How Will Healthcare Reform, ACA, Impact Small Business Group Health Insurance?
With state health insurance exchanges gearing up to offer guarantee issue health insurance in 2014, there is fear that businesses will abandon their group health insurance plans for employees. The rational for the fear is, “Why should a business continue the expense and headache of offering a group plan when employees can get it from the state exchanges?”
Certainly, for some businesses, it will be a pure cost-benefit analysis that may lead them to scrap their existing plans. But group health insurance is offered for a variety of reasons by a business: employee benefit, retention, combining dental, disability, vision and life insurance, reduction of taxes with pre-tax deductions. There are also businesses that offer flexible spending accounts which can be a nice benefit for some employees.
How will the health insurance companies respond?
Part of the unknown is how the health insurance carriers will modify, drop or add new group plans. Currently in California there are several insurance companies that offer small group plans to sole proprietors with no employees. Sole proprietors will choose the more expensive small group plan, over a less expensive individual and family plan, because there was an insurability issue with a family member. It may have been the only way to get health insurance for a spouse that is a cancer survivor. Sole proprietors tend to be costly for carriers and they may consider phasing them out.
Small businesses get special attention under ACA.
Small businesses will not be under the employer responsibility requirement if they have fewer than 50 employees. Under the Affordable Care Act starting in 2014, if an employer with at least 50 full-time equivalent employees doesn’t provide affordable health insurance and an employee uses a tax credit to help pay for insurance through an Exchange, the employer must pay a fee to help cover the cost of the tax credits.
In addition, small businesses may be eligible for tax credits for part of their contribution towards the employee’s health insurance premium. Small employers with fewer than 25 full-time equivalent employees and average annual wages of less than $50,000 that purchase health insurance for employees are eligible for the tax credit. The maximum credit will be available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000. To be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost.
Good employees are hard to find.
Often times it is a continuous struggle for small businesses to attract and retain good employees. If a business doesn’t offer health insurance, good employees that need health insurance will gravitate to employment that does offer it. Healthcare reform will also allow employees that are locked into that “dead end job”, only because it offers health insurance, to find a job that matches their passions or family situation. [Healthcare reform to increase worker productivity]
The implementation of the ACA will lead some small businesses to shelve the consideration of offering a small group plan to employees. With guarantee issue health insurance from the state exchanges the pressure will be off the employer to offer coverage. At this point I don’t expect small, medium or large businesses to jettison their existing group insurance plans. Conversely, I don’t see the ACA prompting many small businesses to add group health. This could all change depending on how the health insurance companies respond in the way of new or modified plans for small business.