measure can partially cover company’s expenses (useconomy.com).

It is worth considering that health care act seems to give hope to the American citizens, and raise the level of the public health. Health security is considered to be of a great importance, and government tries to work hard in this sphere. The 2010 Affordable Care Act has totally changed this situation. Small businesses that want to offer health insurance to their employees are given with tax credits. In addition, like individuals, small companies have ‘community rating’ which helps to prevent unexpected charging them from insurers. Employees with higher health costs are not a reason for increasing their payments for medical insurance.

Moreover, small business exchanges allow their owners to gain better rates of their risks. “You’re really taking the benefits that big companies enjoy, and letting small businesses tap into that,” Arensmeyer noted. All this steps mean that small businesses can save money on insurance and spend them on better specialists who are worth of bigger salaries  

It is quite remarkable how the ACA is, in essence, a public health act. What jumps out at you when you read the law is how the vision and mission of our field—to secure health, well- being, and safety for all populations – runs throughout the entire legislation (Powerful Partnership 2013).

More Affordable Care

The Affordable Care Act widely applies a popular 80/20 business rule. Starting from 2010 all insurance companies are obliged to pay 80% of premium of every client on health care or amendments to healthcare. This step prevents unexpected increasing of premiums for small businesses that previously made small companies spend more money on health insurance of their employees. Now every step of insurer should be explained and justified. In addition, the States have the power to block unjustified premium raise until its effect is proved (whitehouse.gov). They have estimated the reasonable premium rate of 9.5% from the sum of income of any employee.

New healthcare reform contains substantial benefits for small companies. The Affordable Care Act prevents insurers to play against the rules. Insurance companies control of taking advantage from their customers and providing them with bad service. Health insurance is of higher quality, more controlled and more affordable for an average consumer. The employees of the small businesses are more protected from dropping one’s coverage in case of sickness. The employees are protected from personal bankruptcy because of limited income that does not allow paying bills. Those people, who are in pre-existing condition, are protected from discriminating on this fact.    

Besides, some researches state that over 100 million Americans have already benefited from the new health care law. This presupposes that millions of people who needed special and more intensive health care, and did not have money to be treated, were lucky to receive their treatment thanks to the Obamacare act. Nevertheless, there also exists an opposite point of view concerning the hope the Affordable Care Act that still not all people are able to maintain their health insurance.

A staff attorney at the New Mexico Center on Law and Poverty, Sireesha Manne, says: “for those with very low wages trying to raise kids, after paying for housing, electricity, food, transportation, and child care, asking people to pay another $50 or $100 a month, that's just out of reach” (Ollove 2014). Additionally, executive director of the Northwest Health Law Advocates in Seattle, Janet Varon, works on various health issues. She concludes: “even with the subsidies, some people simply won't be able to manage to pay their health insurance premiums consistently with all the other costs facing them” (Ollove 2014).

In order to overcome this obstacle, the ACA authors have worked out special program called the Basic Health Program. Due to this program, federal government does not give financial support directly to the citizens who need it, but sends subsidies to the states. Thus, when states want to apply such programs, they cannot do that, since they are controlled by the government. As a result, public health is not supported properly.

One more important point is the act’s influence on different age groups. It goes without saying that by balancing between health priorities due to ages is rather reasonable. For instance, 65 year citizens are provided with particular services. “ACA offers eligible elders a range of preventive services with no cost-sharing. ACA also provides discounts on drugs when older adults are in the coverage gap known as the “donut hole.” Additionally, Obamacare “may increase children’s access to health care, support individuals with poor health, and benefit families in which either the children or the adults have substantial health care needs” (Powerful Partnership 2013). Women health is also considered to be insured: “Full implementation of the ACA will offer women at or below 400 percent of the federal poverty level expanded access to coverage through state Medicaid programs, health insurance exchanges, and federal subsidies for purchasing coverage” (Powerful Partnership 2013).

Nevertheless, people of 50-64 year old who want to retire early, face a problem. According to Barbara Mannino, such people “find themselves in no man’s land when it comes to health insurance: they will no longer get employer-sponsored coverage and are often priced out of the individual health insurance market before gaining guaranteed access to Medicare” (2013). Thus, the so-called boomers continue to be the workforce or just are left without any insurance providing.

Pros of the Affordable Care Act on Small Business

Better tax breaks are available only for small business.

Companies that have more than 50 full-timers are released from paying fee for their first 30 workers. Large firms do not have such option and experience more negative effect of the new medical law. 

The employer mandate is not applied to small business and cannot hurt it. Spreading it on big companies means providing affordable health insurance to a bigger number of American employees.

The share of small business owner in cost of worker premiums is reduced almost in half. Instead they pay a special tax that can be returned or carried forward.

As far as new Affordable Care Act provides more benefits to small business, its owners are able to provide more benefits and better protection to their employees.

Small companies have received access to Small Business Health Options Marketplace aka SHOP. It means that from now they are able to estimate the most affordable insurance programs for their business. Buying power of small and big businesses has become equal.

Taxes provided by the Affordable Care Act are affordable and even decreased in order to enlarge small businesses and give business owners to pay higher salaries to their workers and provide subsidized medical protection to Americans with low and middle income. 

“96% of all firms in the United States - or 5.8 million out of 6 million total firms - have under 50 employees and Will not Be Penalized for choosing not to provide health coverage to their employees” (ObamaCare Small Business Facts, n.d.). In fact, 94% of those companies have offered medical insurance to their workers. Those who are to provide health insurance are 10,000 out of 6 million which is about 2% of the total amount.

