As the federal Affordable Care Act lurches toward a full implementation in 2014, a new study provided reassurance that the smallest businesses will see the biggest benefit.
The ACA continues to play out in unforeseen ways ”“ for instance, published reports late last month pointed out one short-term loophole that would allow many middle-class Americans to enroll in Medicaid, further burdening states already buckling under Medicaid costs. The Obama administration and Congress said they might address the issue.
The report was published in late June by researchers at the Urban Institute and the Robert Wood Johnson Foundation who stated that despite criticism of the ACA, employers with fewer than 50 employees should experience substantial savings on health care costs, due to the benefits of the health insurance exchanges being formed in various states and subsidies for the smallest firms.
The report does not address the potential for higher taxes some critics have laid at the door of ACA.
“We find little evidence that the ACA will negatively affect small firms, and, instead, we find evidence of significant benefits for these employers and their workers,” the researchers stated. “The law expands coverage options for small firms while limiting the new requirements imposed on this group.”
As of 2009, about 34 percent of U.S. employers with fewer than 10 workers offered health insurance as a benefit, down from nearly 40 percent at the start of the last decade. Workers at companies with between 10 and 24 employees also suffered a sharp drop in coverage, from 69 percent in 2000 to under 63 percent in 2009.
The researchers said the primary benefits of health reform for small firms will come from the introduction of the Small Business Health Options Program (SHOP) and reforms to health insurance markets. All plans offered in the health insurance exchanges will have to conform to new rating restrictions established in the ACA; the same is true for new
policies issued outside the exchanges in the small-group and individually purchased markets. Premiums will only be allowed to vary in these markets based on:
Ӣ age, with premiums charged for those age 64 capped at three times a premium for an 18-year-old for identical coverage;
Ӣ tobacco use, with users charged no more than 1.5 times the premium for non-users; and
Ӣ geography and policy type, such as single or family policies.
No premium rating based on health status, claims history, industry, group size or duration of coverage will be permitted as of 2014.
All plans will also be required to report the proportion of premium dollars
spent on clinical services, quality and other costs. Rebates to enrollees will be provided when the proportion spent on clinical services and quality is below 85 percent for plans in the large-group market and below 80 percent for plans in the small-group and individual markets.
Additionally, small employers can receive a credit for up to 35 percent of their premium contributions through 2014, depending on their size and average wages. In 2014, those employers will be eligible, for two consecutive years, for credits of up to 50 percent of their premium contribution to buy coverage in the exchange. These credits aim to further improve access to affordable coverage for those employers least likely to offer coverage without assistance.
Those employers face no requirements to contribute to the health care costs of their workers under the ACA. Small-company workers and their families are also expected to reap substantial benefits from the Medicaid expansion, individual health insurance exchanges and premium subsidies to low-income families, resulting in significantly increased insurance coverage for the group.
Companies with between 50 and 100 workers, however, could see a small increase in their total costs with savings on premium contributions not enough to offset “employer responsibility” assessments.
Employers with 50 or more workers that do not offer insurance coverage will be subject to an assessment if at least one of their full-time employees receives a federal subsidy in an exchange. In 2014, the assessment will be $2,000 per employee, excluding the first 30 employees.
Some have speculated that could encourage employers to avoid hiring that 50th worker, relying instead on temporary workers or independent contractors supporting a base workforce of fewer than 50 people.
