Many small businesses won a reprieve from having to provide health insurance under the Affordable Care Act until 2015 or later. But the law is already having a lasting impact on how lots of owners choose to run their companies. Some owners have begun to weigh strategies that might help them avoid complying with the law later on, such as opting out of providing the required coverage and instead paying a federal penalty of $2,000 for each full-time worker after the first 30. Others have begun restructuring their businesses, reducing their employees’ hours, for example, or trimming their total head counts to fewer than 50 full-time workers.
“You’ve really got to run the numbers and find out what’s going to work best for your bottom line,” says Melinda Emerson, chief executive of Quintessence Group Inc., a small-business consulting firm in Philadelphia. “You don’t want to wait and then have to make a drastic cost increase to your customers or make a significant reduction to your labor force” when the law’s provisions take effect, she says. “You want to do that gradually.”
In January, nearly half of small-business owners with at least five employees, or 45% of those polled, said they had had to curb their hiring plans because of the health law, and almost a third—29%—said they had been forced to make staff cuts, according to a U.S. Bancorp survey of 3,173 owners with less than $10 million in annual revenue. To be sure, an estimated 5.4 million businesses with fewer than 50 full-time employees—accounting for 96% of all U.S. employers, according to the U.S. Small Business Administration—are largely exempt from many of the law’s most stringent aspects. Larger ones got more time to comply when the Obama administration said in February that employers with 50-to-99 full-time workers will not have to meet the law’s requirement that they provide insurance or pay a fee until 2016.
As part of its “Faces of the Affordable Care Act” multimedia feature, the Wall Street Journal is profiling two small businesses—T. Cain Grocery Inc. of Fairhope, AL., and retail and wholesale bakery Ovenly LLC of Brooklyn, NY.—and it will revisit them periodically to update readers on critical decisions they face or have made as they cope with the law. While the grocer has 240 employees and the baker has a mere 27, they face similar challenges in figuring out how to broach the subject of healthcare coverage with their employees, who as of this year must have health insurance to comply with the law’s individual mandate or face a penalty. How many sign up is critical because it affects the companies’ overall health-care costs and whether they may need to adjust their plans and the amounts they contribute toward premiums.
They are also finding out now that they may have to cope with rising premiums because of new taxes and new benefits.