Considering the magnitude of the health-care law, it’s no surprise small-business owners aren’t familiar with all the nuances in the legislation. Some of the lawmakers who wrote and voted for the bill have themselves expressed confusion about the rules.
Still, experts say there are some common and potentially costly misconceptions that have stuck with employers for the past few years — ones that, if cleared up, could help them avoid some headaches and save some money going forward.
“The general feeling in the business community when the law came out was that the sky was falling,” Michael Harlow, an accountant and partner at CohnReznick in Washington, said during a health-care forum held last week by the Restaurant Association of Metropolitan Washington.
“Once they looked more closely, it was clear that it’s not the end of the world,” Harlow added. “But there’s still a lot of misinformation out there.”
Joining Harlow on the panel were Stephanie Cohen, an insurance broker and partner at Golden and Cohen, and Khalid Pitts, co-owner of a wine store and tasting room in the District and a board member with the city’s new health insurance exchange commission.
During the discussion, each identified and tried to clear up some of the most common myths and misunderstandings surrounding the health law and its new online small-business insurance marketplaces. Here are the ones they mentioned:
Obamacare is being forced upon employers.
“One of the common misconceptions is that this is being forced upon you,” said Pitts, who with his wife owns Cork Market and Tasting Room. He noted that the vast majority of companies, including his own, have fewer than 50 employees, and are thus exempt from rules requiring employer to offer a health insurance plan or pay a penalty.
And even for small employers who want to continue offering or hope to start offering insurance, “you’re still going to have a choice,” he said. “You can still go directly through the insurance company, or you can go through the new online portals. No one is forcing you into them.”
You’re going to have a choice, to stay with private insurance directly through the insurance company, or to go through the Small Business Health Options Program portal.
Noncompliance penalties will cripple employers.
Companies above the 50-employee threshold will soon have to start providing coverage (enforcement has been delayed a year), and the penalties for noncompliant firms can run as $3,000 per worker per year.
“People hear those numbers and they freak out,” Harlow said. “But I really don’t think the penalties are going to be that big of a deal.”
Harlow said the law simply requires those employers to offer an affordable plan (not exceeding in cost 9.5 percent of the worker’s annual income); it does not require them to persuade those workers to enroll. So, he said, “if you’re looking at a service employee who makes $12 to $15 an hour, and you offer them something that costs $80 or $100 a month, there’s a good chance they won’t take it, yet you have covered yourself and avoid the penalty by making the plan available.”
“If you wind up paying the penalties, it probably means you just threw up your hands and did nothing,” Harlow added.
There’s a quick fix to stay under the 50-employee mark.
Under the law, the 50-employee mark refers to full-time employees, which are defined as those who work more than an average of 30 hours per week. Consequently, Harlow says he has heard employers say “that they will just cut everybody hours back, and that will fix the problem because they won’t have anyone over 30 hours a week.”
However, it’s a bit more complicated than that. The new rules require employers to include in their calculations the hours worked by part-time employees; for every 130 hours worked per month, they must add one “full-time equivalent” to their workforce.
If the sum of their full-time workers and full-time equivalents exceeds 50, they must offer coverage.
“You have to be careful about that,” Harlow said. “It’s not all about the 30-hour rule.”
If you couldn’t afford a health plan before, you probably still can’t.
One of the longest running misconceptions for individuals and employers has been that plans available through the new online exchanges are offered by the government, or that they were fundamentally different than those offered by health insurance companies. In fact, the plans are still purchased from and provided by traditional insurance companies — they can simply be purchased through the government-run shopping portals.
However, just because the plans are often identical doesn’t mean that there aren’t some potential cost benefits to shopping on the exchange.
“I think what people need to understand is that there are ways to be creative and design the plans so that they are affordable for employers,” said Cohen, the broker. She noted that some state-run exchanges (and the one in D.C.) now allow business owners to offer various plans from different insurers to their workers — an option not generally feasible in the past.
“I think people are still nervous that it’s going to cost them a lot of money, but it truly doesn’t have to,” she said. “We can ask, ‘How much do you want to pay?’ and then work backwards from that number.”
In addition, Harlow noted that businesses with fewer than 25 employees that buy plans through the new marketplaces are eligible for tax credits equalling as much as 50 percent of their total health costs, potentially helping some small employers cut costs even further.
Using the online exchanges means going it alone.
“Some employers think that because these portals allow you to go on and see rates for yourself and do it all yourself, that means they have to do it all themselves,” Harlow said. “That’s not true. There are brokers who are there to help you though the process.”
Additionally, he noted that his “clients sometimes think that a broker represents another cost that they are going to have to incur.” He pointed out that it’s the insurance company that pays the broker for the connection, not the small business.
Cohen said her role has actually expanded in some cases.
“When I first looked at the portals, I thought, ‘Oh my God, they’re not going to need us anymore,” she said. “But it’s actually the total opposite. There are a lot of new options, and they actually need our help more, so we have been very busy.”