Could HVACR Contractors Actually Benefit from Obamacare?
The Affordable Care Act, or “Obamacare,” was officially deemed constitutional by five of nine sitting chief justices of the United States Supreme Court on June 28.
While some people believe Obamacare will hurt small businesses, research shows, in the HVAC industry, it may be more of a help than a hindrance.
Beginning in 2014, companies that employ 50 or more individuals will be forced to sponsor a health plan for all of their workers. Employers who refuse to provide insurance coverage will be forced to pony up $2,000 per employee annually — applied to all but the first 30 full-time employees. The penalty, spanned out over an entire year, is estimated to add a burden of approximately 96-cents per hour for each full-time worker. (Let’s do the math for a company with 50 employees: Take 20 employees working 40 hours a week for 52 weeks. That totals 41,600 work hours. Divide $40,000 by 41,600 hours to get 96-cents per hour.)
The government is not requiring companies with fewer than 50 employees to offer health insurance starting in 2014.
Contractors that employ less than 25 employees may see a small benefit through the matter. If an owner covers at least half of employee health insurance premiums, a tax credit of 35 percent is currently available to help offset the employee premium. The credit is set to increase to 50 percent in 2014 and may only be claimed for a maximum of five years. Beginning in 2014, the credit will only be offered for a maximum of two years.
Exchanges and SHOPs
Through current Obamacare framework, each state will begin offering an Insurance Exchange, or state-based competitive health insurance marketplace, where people and small businesses can shop for private health insurance in 2014. Each exchange is designed to cater to its local market and will be accessible through the Internet, toll-free call centers, in person, by mail, or through agents and brokers. The exchanges will serve people of all demographics including members of Congress, and those residing on Wall, Main, and Back Street.
Through these exchanges, small businesses will be able to “SHOP” plans through a Small Business Health Options Program (SHOP), which allows each company to offer a variety of qualified health plans that best fit each circumstance. SHOP will offer side-by-side comparisons of qualified health plans, allowing shoppers to identify benefits, premiums, and other factors that may impact their decisions. SHOP plans will also require health insurers to provide a detailed report that includes prices, benefits, and quality of their plan, and consumer satisfaction survey results. Companies will be allowed to consolidate billing, thus eliminating the hassle an employee may endure while working with multiple insurers.
A Positive Impact?
According to a 2005 Service Roundtable study, 52 percent of all HVAC contractors with a payroll employ one to four individuals; 22 percent employ five to nine individuals; 14 percent, 10-19 employees; 10 percent, between 20 and 99 employees; and only 2 percent pay more than 100 employees.
According to the aforementioned study, 88 percent or more of HVACR contractors employ 20 or fewer employees. The moral of the story: Approximately nine of 10 contractors will not be required to offer health insurance and will not be penalized for not doing so. Additionally, if they do offer the coverage, they may be eligible for a tax rebate that refunds up to half of their costs.
Admittedly, there are many aspects of the bill that could be viewed in a negative light, including an individual mandate, a chance that companies limit growth to 49 employees, a projected $500 billion increase on the national budget, and more. Also, there is sure to be a great deal of necessary paperwork for a small company to complete in order to gain the tax benefit, especially to a small office that sees the husband in the field, and the wife in the office. But, with experience completing 25C, 25D, 25E, and several other IRS forms, tax paperwork is nothing new to today’s contractor.
While many will complain that Obamacare will cripple small business, at face value, for the average HVACR contractor, this plan is butter.
Publication date: 7/23/2012