ObamaCare redefines ‘large business’

The American people are about to receive yet another ObamaCare trick in the coming weeks. While many small businesses thought they would be safe from the costliest provisions of the Affordable Care Act, or ACA, commonly referred to as ObamaCare, some of the nation’s small employers are finding out that they may be counted as “large employers”...

The American people are about to receive yet another ObamaCare trick in the coming weeks. While many small businesses thought they would be safe from the costliest provisions of the Affordable Care Act, or ACA, commonly referred to as ObamaCare, some of the nation’s small employers are finding out that they may be counted as “large employers” under the law.

ObamaCare’s damage to the nation’s employment to date is only a preview of what is to come. As a direct result of the law, the employment picture could get much worse.

The country is facing anemic job growth. Many large employers (with 50 or more full-time employees) are already cutting employee hours to avoid the upcoming ObamaCare costs. An overly broad definition of “large employer” will subject many small employers to new and costly reporting requirements. In many cases, they will also be face stiff financial penalties under the law.

In testimony before a House committee yesterday, Edward A. Lenz, Senior Counsel to the American Staffing Association, explained that:

“The definition of a large employer under the ACA is based on whether an employer has 50 or more full-time employees. In making this calculation, employers must include “full-time equivalent” employees, thus significantly expanding the scope of the law to cover many smaller employers with large numbers of variable hour employees whose connection with the workplace, or with the employer, is tenuous or intermittent.”

Under the law, a full-time employee is defined as 30 hours per week. But what some small businesses don’t realize is that full-time equivalents, or FTEs, will also count toward their full-time employee total. For example, a business that employs 20 full-time employees (30 hours or more per week) and 60 part-time employees (15 hours or more per week) will employ a total of 50 workers. That is 20 full-time plus 30 FTE employees. The U.S. Small Business Administration has instructions for calculating whether a small business falls into the large employer definition of the law.

Under the law, large employers will be subject to financial penalties beginning in 2015 if they don’t provide “qualified” affordable health coverage to their employees. They will also face new information technology and human resource requirements beginning in January.

Employers are already taking steps to avoid the costliest provisions of the law. An employer with 50 employees who does not offer qualified coverage could face a penalty of $40,000. Some employers, even if they do offer qualified coverage, could face similar penalties if the coverage is not deemed affordable under the law.

There are no such penalties for employers with 49 or fewer employees. Firms that replace their full-time workers with part-time workers, regardless of whether or not they offer health insurance coverage, can avoid many of the fines altogether. That is because the formula for determining the penalty is based on full-time workers, not full-time equivalent workers.

There is no doubt that smaller employers, especially those who are on the cusp of qualifying as a large employer, will look to cut workers and/or hours. Similarly, small companies will have little incentive to grow.

The White House claims that reports of large employers cutting hours because of ObamaCare are “anecdotal.” Americans, particularly those whose hours are cut or who lose their jobs, will call it devastating.