Obamacare Implementation Gets Messy for Small Business Owners

Recent developments in the Obamacare (aka the Affordable Care Act) implementation process are confirming what many agreed from the outset was a foregone conclusion: This is going to get messier before it gets better. More specifically, the way the law is currently written is forcing some small business owners to make some pretty tough decisions.

Case in point? Over the last month or so, the mainstream press has cited a number of unsettling firsthand accounts by small-business owners who hover around the 50-employee threshold where offering health insurance to their workers becomes mandatory in 2014. And by mandatory, we mean they have to get on board or pay a penalty.



Here’s the issue, for many of them—even those who want to provide coverage—the math just isn’t working out the way they had hoped. Paying the penalty for non-compliance, they say, is far cheaper than it would be to continue or begin providing their employees with the opportunity to purchase health insurance, so many of them are planning to opt out and pay up. And for those who don’t want to have to make such a seemingly lose-lose call in the first place, the decisions they’re making in order to steer clear of the 50-worker-level mandates altogether don’t look much better.


To avoid even hitting the threshold for compliance, many small business owners report they are having to take some pretty bold steps. Some of them are cutting their employees’ hours or letting them go, while others are deciding not to hire any additional staff or upping the portion of the premium their employees currently pay for healthcare benefits. The fear is that, taken as a whole, these kinds of coping strategies may result in potentially negative consequences for an economy that is still struggling to recover.

Complicating matters even further is the fact that the health insurance exchanges*—which are supposed to make insurance premiums more affordable for both individuals and small businesses because they operate on the principle of pooled risk—may now be delayed in coming online for another year or so. This most recent development even has those organizations that represent small business and that also support Obamacare somewhat concerned.

In his recent testimony before the South Carolina Senate, Frank Knapp, Jr., president and CEO of the South Carolina Small Business Chamber of Commerce asserted that while the new law does offer a solid compromise to meet the demands of businesses who want to provide health insurance to their employees and rein in healthcare costs, any delay in the healthcare exchanges poses a challenge. Competitive state-based exchanges, he said, are “something that we are selling as a benefit of the Affordable Care Act,” so not having them in place sooner rather than later really limits small business owners’ options at a time when they need them the most.

As for small businesses with less than 50 employees, while they are not required under the new law to provide their employees with health insurance, the healthcare exchanges are designed to create a free and competitive marketplace that entices and enables them to do so. Of course, self-employed individuals will also be required to purchase health insurance or risk paying a penalty, which also makes the healthcare-exchange piece of the current law and its effects on implementation so important.

The really good news? And yes, there is some… To help everyone obtain coverage starting next year, health insurers will no longer be able to deny coverage to anyone based on their gender, health status or whether or not they have a pre-existing condition, addressing an ugly reality that has left far too many small business owners, sole proprietors and other individuals in need of health insurance out of luck in the past. Furthermore, insurers will be unable to charge higher premiums based on anyone’s specific health status or circumstances.

Although complicated, Obamacare does provide significant tax incentives for small business owners to provide their employees with health insurance benefits, even now. And for those self-employed individuals who qualify as low-income, tax credits will be available for them as implementation unfolds as well.

*more formally known as the Small Business Health Options Program, or SHOP Exchange

For more information on the very complex issue of Obamacare and its effects on small business owners in particular, we recommend the following resources:

“Some Small Businesses Opt for the Healthcare Penalty” (Wall Street Journal)

“Small Business Obamacare Delay Means Fewer Choices for Workers” (Huffington Post)

“Small Businesses Opt to Pay Obamacare Penalty Instead of Offering Health Insurance” (Huffington Post)

“Some Small Businesses See Obamacare as Welcome Relief” (Entrepreneur)

“Businesses Could Shum Obamacare Exchanges” (CNN Money)

“No Big Deal? Small Business Groups Shrug Off Delays to Obamacare’s Healthcare Exchanges” (Washington Post)

And finally, for a great webinar on how to prepare for Obamacare’s implementation and what it means for the self-employed and those with 50 or less employees more specifically, go to the National Federation of Independent Business (NFIB) now!

HOT TOPIC! We know that Obamacare is causing a lot of confusion and mixed emotions among small business owners in particular these days, so we want to hear from you! How is the new law affecting you and your small business? Are you looking for a low cost business to start but are concerned about the costs of Obamacare? What challenges or opportunities do you think Obamacare presents? Are you concerned about the possible delay in getting the healthcare exchanges up and running? Why or why not?