Why Obamacare Helps Small Business – And What That Means For the Rest of Us

It wasn’t until I had read this Jan. 30 Wall Street Journal opinion piece that I realized that my “nano” corporate” status was packed with such futuristic potential. According to the editorialist, American companies should follow my lead and be “protean” by dropping old fashioned W-2 employees and substituting 1099 contract relationships.  That way, everyone – including a single person “nano” – can enjoy the upsides of being a corporation and stay below Obamacare’s 50 employee pay-or-play $2000 penalty threshold.

Since I formed my own corporation more than 5 years ago, it has certainly participated in “protean” business relationships.

Once things get underway, I’ve discovered that of the many prominent organizations that it does business with really consist of a small core office populated by a few owner-founders, a single administrative aide and one or two payroll folks who oversee the outsourcing of everything else.  While the term “protean” is certainly novel,  distributed, adaptable and organic business networks have been around for years.

But the WSJ editorial opens a window into an underappreciated consequence of Obamacare and the underlying assumptions of the central planners who run Washington DC.  I doesn’t necessarily think it’s bad, but it sure is interesting.

Read on.

While the Affordable Care Act (ACA) was intended to link employment and health insurance, what it has really done is handed many small nimble interlocked businesses another leg-up against their large traditional mainframe competitors. For example, one colleague pointed out to the  that “new” pharma companies are really marketing departments that outsource manufacturing that, in turn, outsources supply management that outsources I.T. that outsources its cloud services. It’s the only way they can compete.

The new economics of health insurance will only accelerate similar trends in other manufacturing and service sectors of the economy.  Toss in the ability of people and capital to move and work across borders and the picture becomes even more dynamic. And in the meantime, Washington DC continues to implement the ACA with a legacy of large companies buying comprehensive health insurance for its employees.

Little did anyone anticipate that the ACA would hamper the success of American big business.

Jaan Sidorov, MD, is a primary care internist and former Medical Director at Geisinger Health Plan with over 20 years experience in primary care, disease management and population-based care coordination. He shares his knowledge and insights at Disease Management Care Blog, where this post first appeared.

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23 replies »

  1. I do accept as true with all the ideas you have introduced in your post. They’re really convincing and can definitely work. Nonetheless, the posts are very quick for beginners. May you please lengthen them a little from next time? Thanks for the post.

  2. “Businesses offer healthcare to be a competitive employer, not to be generous.If I own a cafe and don;t offer healthcare, my best baristas will go to work at Starbucks.where they do.”

    Chuck, not a good example. Starbucks can’t absorb all those wanting an employer in food service who offers coverage. From the protesting pizza places on the ACA mandate it would seem none consider offering a competitive benefits package as necessary to attracting employees.

    I suspect most food service businesses run on part time and locals who have no choice but to take that minimum wage job.

  3. Well if you support federal tax subsidies for buying health care coverage then those “moral” employers will be paying into a system that includes birth control and maybe abortion as well as coverage for gay people. Will that make them feel better?

    I’m going to wait to see what impact the subsidies will have on making health care more affordable (not less costly). One problem is the financial cliff that earners will have to contend with when they move into even a $1 above the earnings to federal poverty level and the subsequent drop in subsidy larger than their earnings increase.

  4. I’m assuming this is all in the context of the ACA so minimum wage earners would have most of their premiums paid through federal taxation. “Us” would all those who are gainfully employed, whether self-employed or hired.

    Actually, the “decide” part relates more to the issue of employer convictions, not wanting to buy insurance that includes birth control, for example. Separate employment from health care results in the employees buying the coverage according to their convictions.

  5. “You solve the personal conviction aspect of insurance, placing the onus on the individual to decide what is covered or not. You level the playing field for all of us working, too.”

    By “us” do you include those working minimum wage? Maybe your local food server will pass on the cancer coverage cause that’s too expensive. Is this the “decide” you were talking about?

  6. Not just the unions tcoyote. Where was the chamber of commerce & Business Roundtable and the rest advocating a plan to get out of it? They’ve beaten the shite out of the unions for the last 30 years on every other issue, but didnt come on to side of good sense in 2010 when they had the chance.

  7. “The exchanges are designed to provide it with affordable health insurance.”

    How do you know that, you aren’t able to price health insurance through an exchange yet. Wait for the premiums compared to wages first.

  8. I’m not sure what sure if what Sidorov describes is so much an unintended consequence as a recognition of reality. We need that nimble workforce described in the last paragraph. The exchanges are designed to provide it with affordable health insurance.

