Cover Story: Obamacare: This Might Hurt a Little
An examination of what the Affordable Care Act means to your business
At the same time, insurance premiums climbed 9% on average for a family in 2011—double the rate of wage growth— to $15,073 in 2011 for employer-provided plans, according to the nonpartisan Kaiser Family Foundation. In 2012, they rose by a more modest 4% to $15,745. And last year, Tate says, they’re up, to about $16,351.
Giving a bit of context, the cost-of-living increases annually calculated by the U.S. Social Security office run far below these health-care increases: 0% in 2011, 3.6% in 2012, 1.7% in 2013 and this year projected at 1.5%. Simply put, healthcare costs are rising two, three, even four times as fast as the nation’s standard cost of living.
For Spencer of Kwik Trip, the law in many ways “encourages businesses to get rid of employer-sponsored plans,” which from the employee feedback she has heard means confusion and worry. “They’re concerned in that they always relied on the Kwik Trip health plan being here.”
She credits the company for continually communicating with its employees to calm those fears. And now that the government has delayed the compliance date, the company has time to continue to evolve its plan. Since 2010, the chain has worked with a third-party actuarial firm to better address its full- and part-time options.
The picture is different for smaller companies. Obamacare provides employers with 25 or fewer workers new tax breaks if they cover their health insurance. The credits amount to 35% of what employers now pay for health-care premiums. That tax credit rises to 50% in 2014.
Small companies—those with fewer than 50 employees in 2014 and fewer than 100 in 2016—will be able to take advantage of new Small Business Health Options Programs (SHOP), offering lower-cost health insurance plans as part of the Affordable Healthcare Exchanges. The SHOP plans are projected to have lower premiums than small businesses have historically been able to negotiate, once they become fully operational in all 50 states. Currently, only one such plan exists, giving rise to speculation of further deadline delays, Tate says.
All plans offered through the exchanges are required to meet specific “essential health benefits” designated by the federal government in 10 broad categories, including maternity care, mental-health services, prescription drug coverage, pediatric care and hospital treatment. The plans come in four varieties: Bronze plans have the lowest premiums, but also offer the lowest amount of coverage at 60% of medical costs on average; Silver, 70%; Gold, 80%; and Platinum, 90%.
An estimated 26 million people will also qualify for federal tax credits to help defray the costs of those plans. For instance, families and individuals who earn too much to qualify for Medicaid but less than 400% of the poverty level will qualify for a subsidy next year.
All that said, small businesses will certainly feel the heat in the bigger picture, says Tom Robinson, president and CEO of 34-store Robinson Oil Co., Santa Clara, Calif. Those with fewer than 50 employees will still have to compete in the labor pool with companies with better health-care packages, he says. In addition, talks at the state and federal level to increase minimum wage is among many other issues hitting small businesses on top of Obamacare.
“We keep wondering why the jobs market doesn’t get better as fast as we expect it should,” he says.
Ultimately, Robinson says he wants Obamacare to work. “I’m not against the idea of improving coverage, cost containment, better quality insurance at a better price. … That would be ideal,” he says. “I’m not negative—just not terribly optimistic I’m going to get the desired effect.”
Knowing Where You Fall
For retailers hoping to make sense of the law, the best place to start is knowing what category of employer a retailer falls into—25 or fewer workers, 50 or fewer, 50 to 99 and 100 or more.