Health care reform affecting businesses

Updated July 8, 2013

Rumors are swirling around the country about how business owners are going to respond when the Health Care Reform act officially starts. One reaction is to cut workers’ hours to fall under the full time status. Under Obamacare, 29 hours/wk is the amount of time someone can work without being considered full-time.  As a result, some reports suggest that many large business owners will drastically reduce their hours to avoid the penalty.

A large business is defined as 50 or more employees. Employers that pass the 50-employee threshold and don’t offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. In other words, an employer who has 100 employees will incur $70,000 a year tax. Surveys show that some CEOs will elect to pay the penalty because of the enormous financial burdens health care puts on their profits.

David Overton, CEO of Cheesecake factory already pays health care for each of his employees who work over 25 hours. In a CBS Interview, he expressed concern about what the numbers will actually look like when January of 2014 enacts the first real financial impact of the health care reform act. He states, “…we pay millions and millions of dollars for health care… we don’t know how much more we’ll pay. For those businesses that don’t pay for their employees, they’ll be in for a very expensive situation.” These costs may inevitably have to be passed to the consumer to help offset the rising cost of healthcare.

Welch Allyn, A multi-national medical device manufacturing company is planning to lay off 275 employees over the next three-years. The layoffs are a response to a health care reform related 2.3% medical tax. CEO, Steve Meyer states, “We firmly believe this restructuring program is the right thing to do for the long-term success of the business, however, we also fully recognize the hardship it will cause some of our colleagues in the short term.” To help offset the layoff, Meyer plans to reimburse up to $4,000 for each person impacted by the layoff who decides to go back to school within a year of their departure.

While these CEOs are concerned about the financial impact of their company, the employees of these businesses may have to make more drastic decisions. Since Walmart decided to raise their healthcare premiums up to 36 percent, many of its employees had to consider whether or not to maintain their health insurance coverage at all.

Obamacare requires businesses with 50 or more employees to provide health insurance. Previously, this requirement was set to take effect January 1, 2014, but because of a rash of protests this ruling has been extended to January 1, 2015. If you have more than 50, but fewer than 100 employees, you can explore the exchanges, which may be a more cost effective alternative. If you choose not offer insurance in 2015, you will be fined $2,000 per employee for all but the first 30 employees. If you have fewer than 50 employees, you will not be held responsible to provide health insurance.

The ripple effects of health care reform will be enormous. Customers who purchase consumer goods and services will bear the burden of increased costs passed to them. Employees who work for these large companies will collectively experience massive lay-offs. Employers will have to make difficult decisions that will impact the lives of those people they employ, and ultimately their businesses. For people involved in large corporations, there is a tsunami headed their way. Only time will tell the full impact of these changes in the health care reform act.

Own a business in the Greater Los Angeles or Southern California Area, and need health insurance advice in preparation of the Health Care Reform Act? Happy to help! See my contact details below…