Why employers fume over Obamacare?

Obamacare has been facing a lot of turmoil ever since it was passed in 2010. Officially known as the ‘Patient Protection and Affordable Care Act’, it tries to bring a lot of change into the health care industry. Evidently no change is accepted without grumblings. When implemented fully in 2014, Obamacare will supposedly affect the business organizations, especially the small ones. Thus, most American business and employers are voicing against the new mandate. The National Federation of Independent Business (NFIB) has tried to restrict Obamacare from the initial stage only, by applying against it in the court, and spent more than $1.2 million in the process. NFIB opines that the health care law will limit hiring in the future, by making it more expensive for the employers. Apart from that, the Affordable Care Act will also affect the cash flow of the business organizations, and thus is criticized for its anti-growth provisions. Read along to know how implementation of the Obamacare will affect the small business in the near future:

The back-door approach

Obamacare neatly bypasses the accountability, since it doesn’t implement the rule directly on the employers. The proponents thereby created the ‘free-rider’ provision to ensure that they offer health insurance provision to the workers in a way that they can’t accuse the government of imposing the law forcefully.

Clauses and Consequences

1. Business organizations with at least 50 employees have to sponsor a qualified coverage for all the full-time employees. If any of their workers buys a federally-subsided insurance through an ‘exchange’, the employer will have to pay a penalty since it’ll be considered that the employer failed to offer sufficient health coverage. Thereby, the employers will be charged $750 as penalty for each worker, by the federal government.
2. A business might choose to pay the annual penalty since it’ll be a lot cheaper than paying for the employee health coverage. In that case, the employees will have to buy individual health care plans from the exchanges, which will be comparatively expensive than the employer funded plans.
3. The provision might discourage the employers to take up more people, since business organizations with less than 50 employees can evade this provision. Small businesses with low profit margins will be unable to pay for the comprehensive coverage to employees. To avoid the penalties, they will not look for growth.
4. The seasonal business will also have to bear the additional costs as well. A combination of employees working 120 hours per month (around 30 hours per week) count as one employee. Thereby, employees who appoint part-time workers may also be penalized under the new mandate.

However, companies with less than 25 employees or those who are self-employed might benefit from the federal tax relief. The tax relief is applicable if such employers make health care arrangements for the employees. The tax credit depends on other variable factors though, like the number of employees, the average wages of the employees etc.