Since the Affordable Care Act went into effect in October 2013, some 11 million people have gotten health insurance through state- or federally-run exchanges. For small business owners though, the massive health care act has been more of a mixed bag.

Increasingly, entrepreneurs need to provide health insurance as a means of staying competitive, an issue that should be top of mind as we celebrate National Small Business Week. While many are grateful that Obamacare enables their employees to get coverage, some question the act's complexity and struggle with the still-high cost of offering company-sponsored plans.

Regardless of their feelings on the issue, owners of businesses with 50 or more employees now must offer qualified health care plans to employees, or face penalties. The mandate, which took effect on January 1, has an extremely broad effect: There are more than 200,000 companies that have between 50 and 500 employees, according to the U.S. Census Bureau's most recent data.

One of those owners is Gary Hu, the founder of Check Maid Cleaning Corp., a residential cleaning business based in New York City. Founded in 2012, the company has $4 million in annual revenue and recently hit the 50-employee threshold. 

Although Hu says he'd like to offer health care benefits, it would cost him about $30,000 a month to do so, which he says is more than his business can afford. Instead, he's opted to pay about $60,000 in penalties for the current year under the health care mandate. The trade-off doesn't please him.

"[Residential cleaning] is a very price-sensitive industry and right now we are competing with many companies that use independent contractors, who don't have to pay for these penalties," Hu says.

Hu's sentiments are common among small business owners--60 percent of those that don't offer health insurance say it's because it's too costly, according to a March 2015 survey by  Manta, the small business network.

About a third of business owners in the survey said they would like to offer health care benefits in order to attract better employees and to improve retention. There is evidence that at least in its first year, the ACA helped small businesses keep down the cost of their plans significantly. However, rates appear to be on the rise in the long term.

For 2015, premiums increased at somewhat higher rates than they had in 2014, though at much lower rate than they have overall since 2010. The average premium for employer-sponsored family coverage among firms with fewer than 200 employees increased 5 percent to $16,625 compared with the prior year, according to a Kaiser Family Foundation survey. In 2014, average premiums at these firms went up a scant 1.7 percent for family plans, and 1.3 percent for individuals.

Another data point: According to a March report from insurance provider Blue Cross Blue Shield, newly enrolled individual customers in BCBS spent $559 per month, while those in employer-based plans spent $457, or 22 percent less.

Although there is increasing concern that the costs paid by workers such as deductibles and co-insurance continue to mount, having increased access to health insurance overcomes a big hurdle for many entrepreneurs.

The ACA "is a big boon to small businesses and their workers, who care about health care insurance," says Dean Baker, co-director of the Center for Economic and Policy Research, a nonpartisan policy think tank. 

Published on: May 5, 2016