Health Reform's Small Business Confusion

Since Lake Michigan Mailers began offering workers health insurance in the early 1990s, the company has considered the benefit as essential as paying wages. Now, David Rhoa, president of the direct-mail business his parents started, doesn’t know if he can afford to offer coverage beyond next year. Like many small businesses, the Kalamazoo (Mich.) company must contend with rising health-care costs and big questions about the reform law intended to keep them in check. “We told our people flat out that we’re having to take it on a year-to-year basis,” Rhoa says. “I’m 50-50 on whether or not we’re going to be able to do it. That’s troublesome to me.”

Starting in 2014, companies with 50 or more employees will have to provide insurance or pay a penalty, but a lot of the details haven’t been worked out. The law doesn’t penalize businesses with fewer than 50 “full-time equivalent” employees for not offering coverage. The government considers 30 hours a week to be full-time. Lake Michigan Mailers, which has more than $10 million in annual revenue, has 55 workers, 37 of them full-time and the rest part-time. By Rhoa’s math, he expects to hit the threshold. He’s also hiring, so even if the company isn’t yet big enough to face penalties, it might be when they kick in two years from now.