How much does ACA really cost?

The Affordable Care Act (ACA) is a U.S. federal law that was enacted in 2010 by President Barack Obama. Under the Affordable Care Act (ACA), businesses with 50 or more full-time equivalent (FTE) employees that do not offer health coverage, or that offer health coverage that does not meet certain minimum standards, may be subject to a financial penalty, referred to as the Employer Shared Responsibility payment. The main goals of the ACA are:

• Make affordable health insurance available to more people, especially those with low income or pre-existing conditions.
• Reduce the growth of health care costs and improve the quality of care.
• Expand the coverage of preventive services and essential health benefits.

The ACA has affected different aspects of the health care system:

• Individual mandate: Requires most U.S. citizens and legal residents to have health insurance or pay a penalty (set at $0 since 2019).
• Employer mandate: Requires large employers to offer health insurance to their full-time employees or pay a fee.
• Health insurance exchanges: Creates online marketplaces where individuals and small businesses can compare and purchase health insurance plans, with subsidies for eligible people.
• Medicaid expansion: Allows states to expand their Medicaid programs to cover more low-income adults, with federal funding.
• Medicare reforms: Changes the payment and delivery models for Medicare, the federal health insurance program for seniors and disabled people, to encourage value-based care and reduce waste and fraud.
• Consumer protections: Prohibits insurers from denying coverage or charging more based on health status, gender, or pre-existing conditions. Also limits annual and lifetime caps on benefits and requires insurers to cover preventive services and essential health benefits.
• Taxes and fees: Imposes new taxes and fees on certain individuals and businesses, such as high-income earners, medical device manufacturers, and health insurers, to help fund the ACA.

The ACA has been the subject of many legal challenges and political debates since its enactment.

Some of the major Supreme Court cases that have upheld or modified the law are:

• National Federation of Independent Business v. Sebelius (2012): Upheld the constitutionality of the individual mandate and the Medicaid expansion but made the expansion optional for states.
• Burwell v. Hobby Lobby Stores, Inc. (2014): Allowed closely held for-profit corporations to opt out of the contraceptive coverage requirement on religious grounds.
• King v. Burwell (2015): Upheld the availability of subsidies for health insurance purchased through both federal and state exchanges.
• California v. Texas (2021): Rejected a challenge to the ACA based on the elimination of the individual mandate penalty, finding that the plaintiffs lacked standing to sue.

What does the ACA Really Cost Small and Medium Businesses?

The ACA has had a significant impact on the U.S. health care system and the population. According to various estimates, the ACA has reduced the number of uninsured people by 20 to 24 million, increased access to preventive and primary care, improved health outcomes for some groups, and slowed the growth of health care spending. However, the ACA has also faced some challenges and criticisms, such as rising premiums and deductibles, limited choice and competition in some markets, administrative complexity and uncertainty, and political polarization and opposition.

The current status of the ACA is that it is still in effect and providing health insurance coverage to millions of Americans, but it also faces some challenges and uncertainties. According to a recent report by the U.S. Department of Health and Human Services (HHS), the ACA has reduced the number of uninsured people by 20 to 24 million, increased access to preventive and primary care, improved health outcomes for some groups, and slowed the growth of health care spending. However, the ACA has also faced some legal challenges and political debates, such as the elimination of the individual mandate penalty, the availability of subsidies, and the expansion of Medicaid2. The Biden-Harris Administration has made some changes and investments to strengthen the ACA, such as the American Rescue Plan (ARP), which lowered the costs and expanded the eligibility for health insurance plans through the Marketplaces (3). The ARP also fixed the so-called ‘family glitch’ that prevented some families from getting subsidies if one member had access to employer-sponsored coverage. The ACA is still evolving, and its future may depend on the outcomes of the ongoing COVID-19 pandemic, the Supreme Court decisions, and the congressional and presidential elections (4).

There have been some recent critiques to the ACA in 2023, especially from small businesses that are affected by the law’s requirements and costs. Some of the common criticisms are:

• The ACA imposes new taxes and fees on some small businesses and their employees, such as the 3.8 percent tax on net investment income for high-income earners and the health insurance provider fee.
• The ACA increases the administrative burden and complexity for small businesses that have to comply with the law’s reporting and disclosure rules, such as Form 1095-C and Form 1094-C.
• The ACA raises the premiums and deductibles for some small businesses and their employees, especially those that do not qualify for subsidies or tax credits, or those that operate in areas with limited choice and competition in the health insurance market.
• The ACA discourages some small businesses from hiring or expanding, because they may face higher costs or penalties if they cross the threshold of 50 full-time equivalent employees.

Some of the small businesses that are particularly critical of the ACA are local insurance agencies, which may face lower demand and revenue due to the ACA’s expansion of public and subsidized coverage, as well as the ACA’s regulations and standards for health insurance plans. Some local insurance agencies may also struggle to compete with larger insurers or brokers that have more resources and leverage in the health insurance market.

Approaching 50 employees?

Companies considering hiring their 50th employee might just think twice. The moment that happens, the company must provide all employees with health care benefits, FMLA and SEFRA or pay the hefty $2000 per employee penalty. It’s unlikely that that one new employee will bring in enough revenue to cover his, or her salary and insurance for everyone. So, what’s an employer to do?

One option is to simply stop at 49 and many economists’ suspect that is what companies will do. This creates a plethora of problems, all resulting in stunting business growth. Owners are then forced into a tango with bad options including hiring freezes, reducing hours, eliminating staff, and overloading employees with additional responsibilities; the list goes on. Technology and automation are great, but not all positions can be replaced with an algorithm, or robotic arm. Those aren’t usually cheap either.

Many large businesses and corporations have resorted to outsourcing solutions. Traditional outsourcing typically involves substandard environments, insufficient management, high turnover, poor data security, unfair contracts, low quality and high seat requirements which places the option out of reach for small to medium business owners. Online freelance platforms work well for single, miscellaneous jobs, but are too unreliable and expensive to replace the quality and level of work you would get from an in-house employee. This is especially true if you have to invest time and training in the freelancer to learn your specific processes and procedures.

Don’t deal with the disincentive to hire.

The program we developed at Staff Boom addresses the above concerns around outsourcing. If you’re business is in jeopardy due to the threat of ACA, if you’re interested in expanding, or perhaps both, contact us today to find out how we can specifically help you.