Health Insurance Reform
Will “Obamacare” batter or bolster your bottom line?
The federal Affordable Care Act (ACA) comes at a time of rising health insurance costs for small businessowners. Annual premiums for employer-provided family coverage grew to just under $16,000 in 2012, a rate some 4 percent higher than 2011, according to a report from the Kaiser Family Foundation.
Will the new federal law help put a cap on rates? If you have 50 or fewer employees, you have a good chance of turning the new federal law to your advantage.
“Generally speaking the law is more favorable to smaller businesses,” said Shawn Nowicki, director of health policy at Northeast Business Group on Health, a coalition of 175 employers, unions and health care providers. Nowicki points to a number of advantages geared toward the smaller operators. These include competitive statewide insurance exchanges, premium reform and tax credits.
Here’s a rundown of how you may benefit from some of the law’s provisions:
• Competitive exchanges. Competition is good. That’s the theory behind the new statewide health insurance exchanges, designed to allow small businesses to shop for plans from competing carriers. These exchanges will be available for employers with 50 or fewer people in 2014.
“To understand how the exchanges will work, imagine navigating to a travel website that aggregates airfares,” said Karl Ahlrichs, benefits consultant for Indianapolis based insurance broker Gregory & Appel. “You type in your parameters, the site sorts your options and you pick what you want. That’s what employees will be doing with the exchange sites.”
Under the best of conditions, the new exchanges will also help trim the human resources overhead, by providing a host of robust administrative services. “Businesses that send employees to the health insurance exchanges will be getting out of the health insurance management business,” Ahlrichs noted.
• Premium reform. Small businesses have long been the targets of prohibitive premium hikes when one employee is hit with a costly illness. The new law levels the playing field.
“Starting in 2014 insurance carriers will not be able to set premiums based on health status, sex or claim history,” said Julie Stich, director of Research at the International Foundation of Employee Benefit Plans, a research organization based in Brookfield, Wisconsin. “This will help small group plans where one catastrophic claim can cause health costs to go up.”
• Penalty exemption. If you have 50 or fewer full-time employees you will be exempted from penalties for not providing health insurance. If you have more than 50 employees and your employees purchase insurance from the new state exchanges, you will pay a fine of $2,000 per employee who does so, excluding the first 30 employees from the assessment.
• Tax credit. Finally, the law provides for a tax credit for businesses with 25 or fewer employees if the company pays at least half of the employee premiums. (See sidebar, “Figuring the Tax Credit.”)