Industry Market Trends

Ahead of 2014 Healthcare Rules, Small Firms Rethink Staffing

Jan 21, 2013

New healthcare rules that are part of the Patient Protection and Affordable Care Act are not set to go into effect until January 2014, but small businesses that will be affected by them are already making anticipatory changes to their staffs. Small businesses are re-evaluating the number of full-time employees on their payrolls ahead of 2014 healthcare reforms that mandate them to offer health insurance.

Credit: Stuart Miles at Credit: Stuart Miles at

According to the provision, firms that employ 50 or more full-time employees and do not offer health insurance are subject to penalties. Sweeping changes will have to be made at companies that employ over 50 full-time staffers, to avoid being penalized.

According to, firms that do not offer insurance but have more than 50 employees, and employ at least one employee receiving insurance subsidies, must pay a tax of $2,000 per subsidized employee. Taxes are applied to all of a company's employees (excluding the first 30), not just those that are subsidized.

"For example a firm with 51 employees would pay $42,000 in new annual taxes, and an additional $2,000 tax for every new hire," the website explains. "For firms offering health insurance,  the penalty is the lesser of $2,000 for every employee (after exempting the first 30) or $3,000) for every employee receiving a subsidy."

Planning ahead for the reform is critical, especially since the federal government will reference a company's 2013 employee data when deciding a firm's liability under the law, according to the Wall Street Journal, which points out that many small businesses that would benefit from early planning have not yet realized what the regulations mean for their firms.

Almost half of small businesses (48 percent) that do not offer health insurance to their employees have cited high cost as the top reason for not offering it, according to the 2012 Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research & Educational Trust.

One way of avoiding health-insurance-related penalties is hiring independent contractors, who are not offered benefits and work on special projects or short-term assignments. Yet employers must distinguish, early on, between full-timers, who work an average of 30 hours per week, and their part-time staffs.

The smallest employers will also be impacted by the Patient and Affordable Care Act. Firms with fewer than 25 full-time employees that provide health insurance may qualify for a tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset the costs of insurance, according to, which explains the key features of the law on its website.

Are you a small business that will be impacted by the 2014 healthcare changes? If so, let us know what you think in the comments section below.