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Employer Mandate Delayed; Health Care Costs Impact Hiring

(2/11/2014)

The Obama administration announced yesterday that it is granting another delay in the Affordable Care Act’s employer mandate provision. Companies with 50 to 99 employees will now have until 2016 before they’re forced to provide health insurance to employees. And, companies with more than 100 employees will now be allowed to phase in their health care coverage throughout 2015 and 2016. The announcement marks the second time that the administration has postponed enforcement of the mandate – it was originally scheduled to be implemented last month and was then delayed until January 1, 2015 before the announcement of this latest extension.

The changes in enforcement of the health care law come as a new study shows that soaring health care costs are preventing small businesses from hiring, impacting profits and causing firms to refrain from increasing existing employees’ salaries. The survey, from the National Small Business Association (NSBA), revealed that 91% of companies experienced a spike in health plan expenses at their most recent insurance renewal, with one in four getting hit with an increase exceeding 20%. Since 2009, the average monthly cost per-employee of health insurance premiums for a small business has risen 90%, from $590 to $1,221.

Daunting numbers like that – and worry over future rises under the newly implemented Affordable Care Act – are weighing heavily on some small businesses. A third of owners say they will not add staff because of cost concerns tied to the act, the NSBA survey reports. Another 10% say they’re reducing hours for staff, while 14% indicate they’re hiring more part-timers rather than full-timers. Significantly, 66% of small companies say they have less profit available for general business growth, while more than half indicate that they held off on salary increases – all because of skyrocketing health care costs. “These costs have real-world implications,” NSBA President Todd McCracken in a statement.

The management team at Stitch Designers (asi/741145), a contract apparel decorator that serves advertising specialty distributors, is staring some of those difficult implications in the face. “We have historically carried insurance for our employees, with the company covering larger and larger percentages annually to keep the employees’ contributions the same, but that will definitely change,” says Joe Thompson, Stitch Designers’ national accounts manager/marketing director. “It has been forecast that premiums will at least double, but most likely quadruple next year and decisions will be made in the name of survival.”

While the health care cost crunch is impacting businesses, not all firms are necessarily feeling burned. Nearly half (48%) of the 780 small businesses that responded to the NSBA survey said that the Affordable Care Act is not compelling them to restructure their workforce. Within the ad specialty industry, firms that include Top 40 distributor firm Proforma (asi/300094) say that health care expenses are not detracting from their operations or success. “While the overall rising cost of health care in our country is concerning, at Proforma we pride ourselves on the affordable health care plans we offer our team members,” said Brian Smith, president and chief operating officer. “We don’t foresee health care implementation having a significant impact on Proforma because of the variety of plans and options we already have in place.”



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