P.S.

Despite the fact that there are many advantages of the 2010 Affordable Care Act that was discussed above, the real situation on business market is a little bit different. For instance, the portal inc.com reveals the comments of small business owners and their current business financial status. Thus, a head of a small company informs that he pays salaries above living wage for his 10-15 employees. For this reason he does not qualifies for the Healthcare Tax Credit. In order to have it he should pay less than $10 per hour which is not an appropriate wage. As for insurance premium, he pays the same amount as before. Even if payment rate increases from 18% to 26%, he will not change it to keep well-qualified specialists. Considering the situation of health insurance around small business, he says the following:       

I may consider implementing the same program I have been reading about in the papers by other small businesses, of just under 50 employees, paying a set $$ amount to each employee & leave them to fend for their own insurance needs. Maybe I'll just wait another year & watch it all implode!” (inc.com).

Another employer who hides his name tells about his small consulting company. There are 28 employees and they earn about $50K per year. These figures do not allow him qualifying for the Healthcare Tax Credits. As far as the Affordable Care Act added fees and taxes to insurers, the owner of this company is obliged to pay 40% more in premiums, though bigger payments do not result in bigger coverage. The owners of small business have compared the figures of the previous years and have found out that the new reform is not better. However, some experts insist that everhthing goes as it should. “Everything that’s happening now was going to happen anyway, and it’s just a matter of how fast and how much,” Darling said. 

Conclusion

To sum everything up, the Affordable Care Act cannot be considered to be the universal solution for all health problems within American society. Without any doubt, Obamacare is quite complicated reform. On one hand, it provides total insurance; on the other hand, it provides limitations for the physicians due to centralized regulation of hospitals. High cost of the reform led to mass layoffs and cutting working hours of employees while the top executives still receive million dollar bonuses. Thus, it can be concluded, that the act is beneficial in several cases: for insurance companies, hospitals, health education providers and the government itself. If the main purpose of the act is to promote affordability and quality of medical treatment for citizens of any stratum of society and for small business as well.

References:

  • “A powerful partnership: Public health and the Affordable Care Act join forces.”School of Public Health. N.p., n.d. Web. 9 Apr. 2014. http://sph.umn.edu/a-powerful-partnership-public-health-and-the-affordable-care-act-join-forces/.
  • Apothecary, The. “Who Can Deny It? Obamacare Is Accelerating U.S. Towards A Part-Time Nation.” Forbes. Forbes Magazine, 31 July 2013. Web. 9 Apr. 2014. http://www.forbes.com/sites/theapothecary/2013/07/31/who-can-deny-it-obamacare-is-accelerating-u-s-towards-a-part-time-nation/.
  • “Employers cut hours, benefits before Obamacare.” Columbus CEO. N.p., n.d. Web. 9 Apr. 2014. http://www.columbusceo.com/content/stories/apexchange/2013/07/22/employers-cut-hours-benefits-before-obamacare.html.
  • “How The Affordable Care Act Will Affect Doctors | The Health Care Blog.” How The Affordable Care Act Will Affect Doctors | The Health Care Blog. N.p., n.d. Web. 9 Apr. 2014. http://thehealthcareblog.com/blog/2012/06/15/how-the-affordable-care-act-will-affect-doctors/.
  • “Is Obamacare Actually Good For Small Businesses?” Inc.com. N.p., n.d. Web. 15 May 2014. <http://www.inc.com/adam-bluestein/obamacare-suroweiki.html>.
  • “James Surowiecki: Why Obamacare is Good for Small Businesses.” The New Yorker. N.p., n.d. Web. 15 May 2014. <http://www.newyorker.com/talk/financial/2013/10/14/131014ta_talk_surowiecki>.Lachman, Vicki D.. “Ethical Challenges in the Era Of Health Care Reform.” Ethics, Law, and Policy 21.4 (2012): 248. Print.
  • Mannino, Barbara . “Health-Care Reform Could Help You Retire Early.” Fox Business. N.p., n.d. Web. 9 Apr. 2014. http://www.foxbusiness.com/personal-finance/2013/04/26/health-care-reform-could-help-retire-early/.
  • Mulvey, Janemarie. “Potential Employer Penalties Under the Patient Protection and Affordable Care Act .” Congressional Research Service 7.5700 (2013): 11. Print.
  • “ObamaCare Small Business Facts.” ObamaCare Small Business Facts. N.p., n.d. Web. 13 May 2014. <http://obamacarefacts.com/obamacare-smallbusiness.php>.
  • Ollove, Michael. “Is Affordable Care Act really affordable for all?.” USA Today. Gannett, 14 Jan. 2014. Web. 9 Apr. 2014. http://www.usatoday.com/story/news/nation/2014/01/14/stateline-obama-health-care/4471957/.
  • “The Affordable Care Act Helps Small Businesses.” Web Document. N.p., n.d. Web. 15 May 2014. <http://www.whitehouse.gov/sites/default/files/docs/the_aca_helps_small_businesses.pdf>.
  • “The Affordable Care Act: Ethical Considerations in Health Care Reform.” N.p., n.d. Web. 9 Apr. 2014. http://prezi.com/dp2tth1ckykq/the-affordable-care-act-ethical-considerations-in-health-care-reform/

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