Texas Tech University Health Sciences Center
Unintended Consequences of the Affordable Care Act

Unintended Consequences of the Affordable Care Act

unintended-consequences-of-the-affordable-care-act- image0Unintended consequences. This is when we accidently produce something we had no desire to produce. An example — we start an exercise program, but sprain an ankle ligament in the process.

A number of small businesses throughout America are beginning to grapple with the Affordable Care Act (ACA), and it appears the ACA has some unintended consequences.

To illustrate my point, under the ACA, employers with 50 or more full-time workers are required to provide coverage for employees who work an average of 30 or more hours a week in a given month. The alternative to this mandate is for business owners to pay a $2,000 penalty for each full-time worker over a 30-employee threshold.

According to a recent article in the “Wall Street Journal,” some companies have concluded it may be less expensive to pay the fine rather than to provide coverage. This is not what the drafters of the ACA had in mind — an unintended consequence.

In fairness, according to the same article, a survey by the National Small Business Association of 400 employers with 50 workers or more, 71 percent said they plan to continue offering health insurance while just 3 percent said they plan to pay the penalty. Maybe the others are undecided at this point; the article was not clear.

If companies really do opt to pay the fine rather than provide coverage, Texas Tech Physicians and others may suffer another unintended consequence — people who had insurance, but have it no longer.

However, for those who do intend to continue to offer health insurance coverage to their employees, change is in the air. To deal with the requirements of the ACA, some small firms are considering strategies, like increasing employees’ share of the premiums, so the company does not have to shoulder the entire cost of offering benefits.  Others say they will stay under the 50 full-time employee threshold or deliberately turn full-time workers into part-timers.

Ouch — that sounds like it might hurt the employment situation. Other companies, especially it seems in fast food restaurants, have said they may cut employees’ hours to ensure they average less than the 30 per week.  This does not sound good either.

Why all of this activity by business?  Well, it is simple.  Average annual premiums for employer-sponsored health insurance in 2012 were $5,615 for single coverage and $15,745 for family coverage, according to the Kaiser Family Foundation. (One thing that might stop businesses from taking the paying the penalty route — health insurance is deductible as a business expense, but not penalties.)

So, the lesson today is to think about those unintended consequences in all that we propose and do.