How will Obama Care affect manufacturing companies?

There have been lots of news about Obama Care and what effects it will have on the cost of health care.    Many companies are trying to figure out if their employee health insurance premiums are going to increase. So specifically, what effect will the affordable healthcare act have on manufacturing companies?  The answer to this depends to a large extent on the size and situation of the company.

Companies that employ less than 50 employees are not required to provide health insurance to its employees.   Small Businesses have the option of buying insurance through the Small Business Health Options Program (SHOP).  Unfortunately the availability of this exchange is delayed until end of 2014. The average size of a manufacturing facility in 2012 was 35 employees.  The size of manufacturing companies has decreased significantly since 2000.  Much of the larger manufacturing companies have outsourced to Asia. The resurgence in manufacturing has mainly been with smaller sized manufacturing.  So in these cases, manufacturing companies will not fall under the Obama Care regulations.

What if a manufacturing company is currently providing health insurance?   This is being debated by both sides of the political aisle.

Most Republicans are predicting that health insurance premiums will be rising and could impact small companies.   If health insurance premiums go up then the business has some options unless it is a union plant where collective bargaining contract would be the primary determination of employer options.  However about 10% of manufacturing is currently unionized and these plants tend to be larger plants with over 100 employees.  If a company is non-union it will have the following choices:

  • If the company has less than 50 employees, it has the option of requesting its employees to get insurance through the health exchange.  No penalty will result for companies employing less than 50 people.
  • If the company employs more the 50 then it can do one of the following:
    • Absorb the higher cost insurance
    • Restructure employee compensation
    • Require employees to get insurance through the exchange and incur a small penalty.

Many Democrats are predicting that health insurance costs for employers offering “adequate” policies will stay the same or go down because more individuals are signing up for insurance or getting forced to go to better plans.  Since most employers offer a fairly good plan in the first place, they would benefit from more people getting a better plan.  If the health insurance goes down, an employer would have the option of passing the savings to its employees or reducing its costs thereby making the company more competitive.

As to who is right or wrong, time will tell.  Most small manufacturing companies are operating with very small margins.  A significant increase in health care premiums will be hard for many to absorb.   Hopefully most companies will not be adversely affected and can continue to offer its employees health insurance.