Like many small business owners, I am getting pretty serious about thinking about the implementation of the Affordable Care Act (“Obamacare”), even with the recently announced one year delay in the employer mandate. I really don’t like that term Obamacare, because it seems kind of disrespectful to our president. I am reminded of the time one of my favorite presidents, Jed Bartlet, said, “In this White House, when the President stands, nobody sits.” I fully understand why many if not most small business owners are pretty concerned about the impact the Act’s implementation may have on their businesses. I am pretty cautious about complaining, because as a 57 year old self-employed person, I am someone who has already benefited from its provisions. I know that people in my category are one job change away from disaster when it comes to health insurance.
I recently read an interesting article in the New York Times that discussed why many business owners are thinking very hard about embracing the $2,000 penalty per employee (in excess of 30) for not offering health insurance. Here’s the link. If you have about 100 employees, the penalty might be something like (100-30) times $2,000 or $140,000. While that may be more palatable than 100 times at least $5,000 or about $500,000 (or much more), even the lower number would be enough to wipe out many, if not most, of my clients. Many of my lawn and landscape clients have many relatively low income employees and the premiums or penalties would raise their costs astronomically. It is not difficult to understand why many small business owners are extremely disturbed and frightened by the employer mandate.
These lawn and landscape employers would, I suspect, often be better off offering a minimal qualifying (adequate) plan with the maximum cost-sharing of 9.5% of the employee’s income. I am confident that relatively few field employees would take that deal, leaving the employer to cover those employees willing to take the deal, but paying no penalties. 9.5% of income for a $10 per hour employee would be around $150 per month. I don’t know many of those guys with $150 extra every month. In many ways, that is not a pretty strategy, but I think it will work for most employers of relatively low-income workers.
It is hard to predict how this is going to affect the small business merger & acquisition marketplace, particularly in the green industry. With valuations being primarily driven by cash flow, it seems impossible for it not to have an impact. We are already seeing situations in which small employers who do offer health insurance are being, at least theoretically, penalized in terms of valuation. I can’t really decide if that makes sense or not.
The one year delay in the employer mandate doesn’t put this topic so far in the future that we don’t have to worry about it now.
Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net