Trucking Companies: Weighing Obamacare Costs vs Penalties

Phil Cohen

The Affordable Care Act’s employer mandate will not take effect until 2015, but employers are already realizing how deep the quagmire of compliance will be. Lawmakers are still writing many of the rules governing application of the ACA’s many provisions; meanwhile, rules that are already in place underscore the law’s unequal impact on different types of businesses.

For trucking companies, the rules regarding the ACA can have a variety of implications. Companies employing fewer than 25 full-time employees with an average salary lower than $50,000 are not only exempt from the employer mandate but are also eligible for tax credits as high as 50 percent of insurance costs, though the incentive may be contingent on purchasing coverage through the federal SHOP Marketplace for employers.

A small trucking firm for example, may only employ ten operators – well below the 25-employee threshold. They will still not qualify for tax incentives, however, if average earnings rise above the $50,000 per year.

Multi-truck operations, of course, will likely be subject to the employer mandate requiring employers with 50 or more full-time employees to provide minimum essential coverage or pay a penalty. The IRS definition of full-time is 30 hours per week, expanding the mandate to include many workers that companies consider to be part-time. This further complicates the matter for employers, who are also responsible for plan costs above 9.5 percent of an employee’s income.

A “part-time” employee working 33 hours per week makes less than an employee working 40+ hours per week but costs the same to cover, meaning employers will have to absorb more cost to cover part-time employees than to cover full-time employees.

Insurance companies are adding their own difficulties to the process. The ACA requires them to cover patients with pre-existing conditions, patients who most companies previously denied to avoid the higher cost of care. Now, providers are passing along their added cost to all policyholders in the form of higher premiums across the board.

Choosing not to provide coverage, of course, exposes mandated companies to an annual penalty up to $2,000 times the number of full-time employees minus 30, e.g. $50,000 for a company with 55 full-time employees. The penalty is set to increase in relation to annual premium hikes. In addition, those companies would fail to qualify for an additional tax deduction for offering coverage. Despite this, though, many trucking companies will find the penalty an easier financial pill to swallow than offering a health plan that meets the ACA’s minimum requirements.

Single owner-operators and large trucking firms alike should carefully consider the impact of these ACA provisions on their business, and whether it makes more sense to offer coverage or pay the annual penalty. Either way, truck factoring can help companies maintain adequate cash flow to cover their expenses. EZ Invoice Factoring’s trucking experts will help you obtain immediate cash to cover any expenses.

Learn more about EZ Invoice’s trucking factoring program, then contact us to get started.

Photo of author

Phil Cohen

Phil is the owner of PRN Funding and sister company Factor Finders. He has been an authority in the factoring industry for over 20 years, serving on the board of directors for several factoring associations.

LEARN MORE ABOUT Phil Cohen

Get Started Now

Secure the funds you need today.