Two Simple Remedies for Reducing Small Businesses’ ACA Regulatory Woes

Former Congressional, SBA Economist Recommends Politically Feasible Changes,
Authors Guide to Help Small Business Navigate Health Reform Complexities, Opportunities

Washington, DC (December 3, 2014) – Two relatively simple fixes to the Affordable Care Act (ACA) would significantly reduce the financial and administrative burdens that health reform has placed on small businesses, without adversely impacting the law’s goal of making health coverage available to millions of uninsured Americans, according to one of the leading experts in the field.

Janemarie Mulvey, Ph.D. – a former senior Congressional health economist and researcher and the former chief economist for the Small Business Administration’s Office of Advocacy – is recommending excluding firms with 50-99 employees from the ACA’s employer shared-responsibility penalties and scrapping the law’s multiple, conflicting definitions of full-time employees (FTEs) in favor of a single, uniform standard. 

“While ACA provides tax breaks and new insurance marketplaces that could potentially benefit small businesses, there also are increased administrative burdens – including new Internal Revenue Service (IRS) reporting requirements and insurance coverage mandates, coupled with potential employer penalties for some companies that fail to offer adequate or affordable health insurance coverage,” says Dr. Mulvey, whose new book Health Reform: What Small Businesses Need to Know Now! was released this week. 

“Add to that the numerous delays in ACA’s implementation and it’s little wonder that many small businesses are in a state of confusion about what they have to do, when they have to do it and what happens if they don’t,” Dr. Mulvey says. “Unfortunately, the answers to their questions are buried in thousands of pages of regulations, some of which are not yet finalized.”

With Republicans taking control of both chambers of Congress in January – but short of enough votes to overturn a presidential veto – ACA won’t likely be repealed. But legislative changes to the law are widely considered to be a virtual certainty.

After many delays, implementation of key parts of the law over the next two years presents crucial challenges for small businesses, and the complexity of the law’s regulations may well have the effect of increasing the administrative burden to small businesses. To alleviate those burdens, Mulvey proposes:

  • Excluding firms with 50-99 FTEs from the employer shared-responsibility penalty. These firms face a Catch-22. They are penalized if they fail to provide “adequate and affordable coverage” – yet the insurance requirements for them are more stringent (in terms of coverage mandates, premium restrictions and more) than for their larger counterparts (e.g. businesses with 100 FTEs or more). In addition, firms subject to the employer shared-responsibility penalty must also report to the IRS the details of their insurance coverage for each and every full time worker. Classifying these firms properly as small businesses rather than as “applicable large employers” would not only eliminate their exposure to potential penalties, but would significantly reduce their administrative burdens with respect to IRS reporting requirements.
  • Making the definition of “full-time” consistent throughout the ACA at 40 hours a week. Currently there are multiple definitions of “full-time” in the law. Under ACA’s employer shared-responsibility provision and for participation in the federal SHOP (Small Business Health Options Program) Exchange, full-time is defined as 30 hours per week. However, under the small business tax credit provision (SBTC), full-time is defined as 40 hours per week. And to really confuse businesses, the District of Columbia and each of the 16 states which operate their own SHOP exchanges can make its own determination of what constitutes full-time within their jurisdictions. 

The 30-hour definition for the employer-shared responsibility provision has led to two problems: First, most employers that provide coverage to their full-time workers working 40 or more hours a week are less likely to provide coverage to workers working 30 to 39 hours, thus increasing potential penalties. Making the definition of full-time consistent at 40 hours per week would save small businesses approximately $38.6 billion in penalties over 10 years (according to estimates by the Congressional Budget Office). Second, measuring who is full-time (using the 30-hour definition) and who is not for purposes of the penalty has led to a confusing and convoluted look-back measurement process for employers which most certainly will cause them increased administrative headaches. 

In Health Reform: What Small Businesses Need to Know Now! Dr. Mulvey examines the complexities of the new law for small businesses and provides timely, unbiased information to guide small businesses through their understandable confusion. Her book is a guide that deciphers and simplifies the new law’s requirements for small business owners as well as their HR staffs, and legal counsel by providing easy-to-understand explanations, timelines, definitions, checklists and worksheets, as well as links to other useful resources.

Since many of the law’s penalties and premium subsidies are implemented through the tax code, Dr. Mulvey’s comprehensive guide also serves as an excellent resource for tax accountants/advisors and for health insurance brokers who work with small businesses. 

“My hope,” Dr. Mulvey said, “is that the book will also help members of Congress better understand their options for addressing ACA’s complexities and their unintended negative consequences for small businesses.”

Among other things, Health Reform: What Small Businesses Need to Know Now! addresses:

  • How employers can minimize potential penalties
  • How small businesses and self-employed workers can qualify for tax credits
  • Eligibility for SHOP exchanges
  • New IRS forms required for each employee and other disclosure requirements
  • New Health insurance requirements for firms 

Noting that most books available for small businesses are either out of date, present a political point of view or are aimed at selling insurance, Dr. Mulvey says, “I produced this guide because I discovered there was a large gap in timely and unbiased information about the implications of health care reform for small businesses. Large companies can pay consultants to help them comply with ACA requirements. But smaller firms are far more focused on business performance. They need less costly, more targeted and simplified resources.”