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Obamacare is giving small companies a headache

April, 17 2013

obama careIf 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 -0.10%) 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 -0.29%) 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.”

From MSN Money.

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