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Editorial: Small firms will benefit from an ACA overhaul

By   /   Friday, July 5th, 2013  /   Comments Off on Editorial: Small firms will benefit from an ACA overhaul

In our view, the act places unfair burdens on small companies.

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During the past month or so there’s been plenty of discussion about the Affordable Care Act.

The good news is that the train wreck that many feared for the health care system has not occurred. The cost of health care is beginning to rise at a much less rapid rate than in the past and insurance companies for the first time are being held accountable for their excessive executive salaries and overhead costs.

However, the act is not perfect, and panelists at the Pacific Coast Business Times Champions in Health Care Summit on June 18 made a number of useful suggestions about how it might work better.  We’d add one more area to consider — small business.

In our view, the act places unfair burdens on small companies. Here are two areas that need correction:

• First,  there should be a change in the penalty structure for companies that add a 51st person to the payroll and do not provide health coverage. Today, the full weight of penalties for all employees kicks in when a company exceeds this arbitrary “small business” limit. We’d argue for the penalties to kick in only on employees added after the company has hit the 50 mark or for there to be a gradual phase-in of penalties.
The alternative is a situation where companies simply create new LLCs or new corporations for every 50 employee unit, which would create other administrative problems.

• The second thing that needs a much closer look is the definition of full-time work. The Affordable Care Act defines it as 30 hours per week. In the real world, employers will then cut the workers who exceed 30 hours on average to 28 or 29 hours a week, depriving people at the very edge of the workforce of much-needed cash. A better definition would be to define full-time work as 35 to 40 hours per week.  That would allow states some flexibility in setting the full-time work standard or to phase in penalties for workers who are in the 30 to 40 hour per week category.

As the Affordable Care Act gets phased in, it is easy to see what is working and what is not. The things that are working are controls on costs, the focus on outcomes and rules that make it easier for younger workers and individuals to get access to health care at reasonable prices.

What does not seem to be workable is the system of penalties for smaller employers. A series of simple fixes will encourage companies with around 50 employees to hire — something that would be good news for job growth.

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