Obamacare is giving small companies a headache

They're grappling with whether to continue offering employee health insurance -- and many are saying they won't.

By Aimee Picchi Apr 16, 2013 12:41PM

Man making faces from behind laptop © James Braund, Digital Vision, Getty ImagesIf you work for a small business and currently have health care insurance, be prepared. You might be in for an unhealthy surprise in 2014. 

That's because companies with fewer than 500 employees are more likely than larger businesses to dump their health care plans under the Affordable Care Act, which goes into effect next year. 

About 10% of companies with between 50 to 499 employees that currently offer health insurance indicated they're considering dropping their plans, according to a survey from the International Foundation of Employee Benefit Plans. That portion of respondents said they are "very unlikely" to only "somewhat likely" to continue health insurance coverage. Fewer than two-thirds of companies of that size said they would definitely continue, the study found.

"One of the questions we did ask people who responded was if at any point they would drop (health insurance), and why? And the number one response was that the cost was becoming too prohibitive," Julie Stich, research director at the nonprofit organization, told MSN moneyNOW. 

The findings lend some support to critics of the Affordable Care Act, which will require businesses with more than 50 full-time employees to provide health insurance or else pay a penalty of $2,000 per worker. 

The study offers a look at how the impact might shake out, with larger companies more likely to continue their health insurance plans. Almost all of the biggest employers -- those with 10,000 or more workers -- said they planned to maintain coverage, the survey found.

Smaller businesses, however, are weighing the costs of providing the benefit, which are expected to rise, or paying the penalty. 

And even the smallest companies -- those with fewer than 50 employees, which means they wouldn't be required to provide health insurance under the law -- are considering dropping their coverage, the study found. Almost 16% of those employers said they were "very unlikely" to "somewhat likely" to maintain coverage, the survey found. 

Critics of the law include fast-food franchisees, and Dunkin' Brands (DNKN) is lobbying to change the definition of full-time to employees who work at least 40 hours a week rather than 30. Home Depot (HD) founder Bernie Marcus last week predicted the law will bring death to small businesses, calling it "the bullet to the temple" because of potentially higher costs. (Of course, Home Depot itself has been blamed for the death of many small businesses, like mom-and-pops hardware stores that couldn't compete on price.)

Fewer than 1% of all employers, regardless of size, said they expect health coverage costs to decrease, the survey found. Most respondents predicted small price hikes, anywhere from 1% to 4%. However, nearly 17% said they're expecting costs to jump more than 10%. 

The underlying claims costs, which form the basis for health care coverage premiums, are projected to surge by one-third under the Affordable Care Act, according to a study last month from the Society of Actuaries. 

Employers still have a lot of questions about Obamacare and how the exchanges will work, Stich notes, adding: "There are holes that need to be filled." 

Follow Aimee Picchi on Twitter at @aimeepicchi.

More on moneyNOW

Apr 16, 2013 1:13PM
I have yet to see the benefits of Obama Care.  Looking at the numbers a greater portion of people are going to be without insurance than in the system before.  We are seeing Insurance cost esculate and this is hitting those in the middle calss the hardest.  Now we are seeing that it will affect Job creation.  Less jobs, higher costs, and it is going to get worst.
Apr 16, 2013 1:28PM
Already predicted to cost twice as much as originally thought, and the price is sure to climb before the law even goes into full effect.  I concede that health care spending is out of control and needed to be reigned in, but Obamacare will be a disasterous legacy. 
Apr 16, 2013 1:42PM
Gee, if only someone could have seen this coming, oh wait they did!!!
Apr 16, 2013 1:38PM
Some people can't see the truth even if it slaps them in the face.  Obama is going to be the death and destruction of this country...okay maybe he will only put us in our place - along with the mediocre and third world countries.  Isn't that his stated goal - to show the world that there is nothing special about this country and that Democracy doesn't work?
Apr 16, 2013 1:54PM
socialism does not work...period.  this law is a disaster waiting to unfold, I am a small business owner and the penalty or premiums aspect makes it tempting to give up my coverage of my employees . But I think that is the goal of the socialists.  They want a single payer system, so I will not give in and will continue to cover my employees, and hope the exchanges are the disaster I think they will be.  Obama hopes I will choose to pay the fine, thus forcing my employees into the exchanges.  The American people have been had. period
Apr 16, 2013 1:50PM
Bottom line-Obamacare is unconstitutional!
Apr 16, 2013 1:18PM
Just remember, written by Democrats, passed by Democrats, signed into law by a Democrat.  And please don't mention the Massachusetts healthcare law, written by Democrats and signed into law by a RINO.
Apr 16, 2013 1:44PM
A headache??? im more worried about the other end right now as that is where they are sticking it to us  right up our ***.  we need a new president who can actually do something right
Apr 16, 2013 1:55PM

How can anyone be surprised? Obamacare is a disaster but it is about INSURANCE not about healthcare! Like everything else our central Gov tries and fails at, dealing with symptoms not the problem. The problem is high healthcare costs.  

Apr 16, 2013 1:59PM

Maybe we should look into suing our elected representatives for misrepresentation

Apr 16, 2013 2:09PM
No we are not....most have exited the healthcare business.  we will (or have) dropped all employer offered plans, will pay the fine, or avoid it (stay under 50 employees, restructure to form multiple companies, restrict hours to under 30).   Let the workers buy their own coverage, so what if it will cost them 2-4 times more.   Let them tell the democrats that rammed this down their throats how pleased they are at the polls.

