By Rieva Lesonsky
Today, the United States Supreme Court upheld the constitutionality of the Affordable Care Act. There’s a lot of rhetoric around what this means for small business (though remember the bill only affects businesses with 50+ employees (which by my standards is decidedly not small).
But the bill is long, the issue is complicated, and there’s a lot of bad information out there. And what do small business owners really think?
According to Sam Gibbs, President, eHealth Exchange Technology Group, “The vast majority of small employers want to offer their employees health insurance coverage, and our own internal research bears this out. A survey we ran this March found that 71 percent of employers wanted to offer employees coverage, either out of a moral obligation (44 percent) or a desire to recruit talented staff (31 percent). Unfortunately, the rising cost of health insurance has resulted in a downward trend in the number of employers able to offer health insurance to employees.”
Gibbs continues, “What the Affordable Care Act does is create more opportunities for small employers (fewer than 200 employees) to provide health insurance coverage for their employees by either allowing them to continue offering small group coverage, or to send their employees to a public or private health insurance exchange where they can shop for health insurance plans and also access subsidies from the government or employer to help them pay for coverage.”
Finally, Gibbs concludes, “With all the rhetoric about the law, it’s important to be aware of the facts. Employers with fewer than 50 employees are not required to provide health insurance for employees, or pay a tax penalty for failing to do so, under the Affordable Care Act. Employers with 50 to 199 employees can either provide health insurance for employees, or pay a tax penalty of $2,000 per employee (provided that the employee gets subsidized insurance from the government). By way of comparison, the average employer contributes $4,508 per year per individual employee’s health insurance.”
eHealth has a great overview of what it all means. I’ve pulled out the portions relevant to small business below.
Employer Mandate – This provision of the ACA requires employers with fifty or more full-time workers (or the equivalent in part-time workers) to provide employer-sponsored health insurance to employees. Like the individual mandate, this provision of the law is not scheduled to go into effect until 2014. Employers who fall under the employer mandate in 2014 but who choose not to provide health insurance to workers may face financial penalties.
Who’s affected: Employees of companies with 50 or more full-time workers, some of whom are currently uninsured. Employees at companies of this size who do not currently get health insurance through their employers may reasonably expect to be offered employer-based coverage beginning in 2014, unless their employers opt to pay federally imposed penalties rather than provide coverage.
Online Health Insurance Exchanges – The ACA calls for the establishment of online state health insurance exchanges by 2014, websites where individual consumers and small businesses can shop for and compare health insurance plans available in their state. State-sponsored health insurance exchanges would facilitate online enrollment in health insurance plans and enable eligible persons to have federal subsidies applied toward their premiums. Private, commercial versions of health insurance exchanges with online enrollment capabilities exist today and will continue to serve consumers in the post-2014 market too.
Who’s affected: Individuals, families and small businesses who buy coverage on their own. Beginning in 2014, when the mandate kicks in, health insurance shoppers will have one more place to turn to buy coverage: state-sponsored health insurance exchanges. They’ll also be able to purchase directly from health insurance companies, local agents, or online health insurance agencies like eHealthInsurance.com – just like they can today.
Provisions of the ACA Currently in Effect:
Tax Breaks for Small Business – Though not subject to the “employer mandate” (see above), businesses with fewer than fifty full-time workers may qualify for special tax incentives when they choose to purchase group health insurance for workers. These tax incentives are in place now, and they’re scheduled to be expanded in 2014.
Who’s affected: Employers and employees at small businesses. Small businesses with fewer than fifty employers will not be penalized for not providing health insurance to workers in 2014, but they may be more inclined to provide coverage as tax credits are expanded. Employees of these small businesses may be able to choose between enrolling in their employer-sponsored plan or purchasing coverage on their own.
Medical Loss Ratio – This provision of the ACA went into effect in 2011 and requires insurance companies to spend 80-85% of member premiums directly on member medical expenses. The insurance company’s costs and profits are limited to the remaining 15-20% of premium income. Insurance plans that do not meet these medical loss ratio (MLR) criteria are required to issue rebates to policyholders.
Who’s affected: Health insurance policyholders. Rebates due to policyholders for premiums paid in 2011 must be issued by insurance companies no later than August 1, 2012. Rebates based on premiums paid in 2012 must be issued to policyholders by August 2013.
Preventive Medical Care – A September 2010 provision of the ACA mandated better coverage for specified preventive medical services and screenings. These benefits were made available on most new and existing individually-purchased or employer-sponsored health insurance plans with no out-of-pocket cost to the member seeking medical care.
Who’s affected: People with health insurance. Health insurance consumers will retain gains in preventive care coverage as a result of the Supreme Court’s decision to uphold the ACA.