Just when small business owners (and everyone else) had started to wrap their heads around what the Affordable Care Act meant for their organizations, it seems that we will all be adjusting yet again with Obamacare’s repeal looming largely on the horizon. Whether you love the Affordable Care Act or hate the Affordable Care Act, it is imperative that small businesses start preparing now for what impact the law’s repeal will have on their operations. And while no one knows the exact details of what Obamacare’s repeal will entail, there are some steps and items to be aware of to be primed to make the most of any changes that come our way.
Prepping Your Business for Affordable Care Act Repeal
First of all, there is some significant consensus that rather than being repealed outright, the existing health care law will only have sections repealed while new provisions are added in during a process known as reconciliation. This act will make it easier for Republicans to prevent a filibuster and lower the threshold for votes they need to enact whatever changes to the Affordable Care Act they should decide to pursue. Essentially, look for provisions that are extremely popular (like allowing people to stay on their parents’ health insurance plans until they turn 26) to stay intact as will provisions that do not directly impact the budget (they cannot be repealed via reconciliation and Republicans do not have a filibuster-proof majority).
Budget Reconciliation Process
Next, the annual reporting requirements dictated to businesses by the Affordable Care Act are not likely to go away anytime soon. The budget reconciliation process being undertaken by Republicans can only be used for items that directly affect the budget. So even if the requirement for businesses with more than 50 employees to provide health coverage to employees (the employer mandate) is repealed, the reporting requirement will stay in place. Theoretically, President Trump could issue an executive order to do away with reporting requirements, but it is better to be safe than sorry.
The Cadillac Tax
One aspect of the Affordable Care Act that is very likely to go away is what is known as the Cadillac Tax—a tax that was to be leveraged against high-value health insurance plans (a whopping 40 percent tax for every dollar over a certain threshold) and to become effective in 2020. With 2017 just getting started, the odds of the unpopular provision remaining intact is practically null. It is worth noting that there are some rumblings in the House of Representatives for some other law that would function in a similar way to charge a tax against high-value insurance plans provided to employees, though it is anticipated that the threshold will be much higher and the tax will be a significantly lower percentage.
What this means for business’
Finally, and, perhaps the most well-known section of the Affordable Care Act directly impacting businesses, the mandate that employers provide coverage for full-time employ ees, is very likely to be changed or repealed. This will be complicated because it will be very tempting for many small businesses to stop providing health coverage altogether as a way to reduce overhead costs. However, it will be crucial that employers examine their roster, the talent market and overall employment trends in their industry to make an educated decision about whether or not they are likely to lose employees as a result of doing away with coverage and if they would be able to satisfactorily replace those employees. Another component to think about will be the likelihood that costs to provide health coverage will likely increase as fewer people will be paying for coverage due to a likely repeal of the individual mandate as well. There may be a compromise you can come to depending on the specifics of your small business. For instance, the Affordable Care Act defines full-time employees as anyone working 30 or more hours per week. You may find that adjusting your company’s policies to provide coverage to those working 40 or more hours per week (the traditional definition of full-time) may be a strategic decision that makes sense for your bottom line and still enable you to offer competitive benefits to your workers. Or, by taking advantage of the Affordable Care Act repeal resulting in loosened requirements of the health coverage offered, you may find that you will be able to reinforce your bottom line while offering coverage to even more of your employees.
If you would like to chat about strategies for adapting to the Affordable Care Act’s repeal, like deciding when and how to provide coverage to employees to the benefit of your business, give us a call. We have helped businesses of all sizes and across many industries that deal with all sorts of accounting and HR challenges.