Some owners and managers of small construction companies (those with fewer than 50 employees) may feel that they have dodged a “health care bullet,” because the key provisions of the Patient Protection and Affordable Care Act (PPACA)—also known as Obamacare—apply mostly to companies with 50 or more employees. Small construction companies aren’t affected by the Act’s critical employer mandate, which—starting in 2015—will require companies with 50-plus employees who work 30 or more hours per week to offer health care coverage to those workers.
But owners of small construction companies shouldn’t feel too smug. Non-union employees of a small construction company often begin to feel that their insurance coverage is inferior to that of the company’s field personnel who are covered by a union plan. For this reason, many contractors with fewer than 50 workers must ask themselves whether they should offer an enhanced health care plan to their office workers or potentially have those workers purchase insurance through a state or federal health care exchange established by the Affordable Care Act. (As of Jan. 1, all Americans are required to have health insurance—whether through an employer, a health care exchange or another source—or pay a penalty.)
The Affordable Care Act will impact small construction firms directly and indirectly on risk-management and other levels. Consider the following examples:
- Because of the Affordable Care Act, a construction company with fewer than 50 employees can expect to face increased competition for their employees. Since the Act will require larger companies in every industry to offer health care beginning Jan. 1, 2015, those firms can use a robust insurance plan to entice a small construction company’s prized office employees who may feel their insurance coverage is lacking to jump ship. Considering the time, effort and energy expended to train workers, losing valuable employees can be devastating to a small construction company.
- Small construction companies may find that their younger, less expensive employees will choose to obtain insurance through health care exchanges that provide a subsidy to purchase that insurance. That would leave older and more expensive employees on the employer’s health care plan, driving up the company’s insurance rates. (If an employee has access to health coverage that costs less than 9.5 percent of their monthly income for employee-only coverage, they are ineligible for a subsidy.)
WHAT TO DO
The impact the Affordable Care Act has on small construction companies could fill a small volume. Since employees are arguably a small construction company’s most valuable asset, the key is to attract and retain the most talented people; one way to do that is to offer competitive health care benefits.
Small construction companies can take advantage of a quality, affordable insurance plan offered by the Master Builders Association—which is particularly attractive for contractors with 25 to 50 employees. National and regional insurance carriers (including Aetna, Blue Cross/Blue Shield, Cigna, United Healthcare and others) also offer insurance plans designed for small businesses; however, small employers covered under those plans can pay an average of 18 percent more than larger companies for those same policies. The difference covers the cost of administrative work the carrier performs that typically would be handled by a larger contractor’s human resources staff.
Another health care option available for small construction companies is the Small Business Health Options Program (SHOP), which was established by the Affordable Care Act and is focused solely on small businesses. This program will take effect in some states this year and in all states in 2015, and it will provide an opportunity for small construction companies and other businesses to pool their insurance risk.
With SHOP, construction business owners can choose from a variety of affordable health care plans. According to the Department of Health and Human Services (healthcare.gov/marketplace), small business owners can use SHOP to access a single location to learn about health insurance and different health care plans, make “apples-to-apples” comparisons of the prices and benefits of private insurance plans for their employees and choose a plan that works best for their specific companies (factoring in their budget, business, employees and other variables).
A word of caution: In some states, few insurance carriers have agreed to participate in SHOP, so owners of small construction companies in those states will have few, if any, options through the program. For information about SHOP, visit healthcare.gov/small-businesses/.
25 OR FEWER EMPLOYEES
The Affordable Care Act offers a significant incentive to companies with 25 or fewer employees who earn an average wage of less than $50,000 per year. A construction company can earn a tax credit if it pays 50 percent or more of the health care premiums for those workers. For more information, visit irs.gov.
HEALTH CARE EXCHANGES
A small business owner who does not offer health insurance should be aware that many of his or her employees who are not covered by a union health care plan will turn to the health care exchanges available to residents of every state as their perceived best method to obtain coverage and avoid penalties. The exchanges, in essence, are designed to be a one-stop shop for individuals to research and analyze health care plans offered by insurance companies and choose the one they believe will be best for them and their families.
The exchanges are operated in one of three ways: by the individual state, as part of a state-federal partnership or (for residents in most states) by the federal government. Open enrollment in the exchanges began Oct. 1, 2013, and will continue through March 31. Starting this year, open enrollment will begin each year on Oct. 15 and end Dec. 7.
Owners of small construction companies should ensure that their insurance plans for office employees are at least comparable to the coverage and costs offered by the exchanges. Construction business owners should make adjustments accordingly, or they may experience a significant percentage of their employees migrating to the exchanges—increasing the employer’s insurance costs and risk.
When the Affordable Care Act was enacted March 23, 2010, its stated goal was to increase the quality and affordability of health insurance and enable all Americans to enjoy that coverage through a variety of means. Predictably, the Affordable Care Act has resulted in a maze of regulations and options that can confuse even the best-informed construction business owner.
Construction business owners have plenty to do without spending unnecessary time trying to understand the nuances of the Affordable Care Act. To manage their insurance risk and retain valuable employees, those owners should tap the health care reform expertise of their benefits consultants who have been living and breathing Obamacare for nearly four years.
For an overview of Affordable Care Act requirements, relative costs for the small business owner and the employee, and other variables, visit hubinternational.com/health-care-reform/.