Another potential benefit of the new law is it may provide smaller businesses access to higher-quality personnel. Under the current system, some workers are tied to their jobs because they may be uninsurable if they change jobs.

“They may have a daughter or wife who is diabetic or a cancer survivor, or they themselves may have some chronic condition. As a result, they're handcuffed because of healthcare,” Ahlrichs says. When the exchanges come online, the handcuffs come off. “This could be a huge benefit to small entrepreneurial organizations that position themselves as places where talented people can exercise some freedom,” he adds.

Decision time

Many business owners are upset about the minimum level of benefits required by the new law. In some cases, those levels are higher than what's currently being offered in the workplace. That means greater expense in the form of higher premiums.

Will employers, as a result, drop health insurance coverage completely and opt to pay the fine? Ahlrichs thinks some will be tempted to pay the $2,000/employee fine.

But there are additional ramifications for employers who opt to not offer insurance, Ahlrichs points out. First, the $2,000 fine isn't tax deductible. Second, employees who go to the exchanges find out insurance isn't free.

“Maybe the premium for a family is $8,000 annually,” Ahlrichs says. “Who pays it? If the employer wants to keep the employees, the employer may want to make them whole and give them the $8,000 needed to pay for their insurance.”

The story doesn’t end there, Ahlrichs adds: “The premium payments are now taxable, so paychecks have to be grossed up to around $10,000, in the above example, so the employees can pay premiums out of after-tax dollars.”

Put it all together and cessation of a health insurance program can backfire, Ahlrichs concludes.


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Realistically, though, the decision to retain or drop health insurance might depend less on the costs of noncompliance than on what other businesses in the same market are doing. No one wants to lose top talent to other employers offering better benefits.

As a result, many businesses seem to be playing a waiting game. “We keep hearing statements such as, ‘We’re afraid to be the first one to drop coverage, but we’re not afraid of being the second or third,’” Nowicki says.

Maybe that’s why most employers say they'll continue to offer health insurance. “Employers see health insurance plans as important tools for employee satisfaction, retention, and for attracting talent,” Stich says. “In our surveys, only 1-2% of employers say they won't provide health insurance coverage.”