Small Business Owners and Obamacare

With the news of a delay in a major part of the Affordable Care Act, small businesses and employees who want to work full time, rather than part time, have another year until they are impacted by so-called employer mandate provision of the law. As I wrote in my book Priceless, Curing the Healthcare Crisis, if you own a small business, you will want to learn of the implications.

If your company employs fewer than fifty-one full time workers, you will be exempt from penalties for failing to offer health coverage. The fifty-first worker, however, could be a very expensive hire. If you employ fifty-one or more workers, failure to provide insurance will subject you to a tax penalty of $2,000 for each uninsured employee beyond the first thirty employees.

So growing from fifty to fifty-one uninsured workers would subject you to a fine of $42,000 [(51−30) × $2,000] for adding the last worker. This fine, however, will be much smaller than the cost of providing fifty-one employees with the insurance mandated under the Affordable Care Act.

Moreover, the fine is much smaller if a firm hires a significant number of part-time workers (those working less than 30 hours per week). In the example above, if twenty of the firm’s fifty-one workers were replaced by part-time workers, the firm’s penalty would fall from $42,000 to only $2,000.¹

One implication: Many workers who want full-time work may only find part-time work.

Notes:

1. “Employer Mandate Penalties: Calculations,” National Federation of Independent Business, undated.

[Cross Posted in Psychology Today]