PPACA: Pushing a Political Act of Congressional Aggravation?

Like Melville’s great white whale, the law of unintended consequences has risen yet again to smash the merry crew of Ahabs who designed the Patient Protection and Affordable Care Act (PPACA) - more
commonly known as “Obamacare”. Based on the outraged reactions of the businesses who will actually
have to finance this new boondoggle, the law could have been denoted the “Pushing a Political Act of Congressional Aggravation” act with no damage to its acronym, and far more truth in advertising. The uncertainty of the act has contributed to a real unemployment rate of over 15% as of this writing.

Large businesses with more than 100 workers generally insure their workforce at or near the levels mandated by PPACA, so they are minimally affected. But other than a hiring freeze, what options do small enterprises have in the current business climate if they wish to expand their workforce to pursue new opportunities? One solution is to join an “Exchange” established by the Act and administered by the same people who currently administer Amtrak and the Post Office. With history as our guide we can predict
that the rates charged to businesses will increase and the benefits of the “Exchange” will degrade over time. Another option is to seek out private insurers who will provide compliance with the law. But this coverage is not cost-effective for a smaller business. Even if a small business could afford this coverage, their private insurer will be competing with a government run system, and will themselves be regulated by the government. Is there another way to economically outsource benefits?

A good option for a small business to consider is a Professional Employer Organization (PEO). A Professional Employer Organization operates by dividing employer responsibilities with their clients by outsourcing benefits. The client of a PEO retains responsibility for hiring, firing and managing employees, but the PEO becomes the employer and assumes all other responsibilities, including payroll, insurance and taxes. The client funds these activities by periodically transferring funds to cover the expenses, plus a fee for the PEO service. To an employee of the business, this is virtually transparent- it does not change the work environment or the people that direct them. But the PEO assumes the Human Resource Outsourcing and Payroll responsibilities.

Since the PEO or staff leasing company usually has many clients and is a very large employer, it is able to negotiate better rates for things like health insurance and worker’s compensation insurance. Since they specialize in this area, they are more efficient in administering the programs. By outsourcing benefits, a business can focus on its area of expertise, and reduce stress on the managers of the business. Very often the savings gained by the PEO offsets the fee due to the PEO, so operating the business is easier and more profitable- a win-win situation!

Whatever solution a small business chooses to deal with the current complex legal environment, history indicates they must anticipate further regulation and higher assessments in the future. The hapless Pequod and crew were not able to avoid the destructive flukes of Moby Dick, but every small business should be looking for ways to avoid the giant fluke of a law called PPACA.

About the Author

Carolyn Sokol is a frequent contributor to PEOcompare and writes about issues that may affect small businesses such as HR Outsourcing. She is a founder of PEOcompare.com which provides unbiased information on employee leasing, Professional Employer Organizations, and PEO insurance.