Obamacare - Does It Help or Hurt Small Businesses?

Affordable Care Act Provisions - How they Affect Small Businesses

Obamacare for Employers
Obamacare for employers. Frances Twitty/Getty Images

A recent article from the Small Business Administration discusses the Affordable Care Act (otherwise known as Obamacare) and how some of its provisions may benefit  small businesses.

On the other hand, some businesses are finding Obamacare has negatively affected their business, with increased premiums,making health care coverage for employees an impossibility.

The purpose of this article is to discuss some of the provisions of Obamacare that are taking effect in 2013 and 2014 and how they relate to small businesses Because every business is different, Obamacare will affect each business differently.


Health Care Law a Concern of Small Businesses

A recent survey by the U.S. Chamber of Commerce showed that concern about Obamacare is having a negative affect on hiring, with 71% of small businesses saying the health care law makes it harder to hire.

The employer mandate requiring employers to provide health insurance or pay a penalty, seems to be of particular concern. Small businesses affected by the employer mandate say they will either cut hours to reduce full-time employees or replace full-timers with part-timers to avoid the mandate.

But there are some bright spots for small businesses in the new law: 

Health Care Tax Credits for Small Businesses

One provision of Obamacare that can help small businesses is the ability to qualify for, and receive, a tax credit for providing health insurance for employees, starting in 2010. To qualify, your business must have fewer than 25 full-time equivalent employees, with average wages of less than $50,000, and your business must pay premiums through a "qualifying arrangement."  The credit is currently (2013) 35% of eligible premiums; the credit increases to 50% of eligible premiums in 2014.

William Perez, at Tax Planning has more information on this tax credit and how your business can apply.

SHOP exchanges

USAToday says the new SHOP marketplace exchanges will help small businesses. These exchanges  have been available since October 1, 2013.  In most states, the exchanges are run by the federal government, but some states are managing their own exchanges or are in partnership with the federal government.

Small businesses with 50 or fewer full-time employees can use the Small Business Health Options Program (SHOP) to offer coverage to their employees, beginning October 1, 2013. This option applies to non-profit organizations as well. You control the coverage you offer and how much you pay toward premium costs.

The USAToday article explains how the SHOP exchanges can work to offer higher-quality health insurance for employees with more plan options.  The SBA says the SHOP exchanges "will allow small groups to pool risks and reduce administrative complexity, thereby increasing their purchasing power and reducing costs for small businesses that want to provide coverage to their workers." Read more about the SHOP exchanges for small businesses.

Employer Mandate Delay

The mandate for businesses with over 50 full-time employees to provide health care to employees or pay a penalty has been postponed to January 1, 2015.

Kimberly Amadeo at U.S. Economy says: This [delay] may be good news for you, because many of your employees may find insurance on the exchanges by then, lowering your costs."

Benefit or Drawback - It Depends

In conclusion - benefits and drawbacks:

  • Drawbacks: Obamacare's increased insurance coverage mandates may raise premiums for some businesses, and businesses hovering around 50 employees may cut back or delay hiring to avoid incurring penalties for not providing coverage
  • Benefits - The new marketplace exchanges can help small businesses find more affordable coverage, smaller businesses might consider taking advantage of the tax credits available for providing coverage, and the delay in the employer mandate will give businesses more time to make decisions on health care for employees.

In general, while the health care law has been a concern for some small businesses, and some businesses, like individuals, have lost coverage, the small business health care tax credit and the new marketplace exchanges have been a positive.

Every business is different; some businesses that already have coverage may find their coverage more expensive, while other businesses that were not able to get health care coverage for employees at a reasonable price may now be able to provide this coverage.

Some changes might help your business, while others might not.

More in these related articles

2015 changes to Obamacare for Employers

How the Health Care Law (Obamacare) Affects Small Businesses