Effects of the Affordable Care Act on Employers

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The impact of the Affordable Care Act on businesses has been a chart-topping subject of debate since the announcement of its very existence. According to critics of the law, it will shake up companies to the point where they will be forced to cut hours and staffing just to hold their bottom line above the proverbial water. Or will it?

medical_billing_advocate-75Change has definitely been the only constant since the Affordable Care Act was rolled out, but as people become acclimated to the law and all its nuances, it seems as though some of the uproar is dying down. Still, that doesn’t mean the law isn’t penetrating each and every sector and causing a stir– maybe just not to the degree feared.

Data from the Federal Reserve Bank of New York says that, based on last year’s numbers, health coverage costs are expected to increase by 10% next year. Even though many believe the Affordable Care Act is the reason behind the increases, it isn’t a belief held by the vast majority anymore.

The intentions of the Affordable Care Act were to broaden access to healthcare, improve quality and, of course, make it affordable. By broadening access, more people will be able to seek care – especially preventative care – helping our society as a whole become healthier. By improving the quality of care, we are getting a little more return on investment for our healthcare buck, and by implementing price transparency, costs can be better addressed.

This all sounds like a fantastic improvement, but the multitude of changes that have to be implemented have some organizations up in arms. Rising healthcare costs and other inclusions of the Affordable Care Act as a whole have caused some businesses to take drastic measures.

A number of these measures have been less than tidy, neat, and productive, and sometimes lead to job losses. So while some businesses continue to thrive regardless of the many facets of the Affordable Care Act, others are making vast modifications to their businesses and intentionally halting growth to help soften some of the blow.



Data from the Federal Reserve Bank in Dallas shows that 84% of manufacturing firms report increased healthcare costs this year. Over 25% of these companies say they have fewer employees than before, and 16% said they hired more part-time workers. Furthermore, 17% said they outsource more work, and 20% say they have cut wages.

medical_billing_advocate-71We see some businesses cutting back hours to keep some employees part-time so they do not have to provide health insurance. These companies have weighed the costs and found that it just doesn’t make good business sense to spend the money on the staffing if they must also spend more on insurance.

We see job cuts and hiring freezes, which helps companies keep their “small-business” status. Also, for those employees who are in the know, fear of job loss isn’t conducive to stellar productivity.

A company’s overall productivity can certainly be affected, but it isn’t always negative. According to results provided by the third annual Littler Mendelson Executive Employer Survey, most categories studied saw a positive change from 2013 to 2014 in reported negative effects of the Affordable Care Act. In fact, the 2013 survey showed that 57% of respondents expected a significant impact for the Affordable Care Act, but in 2014, that number dropped to 41%.

Twenty percent of businesses reported reducing hiring or anticipating a future hiring reduction in 2013. The most recent survey, however, shows a drop of two percentage points in that category.

Furthermore, employers who had to cut hours or anticipate cutting hours fell from 27% to 25% in the last year – a slight drop, but a drop nonetheless. Even with the majority of the surveyed companies not cutting hours, the 25% who have to cut hours will definitely see a productivity shift.


Workers’ Compensation

The survey also noted that 52% of employers have or are planning to implement an employee wellness program. Some companies offer fitness counseling, diet counseling and facilities for physical activity or discounts at a nearby fitness club. Workers’ comp claims will decrease with a healthier population.

Implementing employee wellness programs is also noted by the U.S. Department of Labor as possibly decreasing overall healthcare spending. Preventative care and problems that can be avoided by simple diet and lifestyle changes, such as many cases of obesity and heart disease, can be expensive. All in all, a healthier workforce means better productivity and less reliance on workers’ comp.


Increased Expenses

Following the same decline, in the 2013 survey, 16% of companies decided to hire more temporary or contract workers as a result of the Affordable Care Act. This year, that number dropped to 11%. While the decline is a good sign, some employers are still hiring contract workers over regular workers.

medical_billing_advocate-98Contracting isn’t always as efficient and is often more expensive than having regular employees do the work. There is often a long-term loyalty that comes with having regular employees, which strengthens the company as well as the economy. Also, the time spent training contractors could be spent in other areas.

Other additional expenses are expected. A smaller number, 6%, of those surveyed in 2013 planned to keep their businesses exactly the same. They planned to pay the fine and not comply with the Affordable Care Act, while only 2% feel this way in 2014.

The drop is likely due to more education and understanding around the Affordable Care Act. Moreover, adding cost to more cost, 58% have hired or are still planning to hire consultants to come in to help them navigate the nuances of the Affordable Care Act.

In the survey done by FRBNY, even though the penalty doesn’t take effect until 2015, nearly 95% of all respondents say they already provide healthcare to their employees. Although this seems to point to higher costs, many businesses were providing insurance long before the Affordable Care Act came into play.


Employees Leaving

Subsidies have been a subject of the Affordable Care Act that has caused quite an uproar. What could this possibly have to do with employers? It’s simple. On paper, we can see that with higher income, subsidies decline, and with lower income, subsidies increase. Some are finding it more profitable to quit their jobs.

medical_billing_advocate-81According to the Congressional Budget Office (CBO), the subsidies “reduce the incentive for some people to work as much as they would without the subsidies.” The CBO estimated that the Affordable Care Act will ultimately lead to an overall decline of 2 million workers, some of which will be voluntary.

This unexpected outcome is affecting businesses because seasoned workers are jumping ship after realizing they’re paying more for health insurance by having a job than they would be without having a job.

Sure, plenty of people are competing for jobs every day, so the company can get a replacement, but there’s the hiring process, the training process and no guarantee that when the new employee does his or her own math on the subject that they won’t quit, too.

So while many companies seem to be scrambling to save payroll dollars, others are scrambling to stop their current staff from bailing out. Any time a change comes in and regulates businesses, there is bound to be backlash. In this case it is on both sides. The majority of businesses seem to be left unshaken, but the ones who do report changes seem to be affected in ways that really hurt.

Filed under: Small Business ACA, Resources, Obamacare, Medical Billing Industry, Affordable Care Act

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