Small Business Owners Choosing To Drop Employee Healthcare

Many small business owners are choosing to drop their healthcare plans. It's not that they are being mean or hateful. They are simply trying to survive, and ironically, protect the jobs of their employees. The Affordable Care Act legislation has not been kind to most employers, and survival is, as you might expect, the top priority.

In 2014 when much of the new healthcare began, a business that had 50 or more full-time employees, was forced to purchase health insurance for workers that average 30 hours (weekly) in a specific month. And that is expensive. However, the alternative is rather attractive. A mere $2,000 tax for any full-time employee in the company (exceeding 30).

Since many business owners spend twice or three times that amount on healthcare benefits, it is tempting to drop the group medical plan and pay the fine. With the extra money (and there could be quite a bit), more funds are spent on research, development and upgrading equipment, which potentially would make the price of their products more competitive.

Also, since these changes would result in increased sales, the security of the employee's job position would be enhanced, and perhaps wages would also increase. Of course, the worker would not have to purchase their health insurance through their state Exchange or Marketplace, which would require the help of an experienced broker.

A company that employs 250 people is likely to save between $350,000 and $750,000 in insurance premiums each year by allowing workers to purchase their policies on an Exchange. It costs (on average) about $15,000 per family to cover medical benefits. That saved money may provide more employment possibilities for the company, and ultimately helps the local community. A bit like a vicious circle, but just the opposite!

And if the family that is losing benefits qualifies for the federal subsidy, it is likely their cost will be very affordable, and the coverage will include maternity and most (or all) benefits that were enjoyed on the group plan. Since Open Enrollment occurs every year, a worker that is not provided group benefits can apply for a new plan, or keep their existing benefits on an annual basis.

Many of these mandatory requirements for business owners have been put off...for now. First extended to 2015 (and now extended to 2016), the Administration seems to comprehend that the new legislation forcing businesses to buy expensive healthcare must be tweaked or changed. And so far, that's exactly what is happening.

The Department Of Health And Human Services predicts that most employers will not drop their healthcare plans and pay the fine. By the beginning of 2016, we'll find out. I suspect more employers will indeed terminate group plans simply to stay competitive with other US, European and Asian competition. However, if problems begin to surface with hiring the best workers (because of lack of healthcare), the percentage of businesses that retain benefits will be higher.