This will cost thousands of jobs and be a huge burden on the middle class...  Typical Obama socialism...  
Apr 16, 2013 2:01PM
Well azzholes, you passed it in order to find out what was in it!!  Bwahahahahahaha...
Apr 16, 2013 2:20PM

We have a small business with 11 employees. We pay 80% employees insurance and have so since we started. We could not afford it then, but felt that not only was it the right thing to do it would set us apart from other employers. Perhaps we could attract and retain better employees. Now I view health insurance as another government fee or tax. Not something I have no choice in, which just burns my a%&, but no longer seperates me from any other business. So there goes capitalism.


Last fall our premiums went up nearly 30%. NOT a single employee stopped to tell me thanks for the "raise" they just received. Since then I drew a line in the sand. Any increase in premiums greater than 3% a year will come out of the employees paycheck. So, I figure someday we may be paying less than 50% of their premiums. Maybe they will vote differently the next time.


The lowest annual premium we pay is approximately $3,300. I will definetely consider paying the government imposed $2,000 tax, or is it a fine, or was it a tax..........

Apr 16, 2013 2:09PM
For all those that will loose their health insurance, you can blame the Democrats for that unfortunate situation.  Everything has unintended consequences. 
Apr 16, 2013 2:35PM
Just another step in Obama's plan to change America into a third world country. 
Apr 16, 2013 1:23PM
My question is simple ! With healthcare running 150% above inflation per yr for the last 10 plus yrs . Why has congress made no a law that pulls in these costs . 150% above inflation a yr is ridiculous and gouging pure and simple! If anything going to bankrupt this country , its healthcare ..All other countries has controls on healthcare but the USA.. Thanks Congress , they cannot even fart right. Oh i forgot the SCOTUS said money is free speech.. So we have the best US CONGRESS money can buy ! And boy are they bought....Obama don't make the laws , congress does he just signs them into law... He can recommend ? But in the end congress are the ones to vote on this ! What's bankrupting Medicare is the costs now.... <<<< Way before Obamacare... DUH.....People in the US Congress are a pure joke and the all need to be fired.... Republicans and Democrats... ALL OF THEM .... But America is the stupidest country in the World ! FACT......And they keep electing these idiots...
Apr 16, 2013 2:27PM

If Obamacare is such a great idea, why is damn near every union in the country lining up to get a waiver from having to implement it?  Answer: It's flawed.  His biggest supporters don't want it. 


Why did he give a choice to businesses to keep employees insured or pay a penalty?

Answer:  Because no matter what happens, it a money grab to pay for this fiasco.  He will get money from businesses for the penalty, he will get taxes from them as part of the benefit process, or he will get taxes from the workers if they do not fall in line under penalty to get insured.  The only winners are the insurance companies as they get to pass along their costs.  And believe you me, they will skyrocket due to the increase in claims the insurance companies will pay out.


This legislation did absolutely NOTHING to curb the costs of healthcare and insurance which is the root of the problem in the first place. 

Apr 16, 2013 2:18PM
Let us not forget that the Federal Government knows what is best for you or else
Apr 16, 2013 2:36PM

I'm continually amazed that people, such as the so called author of this little diddy, are surprised that the gov't can't actually do what it says it will do. Small things like keep costs under control. Hmmm. I'm old enough to remember when the gov't in all their brilliance decided they were going to regulate cable TV costs, cause they were all experts at economics, just ask them. As usual there were too many loop holes and ya wanna know what? All you lefties hang on, this might hurt a bit........Prices went UP!!!! Not only did they go up, they went up at a FASTER rate than before the beloved POS's got involved.

People need to realize that this gov't should only be around for ONE thing. To work for US. Not give us free garbage. And that's all this crap health care plan is. Garbage. I hope the shock isn't too bad for all the people that voted for these idiots who want to RULE us rather than work for us. A sad day is coming......

Apr 16, 2013 2:09PM

The federal government issued press releases about very costly new "navigators" that all 50 states now must hire by the tens of thousands to explain the new exchanges to consumers, and also enroll them.

They're new bureaucrats, which taxpayers must now foot the bill for, a bill that could soar into the tens of millions of dollars.

The government issued no press releases on its new rule last year allowing for free, cheap Internet enrollers, while it did issue press releases touting these costly new "navigators."

The Internet is the easiest, quickest, cheapest way to enroll the uninsured in the new government exchanges under the law, versus hiring "navigators," many of whom will come from community activist groups or unions.

They're new bureaucrats, which taxpayers must now foot the bill for, a bill that could soar into the tens of millions of dollars.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?


[BRIEFING.COM] As expected, the major averages began the day on the defensive. The S&P 500 trades lower by 0.2%, while the Nasdaq Composite (-0.3%) underperforms amid relative weakness in its top component.

Shares of Apple (AAPL 100.11, -1.52) have surrendered 1.5% in the early going, which has translated into relative weakness for the technology sector (-0.3%). Similar to technology, other cyclical groups like consumer discretionary (-0.4%), industrials (-0.3%) also trail ... More