The Long and the Short of Obamacare for Small Employers

How Once Small Businesses Became Large Businesses Overnight

The Affordable Care Act, better known as Obamacare, has unveiled many surprises; however, it may be fairly said that no surprise was more “surprising,” more filled with impact and unintended consequences, than the little-noted redefinition of what companies are “large businesses” and what businesses are “small businesses.”

Having passed that bill and finally finding out what it means, more than one million formerly small American businesses are discovering that “the joke’s on them.” These are companies with as few as 50 full-time or full-time-equivalent employees, who are now told that they are large businesses, with large-business headaches and large-business employee-health-insurance and reporting requirements.

But what are these one million companies, and how much do they impact America? These one million formerly small businesses – as defined by the U.S. Small Business Administration – employ a total full- and part-time workforce of more than 100 million Americans. In addition, these same one million formerly small businesses pay their 100 million full- and part-time employees a total annual payroll of $4.3 trillion dollars.

The surprise for these suddenly and officially large businesses is that, as of now, thanks to Obamacare, they are no longer officially-defined by the Federal government as “small businesses,” though that’s how the U.S. Small Business Administration has defined them – as “small businesses” – for more than fifty years.

Now, under Obamacare, they are all “large” businesses, with huge new reporting requirements.

Until the advent of Obamacare, the Federal Government had a reasonable set of definitions that identified what it meant to be a “small business.” This was important, because small businesses were expected to meet fewer government requirements while being exempt from quite a few of those regs. Smaller businesses were expected to offer fewer employee benefits, and typically they did not employ professional Human Resources (HR) executives, labor lawyers or other kinds of costly advisers which larger businesses make use of as a matter of course.

The challenges routinely faced by Small Businesses were so significant that, fifty years ago in July of 1953, Congress created the United States Small Business Administration, a federal agency whose purpose was to provide a wide range of assistance and support to small businesses, the better to enable them to compete on a more-or-less level playing field against America’s larger businesses. In this context, the SBA defined small businesses in the four largest broad business categories (i.e., categories defining most businesses) as:

· Manufacturing: Up to 1,500 employees (depending on products manufactured); or

· Wholesaling: Up to 500 employees, depending on products being wholesaled; or,

· Services: Annual receipts of up to $21 million dollars, depending on services offered; or,

· Retailing: Annual receipts of up to $21 million dollars, depending on products sold.

Clearly, for fifty years, the Federal Government has defined small businesses as having from 500 to 1,500 employees, or as having annual receipts of up to $21 million dollars.

Then, Obamacare came along and, with the stroke of a Presidential pen, redefined a “large” business as any employer with more than 49 full-time or full-time equivalent employees. Overnight, according to US Census Department statistics from 2010, more than one million companies that had formerly been defined as “small” by the U.S. Small Business Administration are now to required to consider themselves as “large” businesses, with all of the added reporting and insurance-provision responsibilities that go with being a “large business.”

Let’s break down those numbers.

Those one million suddenly-large businesses employ 106,165,501 full and part time employees – rounded off, that’s a bit more than 100 million workers. Until now, those employers had no responsibility for providing health insurance for their employees – for hundreds of thousands of those small businesses, the added cost of providing insurance would have made them financially unable to compete with larger businesses – another reason why the SBA was created, to help them compete in a much larger arena. Now, they will all have to either provide insurance that they cannot afford, or pay an equally-unaffordable penalty, which the Supreme Court last year redefined as a tax.

Overall, according to the 2010 census, the entire United States (including businesses, churches, government agencies and other employers) employs just over 121 million workers. Of these 121 million workers, many obviously work several part-time jobs to help keep up with inflation and to survive the still-ongoing economic hard-times which began in 2007. That part-time phenomenon, which is why formerly small businesses can employ 106 million workers, is growing, as companies scramble to downsize their full-time workforce to avoid the penalties, taxes or insurance requirements – none of which they can afford, despite the bill being called the Affordable care Act.

This section of once-small (now large) businesses employ more than half of all working Americans, a number that will only grow as they increase their part-time work-force at the expense of full-time employees.

In employing these 106 million full-and part-time workers, these once-small (but now large) businesses pay their workers an annual payrolls of $4,266,231,000,500 – that’s four-point-three trillion dollars in round numbers.

With the stroke of a Presidential pen in March of 2010, by the act of signing into law the bill of which Speaker Pelosi famously said that “we have to pass the bill so that you can find out what is in it,” far more was changed than just the “Affordable Care Act.” Courts and the Administration have yet to figure out a way of reconciling the SBA’s definition of “small” as being employers with from 500 to 1,500 employees, and a payroll of up to $21 million dollars annually.

However, “smart money” says that Obamacare will trump the definitions offered by the SBA and other Federal agencies. When that happens, the demands put on formerly-small employers will be far greater than merely providing health insurance – or paying a fine in the form of a tax.

Our best advice – start by checking with your employment legal counsel, your accounting firm, your industry’s trade association, and your insurance provider – all of them should have some pieces of the puzzle, and together, they can help you avoid getting caught out by innocent non-compliance with the new rules, the new regs and the new laws.

The Employers Guide To Obamacare

The Affordable Care Act (ACA) is one of the most confusing and difficult laws US employers have ever had to face. It is thousands of pages long and changes constantly. The Congressional Budget Office has estimated that the IRS will collect approximately $130 Billion dollars from employers who fail to comply with the law over the next 10 years. Fortunately, the Employer’s Guide to Obamacare is here to help business owners navigate the minefield.


Join Our Mailing List

Partial Client List - Franchisees of


Book for a Media Interview