    If they are successful, you can bet large employers will be eyeing them, especially as the complete globally with companies that enjoy the benefit of single-payer or other national systems.

  9. Of course not. We were discussing how the mandate affects small employers. If you want to talk about those that will need individual coverage, that’s another discussion.

    Please stay on the topic.

  10. I would assume that the ACA requirement that all should be covered would negate this argument.

  11. First of all… no business under 50 employees is affetcted by the mandate… and a vast majority of small employers don’t have that many. If they do wnat to cover employees, they can go to the SHOP program and buy coverage cheaper than before.

    In Massachusetrtts, more small businesses have healthcare coverage for employees than they did before Romneycare, exactly the opposite of what the doomsayers are predicting.

    Businesses offer healthcare to be a competitive employer, not to be generous.If I own a cafe and don;t offer healthcare, my best baristas will go to work at Starbucks.where they do. Plus, it helps productivity by keeping people at work and not home sick or injured. I don’t want one employee infecting ever other employee. See what happens to yoiur business when all your uncovered employees get the flu.

    You save on healthcare premiums and give it all back in lost productivity.

    That’s why no large businesses are dropping healthcare coverage… thery know how important it is.

  12. This absolutely hilarious!!!
    Health care reformation may be advantageous for small businesses and detrimental to big business everywhere except health care itself, which is transforming itself into a byzantine system of ginormous inefficiency….

  13. @tom39-I agree. This is one of the least appreciated results of the health reform: repealing the injustice of being beholden to one’s employer just to get healthcare – something that has nothing to do with employment, anyway. Now, employers will have to maintain more favorable employment environments and rewards to compete for the choice employees who are soon to be liberated to replacing the 40-hour drudgery job they now settle for with a mix of part- or full-time jobs more mutually beneficial in the contemporary economy. Can’t wait to see it play out next year.

  14. Interesting read, this is a situation where differing opinions form because you can read into it so many ways, and people take offense very easily when discussing their future healthcare. I hope that the negative predictions of Obamacare turn out not to be true.

  15. Most small businesses already offer insurance. It is almost universal among very large companies. If they didnt want the costs, they could already be avoiding them. They mostly don’t. Overall rates of insurance for employed people will not change that much.


  16. In due course of time, if buying health insurance through the exchanges turns out to be a feasible, cost effective option for individuals, decoupling the employer-healthcare relationship will be beneficial. It will create a more nimble and dynamic workforce that can take on greater risk, hopefully driving greater innovation. The key will be availability, accessibility, and quality of coverage through the HIXs.

  17. One of the “lessons learned” from the California experience with the “Meaningful use” program to date (as recently reported by CHCF) is that they underestimated the Medicaid provider registrations volume (‘Medi-Cal’) by a factor of nearly 3.

    This is expected to only worsen (on the actual patient care front) as Medicaid eligibility expands under ACA to pick up those otherwise priced out of for-profit insurance and not getting employer-paid coverage. Medicaid docs have long been overworked and underpaid. California has no idea how they’re gonna have enough physicians (or even PAs and NPs) to service this looming population once ACA is in full swing.

    This will be a problem in just about every state.

  18. I’m with you, Tom. It was the insuperable barrier of the labor unions that kep employers in the health benefit business. I think the clean approach is for employers to exit, which is what they are going to do in response to ACA, small employers first, then larger ones when the Cadillac tax kicks in.
    The employer is “in the way” of patients taking charge of the health benefit, and keeping the savings from making intelligent benefits choices.

  19. I’m one of those who work on contract so I welcome the additional opportunities. I still do NOT understand why we perpetuate the employer/health care relationship. Separate employment and health care and you solve a ton of problems and free up business capital. You solve the personal conviction aspect of insurance, placing the onus on the individual to decide what is covered or not. You level the playing field for all of us working, too.

  20. The sad situation is many business owners will drop health plan coverage or reduce the work hours to 28. The latter is going to cause a financial strain on a segment of society that needs every dollar/hour they can get just to keep their heads above water.

  21. If Obamacare was viewed as disassembling corporate health coverage it would have never made it.

    I support the contracting out of employees solely to avoid buying them insurance because that will be the fastest way we will get to single pay supported by the tax system. Once newly contracted employees find out how precarious their new health care situation is they’ll line up for more secure single pay.

  22. contra workers / vis a vis perma-temps; I wrote a paper on it 3 years ago. If you didn’t anticipate this movement – you didn’t read the bill completely, and haven’t studied the several state examples of unintended consequences.
    Microsoft has deployed this meme for decades.