ACA and Small Employers

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA and Employers >> ACA and Small Employers (last updated 2.24.16)

Topic Outline

1 Overview
2 Small Business Health Care Tax Credit
3 Resources
4 Research and Analysis
- 4.1 Overview
- 4.2 Self-Insurance
5 ACA Impact on Profitability
6 News

Overview

Small employers (less than 50 full-time workers) are not required to provide health benefits to workers or their dependents. However if they provide health benefits, these plans are subject to the same group health plan requirements as large employers. As well, selected small employers can qualify for tax credits to help offset the cost of that coverage. The resources listed below are targeted specifically at small employers or have major breakouts showing how small business is affected.

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more at:

IRS. Small Business Health Care Tax Credit for Small Employers.
Establishing SIMPLE Cafeteria Plans for Small Businesses (NAHU)

Resources

On-line Resources

Anthem, Making Health Care Reform Work is one-stop resource for reform information for small and large businesses.
Endowment for Health Pilot | Small Business/Employers is a portal site for reform information, including resources for small businesses

Print Guides

U.S. Chamber of Commerce. Critical Employer Issues in the PPACA
NAHU. The New Small Business Tax Credit

Frequently Asked Questions

US DOL. ACA Implementation: F AQs Part I
US DOL. ACA Implementation: FAQs Part II
US DOL. ACA Implementation: FAQs Part III
US DOL. ACA Implementation: F AQs Part IV
US DOL. FAQs About Affordable Care Act Implementation Part V and Mental Health Parity Implementation
ReformJunction provides a politically neutral place for brokers and employers to find answers to questions associated with health care reform.

Calculators

Research and Analysis

Overview

How Will PPACA Affect Small, Medium and Large Businesses? (Urban Institute)
Eibner, C., F. Girosi, A. Miller, A. Cordova, E. A. McGlynn, N. M. Pace, C. C. Price, R. Vardavas, and C. R. Gresenz, Employer Self-Insurance Decisions and the Implications of the Patient Protection and Affordable Care Act as Modified by the Health Care and Education Reconciliation Act of 2010 (ACA), Santa Monica, Calif.: RAND Corporation, TR-971-DOL, 2011.
Eibner, C., F. Girosi, C. C. Price, A. Cordova, P. S. Hussey, A. Beckman, and E. A. McGlynn, Establishing State Health Insurance Exchanges: Implications for Health Insurance Enrollment, Spending, and Small Business, Santa Monica, Calif.: RAND Corporation, TR-825-DOL, 2010.
Laura Skopec and Richard Kronick. Market Competition Works: Proposed Silver Premiums in the 2014 Individual and Small Group Markets Are Nearly 20% Lower than Expected

Self-Insurance

Pozen, Robert. How Obamacare Inadvertently Threatens The Financial Health Of Small Businesses, And What States Should Do About It. Forbes.com (11.12.15). By financing their own health care plans, they stay exempt from the community rating requirements that restrict how much insurers may vary premiums based on factors like age and smoking status; they also stay exempt from the federal and state taxes on most health care premiums that are paid to traditional insurers. Only 16% of small companies of between 50 and 100 employees currently self-insure but that number is likely to rise due to the incentives contained in the ACA. To limit their risk, small companies usually purchase stop-loss insurance, which kicks in when an employee incurs unusually high medical expenses. But here’s where things get dangerous: The handful of large reinsurers that sell stop-loss insurance do not typically require small businesses to constrain their health care costs. In other words, if a reinsurer believes a small firm has an expensive health care plan, it will simply charge a higher premium with a higher deductible. Since stop-loss policies are issued on an annual basis without guaranteed renewal, an unexpected rise in the health care costs at a small firm can lead to much higher premiums the following year or an abrupt cancellation of the policy. Three options are suggested for states to address this problem

ACA Impact on Profitability

Majority of Small Business CFOs Call Obamacare ‘Fastest-Growing Threat.’ “According to a poll conducted by LevelFunded Health, a company that offers small businesses ‘an alternative to traditional [health insurance] plans,’ 64 percent of more than 1,500 chief financial officers (CFOs) surveyed say ‘small group health insurance premiums are now the fastest-growing threat to their company’s bottom line,’ a change a majority of the CFOs claim is a result of policies imposed by Obamacare. Sixty-nine percent of the respondents agreed the complexity of Obamacare regulations ‘as it pertains to their small group health insurance plans take their focus away from other financial areas of running the business.’ One reason businesses are spending so much time dealing with Obamacare regulations today is the 2015 tax year marks the first year many of the Affordable Care Act’s small business tax rules go into effect. The Associated Press (AP) reports new forms many small businesses must comply with are ‘labor-intensive’ and costly… Accountants have described the forms as labor-intensive because they require information from a number of sources, including payroll and health insurance records,’ AP reports. ‘Many companies have had to hire workers or payroll services to complete the forms.’” (Townhall.com , 2.24.16)