Affordable Care Act and its Effect on Employers
Small firms face many obstacles to purchasing coverage for their employees in the current health care system. The Affordable Care Act (“ACA”) has many features intended to improve gaining access to reasonably affordable coverage for small firms. Every employer will deal with specific issues related to the ACA. Some analysts suggest that in many cases small businesses employers will derive noticeable advantages from the ACA. The primary benefits of health reform for small firms will come from the introduction of the Small Business Health Options Program (SHOP) exchanges and reforms to health insurance markets.
Typically, small firms will have access to more affordable coverage in the SHOP exchanges, and some will be able to use tax credits to aid in purchasing coverage. Some analysts have concluded that businesses with less than 50 workers will enjoy noticeable health care savings in addition to a minimal increase in the number of employees that will be covered in the employer-sponsored plans.
All plans offered in the exchanges will have to conform to new rating restrictions established in the ACA. Further, 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 age (with premiums charged for those age 64 capped at 3 times a premium for an 18-year-old for identical coverage) and tobacco use (with users charged no more than 1.5 times the premium for non-users), geography and policy type (e.g., single, family). No premium rating based on health status, claims history, industry, group size, duration of coverage, etc., will be permitted as of January 1, 2014.
Estimates of the effects on employers with greater than 50 employees are much smaller. Employer costs should increase by one percent as a result of new assessments just offsetting declines in premium contributions. Offer rates for these firms should remain relatively stable, but their gains are not as strong as for the smallest firms, yet they are also not consistent with more negative predictions suggesting a virtual collapse of employer health insurance. In addition, trends preceding the above mentioned reform showed strong declines in offer rates and coverage among small firms. Thus, the evidence suggests that the ACA may have a stabilizing influence on small firm coverage. It could well be that significant health care cost savings will accrue to (a) firms with less than 50 workers, as well as (b) a small increase in the number of people covered by their employer-sponsored plans.
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