What will the Affordable Care Act Mean to Montana Business?

Ask most people if they support government healthcare and you will most likely get an answer that falls along party lines. Democrats love it; Republicans hate it. But, ask either group what government healthcare actually covers, or how much it will save the average American and you get the deer in headlights stare. The rank and file worker in America has no idea what the bill will or will not cover or even more amazing what it’s going to do to their future paychecks.

While some of the bill is obscure there are parts of it that relate to business that are crystal clear. The governmental bar on healthcare depends on the number of employees you have, how many are full or part time and their salary. To put things in perspective let’s talk about what it costs a company to hire an employee.

How Much Do Employees Cost the Company?

"It Costs Our Company $74,000 To Pay An Employee $59,000--Of Which She Keeps $44,000." Michael Fleischer, the CEO of Bogen Communications, a company with 83 employees in New Jersey.

Is it any wonder that employers would like a little clearer picture of how much the Affordable Care Act (ACA) will add to this bill for each employee? Here are some known costs that are already in the bill. Other costs are not in the bill because they haven’t been written yet.

What’s in the healthcare bill for business?

It all boils down to number of employees, how much they make and how many hours they work. If you have 50 or more full time employees making less than $25,000 per year you are going to have to provide a minimum level (determined by Uncle Sam) of coverage or pay a hefty fine.

It gets worse. If any single employee applies for and receives a government subsidy to purchase heath insurance, you will be fined $2,000, not just for that employee, but for EVERY employee in your employ. But Uncle Sam is not totally heartless. You can deduct 30 of the 50 employees from your fine. So you would only owe $40,000 in fines.

If you have less than 50 full time employees you are off the hook … sort of. Suppose you have 100 workers that put in 20 hours a week each.  Uncle Sam will combine workers and part time hours together to produce a full time worker. So, your 100 employees would produce 50 full time employees. Do you begin to get the picture of how this plan will be paid for?

Would you like some more? If any of your employees fall into certain poverty levels you could be forced to pay the difference between what Uncle Sam pays and the total cost of the premium.

Depending on what the Supreme Court does, healthcare could turn into a bookkeeping nightmare for your accounting department.

How Will Montana Be Affected?

There are just too many unknowns at this point to make a valid prediction. The vast majority of Montana businesses are nowhere near 50 employees. Most are five to fifteen at best. Where the problem comes in is profitable companies using healthcare to lure good employees away from less profitable companies. This environment could put some under capitalized companies out of business and create lack of competition. That could affect what we pay for goods and services in the years ahead. It also depends on how much the premiums of healthcare will be and how many employees might need some form of subsidy. And where do workman’s comp insurance fall in with the future insurance exchanges. No one is really sure.

There is no question that Montana will be affected more than some other states due to our low population. If medical care becomes unprofitable here that could cause serious problems in the future.

Hear Tom's interview with Michael Cannon, of the Cato Institute, on how the health care bill will affect business. (May take a few moments to load.)

Additional Link: Michael Cannon White Paper "Bad Medicine" on Healthcare and Business

Tomorrow’s topic: How Will Healthcare Affect Seniors?