Community-oriented small business owners know better than anyone the importance of taking care of their employees, but government intervention has made it increasingly difficult to do so. Providing health insurance has emerged as arguably the greatest business banking challenge facing entrepreneurs today – with the 2010 passage of the Affordable Care Act, companies are now facing a federal mandate to provide insurance for their workers.
Rachel Shein, the CEO of San Diego bakery Baked in the Sun, told the New York Times that insuring her employees would cost $108,000, making a huge difference on her bottom line.
"Our revenues are about $8 million, but the food business is a low-margin industry," Shein said. "Cutting $108,000 out of our profits, which are just over $200,000, is a big deal."
Obamacare requires all companies that employ more than 50 full-time workers to provide health insurance or else pay into a government fund. Businesses with under 50 employees are exempt, and larger corporations can afford to eat into their profits a bit, but it's the in-betweeners – like Shein's bakery, which employs 95 people – that get squeezed.
"It's ironic that our success meant we could grow," Shein said, "and now we will be competing against smaller companies, with 50 employees or fewer, who will be able to charge less per item because they don't have the financial burden of health insurance."
The good news, according to Bloomberg, is that Obamacare also includes a tax credit for small businesses that reduces the cost of providing health insurance. So far, though, this credit has gone largely overlooked by a vast majority of business owners – Pat Thompson, an accountant in Rhode Island, estimated that only 1 percent of her 2012 returns claimed the healthcare credit. For some, the problem was a lack of awareness, but others failed to meet the strict requirements for eligibility.
For managers in the same predicament as Shein, the options are limited. One is paying for the health insurance, which isn't cheap but might be necessary. Another is to let employees find their own insurance, which would mean incurring penalties from the federal government. Shein is also considering a third option – outsourcing jobs to reduce the number of American workers eligible for healthcare.
None of the above is ideal, but something must be done. Healthcare legislation is changing the small business world, and CEOs will soon be faced with some tough decisions.