It seems like just yesterday that we were advising our clients on the impact to their businesses of the 2010 Affordable Care Act (“ACA”), otherwise known as “ObamaCare”. The ACA mandated that employers with at least 50 full time employees were required to provide those employees affordable health insurance. If they did not provide affordable health insurance, employers would be subject to a penalty, known as a “shared responsibility payment”. This caused a large increase in health care costs for many employers, especially those that utilized part time employees since a full time equivalent was defined as an employee who worked at least 30 hours per week.
Insurance premiums have increased significantly in many states since the passage of the ACA which has caused an even larger spike in health insurance costs to many businesses. Add on top of that the additional reporting and compliance costs associated with the ACA and it is clear that the law was a very expensive one for employers, especially small and midsize businesses with limited resources.
President-elect Donald Trump and congressional Republicans have been adamant that the repeal of the ACA will be a top priority in 2017. Many business owners are anticipating lower health care costs if the ACA is repealed. While this may be true in the long term, business owners are not likely to see much change in 2017. The ACA is very complex and unwinding it will take some time. There are upwards of 20 million previously uninsured Americans who are insured under the ACA.
The President-elect and Republicans in Congress will need something to replace the ACA before it can be fully repealed. This could take several years to implement. Even with immediate action in Congress to repeal parts of the ACA through the budget reconciliation process, the provisions that most impact employers (i.e. the mandate to provide employees with affordable health care and reporting requirements under the ACA) most likely will not change in 2017. In fact, some employers may see costs increase if the health insurance exchanges are eliminated. Many would-be employees have been willing to work as independent contractors due to their ability to acquire health insurance through the health insurance exchanges that were created under the ACA. If this is no longer available, employers utilizing independent contractors could see the pool of available resources dry up as more people look for full employment status to be able to acquire health coverage.
Whatever your view of the Affordable Care Act, it is pretty clear that those businesses affected by the law will see a decrease in health insurance costs with its repeal, it just won’t be in 2017.
For more information, contact Jon Huckabay, Principal at 714.569.1000 or [email protected].