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Small Businesses Under ACA Have More Questions Than Answers

Credit: jmtimages (cc) flickr

In 2014, companies with more than 50 workers must provide health insurance or pay penalties under the Affordable Care Act.  The new healthcare law offers help to some small businesses, but leaves others worried about the bottom line.  

On a hot summer day, a big flatbed truck idles with the air conditioner running outside the corporate offices of Connor Industries in Fort Worth. It’s a brief stop on the way to the plant about five miles north. That’s where Connor Industries makes wooden crates for manufacturing companies. And work is finally picking up after a 40 percent nosedive during the recession.  

But inside the offices, CEO Grady Payne is worried about another hit to the bottom line. This one from the Affordable Care Act, the federal healthcare overhaul upheld last month by the US Supreme Court.

“They’re trying to force companies to provide full coverage for all employees. If you don’t provide it, and if they don’t take it, then you’re penalized.  It’s up to $2000 per employee per year,” said Payne. “And it’s not tax deductible.”

Connor Industries has nearly 500 employees at a dozen small plants in several states. Grady Payne figures the healthcare law will cost $1.5 million each year if he pays the penalties. Health insurance premiums would likely be more. Connor Industries is too big to purchase the “affordable” coverage to be offered small businesses through new insurance exchanges created by the healthcare law. Only companies with 100 or fewer employees will qualify. And, Connor Industries is too small to get the more affordable rates larger businesses and corporations are able to negotiate with insurance companies. Payne is looking at layoffs.  

“We’ve got about 100 people that are at risk when this comes in if nothing changes.  The cost is just too much to overcome,” Payne said.

But Payne’s case is not typical according to Rhett Buttle, with the Washington DC group Small Business Majority. He says the vast majority of small business owners either qualify for tax credits if they offer insurance to their employees, or be will be able to purchase affordable policies through an exchange. And, small businesses with 50 or fewer workers are exempt from the penalties for NOT offering insurance.

Buttle says there’s a lot of small business support for the healthcare law.

“We know that this law is not perfect, but we know that it’s a step in the right direction,” Buttle noted. “The status quo wasn’t working.”

Buttle says the law creates more competition among insurance companies, will drive down costs, and benefit all businesses.

Jerry White, director of the Caruth Institute for Entrepreneurship at SMU, says maybe.

“If you just back off and look at the highest level macro idea here, it’s hard to figure out how you can add lots more coverage and lots more people without costs going up.”

White says details of the law are still being worked out: including the list of essential benefits that must be covered; what companies will be part of the insurance exchanges; and what the rates will be. He says that uncertainty is causing a lot of anxiety.  

“You take an unexpected 10-20-30-40-50 thousand dollar hit to a small business, it can throw them out of business,” he said.

CEO Grady Payne says he offers health insurance now for about a quarter of his employees. The rest, mainly those on the production lines, decline it because it’s too expensive. He doesn’t know how he could cover everyone, and says the day-to-day impact of the law on companies like his was not “thought through”.     

“We still don’t know what minimum coverages are going to be required,” said Payne. “I mean if they come in with almost full coverage-type requirements with minimum cash deductibles, there’s no way.  You have to throw in the towel and pay the penalty … and hope you can make it.”

SMU’s Jerry White says if Congress would consider tweaking some provisions to make them work better for people, it would be, as he calls it, “world class leadership”.  

Grady Payne hopes somebody takes a second look.

Kaiser Family Foundation: How the Affordable Care Act Affects Small Businesses

Small Business Majority: In Support of the Healthcare Law

National Federation of Independent Business, Texas : Opposing the Healthcare Law

Former KERA reporter BJ Austin spent more than 25 years in broadcast journalism, anchoring and reporting in Atlanta, New York, New Orleans and Dallas. Along the way, she covered Atlanta City Hall, the Georgia Legislature and the corruption trials of Louisiana Gov. Edwin Edwards.