NCPA - National Center for Policy Analysis

Companies Prepare for Health Law

January 7, 2013

The Affordable Care Act (ACA) seeks to reshape the health care industry to provide care for all. However, this comes at significant costs to individuals and several companies. A particular major provision that will take effect next year is likely to hurt companies around the country, says the Wall Street Journal.

  • By January 1, 2014, employers with 50 or more workers will have to pay penalties if they don't cover full-time employees.
  • The penalties can range from $2,000 to $3,000 per uninsured employee.
  • However, some companies are willing to pay the penalty because of how expensive it would be to cover every full-time employee.

The law will impact small businesses disproportionately since most major companies already offer their employees rich benefits that include health insurance. Small companies, or ones that are trying to grow, have little room to spend on lavish benefits for their employees. Many of the benefits they may already offer could be deemed inadequate by the new law.

As a result, many employers are looking to cut the amount of hours an employee works so he or she is not considered full-time.  Others may end up offering only high-deductible plans or giving workers a set sum of money and allowing them to choose a plan. This way, if they want pricier coverage they can pay for it.

Some employers may end up pushing workers to enter in the health exchanges that the ACA establishes. This is an option available to lower-wage workers that qualify for federal subsidies and find that the exchanges are a better deal than what the employer offers.

However, it is yet to be determined whether this act of prodding some workers toward health exchanges will have barriers. Regulatory agencies may create nondiscrimination standards that prevent employers from taking this sort of action.

On top of the costs, employers will also have to consider the impact on employee morale and recruitment, as well as its public image, if it is to try and trim its health care costs. Operational burdens will also require significant time and resources to ensure that a company is following all the rules and doing all the correct paperwork.

Source: "Companies Prepare for Health Law," Wall Street Journal, January 1, 2012.


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