The Affordable Care Act brings with it good news for members of Generation Flux. The ability to access subsidized health care on the open market lowers the risk for people contemplating leaving the corporate world in favor of starting their own businesses or going freelance.
But what if you are lucky enough to be hiring or employing people, or investing in new companies or businesses? There has been a lot of noise about the “job killing” effects of the employer mandate, which by next year will require companies with more than 50 employees to offer affordable health insurance plans to anyone working over 30 hours a week, under penalties of thousands of dollars.
It’s indisputable that this new mandate will cause some recalculations for people who own, start, and invest in businesses. Here’s a look at exactly what those recalculations might entail:
What Obamacare Means For Big Companies
There are already reports that companies from Trader Joe’s to Home Depot to Forever 21–and even colleges that employ thousands of low-wage adjuncts–are working to wiggle out of the mandate and avoid penalties that start at $40,000 a year. They are doing this by cutting workers’ hours to just below the 30-hour minimum. Some are also withdrawing coverage from their part-time workers, reasoning that these workers now have the right to access public exchanges.
Since employers don’t get punished if employees don’t sign up for the plans offered, they might also try to cut costs by offering a plan that is technically affordable, but actually unaffordable for most of their workers. For example, a worker putting in 30 hours a week at the minimum wage could legally be charged up to $1,074.00 annually for health-care coverage, an expense that some strapped workers may choose to skip in favor of gas or groceries. ($1,074.00 = 9.5% of $11,310, which is what you make on the minimum wage working 30 hours a week)
Needless to say, this strategy won’t land you on any “best companies to work for” lists. But if you can withstand the bad karma, there is probably going to be safety in numbers–many big employers are sure to work hard to find the loopholes in the law, at least until it is amended.
The question is whether or not your business will be able to thrive and grow with the high turnover rates of an all-part-time workforce.
What Obamacare Means For Startups
For fast-growing companies hiring skilled full-time workers like designers or developers, the looming issue is when the size of their staff will trip the 50-person limit and be subject to the costly overhead and red tape of offering a health insurance plan.
“Lean Startup” now has a new operational definition.
We may begin to see many more 49-person companies, companies that rely on part-time contractors or outsource key services (catering? HR? logistics?) rather than bring them in-house.
And, of course, the tech community sees providing health-care services, plans, and administration to startups as a business opportunity in itself, with sites like StartupInsurance springing up as middlemen, marketing plans to startups and entrepreneurs.
Startups under 50 employees also have the option to use the Small Business Health Options Program (SHOP) to shop for and acquire plans; SHOP offers special tax credits to small businesses for 2014.
What Obamacare Means For VCs
Investors hate uncertainty–but love flexibility. Now that the Affordable Care Act is actually going into effect, some of that uncertainty around new costs to businesses, as outlined above, has been lifted. Money will be able to flow more freely, and so will talent. If established software engineers with families no longer feel the need to stay at Microsoft or Yahoo just for the health-care coverage, they’ll have more freedom to leave and start new companies.
For investors in the health-care and biotech spaces specifically, the new mandates create new opportunities. For example, more firms will likely try to support a shift toward electronic health records, more consumer-facing plans, more primary-care and urgent-care options for those new to coverage, and other cost-cutting or low-cost innovations. We’ll likely see more variations in walk-in clinics such as those offered at CVS, Target, and Wal-Mart.
Are you an employer or investor? What does Obamacare mean to you? Tell us in the comments section below.
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