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Obamacarefacts.com states that the 5.8 million small Small businesses in the United States that employ under 50 employees will not be penalized for not providing health coverage to their employees. 90 percent of these firms employ less than 20 full-time employees, and approximately 96 percent have fewer than 50 full-time employees. However, more than 96 percent of firms with 50 or more employees already offer health insurance to their workers, although less than 0.2 percent of all firms face employer responsibility requirements. [http://obamacarefacts.com/obamacare-small-business/] Thus, many small businesses are providing already covering health insurance for their employees, with 96% of firms that employ under 50 FTEs already covering full time workersemployees. These firms, along with larger companies are paying higher premiums, as the cost of health insurance rises. If employers with fewer than 50 FTEs find themselves unable or unwilling to match the rising costs of health insurance premiums, small firms may be forced to discontinue employer-sponsored coverage.
ACA and Entepreneurship (view source)
Revision as of 16:28, 27 September 2016
, 16:28, 27 September 2016no edit summary
Still, there are almost 6 million small businesses that fall under small business size classifications in the United States, and 90 percent of these small businesses employ fewer than 20 people. [http://obamacarefacts.com/obamacare-small-business/] More precisely, 61 percent of firms employ between 3 and 9 employees, and 98 percent of firms employ between 3 and 199 employees. [http://files.kff.org/attachment/report-2015-employer-health-benefits-survey] Thus, the ACA’s employer mandate will only apply to relatively “larger” small businesses, firms that employ more than 50 FTE employees.
Because insurance companies can no longer “conduct medical underwriting to determine the risk associated with an applicant or a pool of applicants when it priced its insurance premiums,” small businesses that choose to provide health insurance for their employees will face rising premiums and increased regulation in providing health insurance. Under the ACA, insurance carriers are no longer allowed to utilize a risk rating process to value premiums in the small business market, and only three factors may considered in determining premiums: age of the insured, place of residence, and tobacco usage. With carriers unable to rely on health factors to compute the risk of its insured, the cost of providing insurance depends on the insured’s relative age, as well as the state in which they reside in, more heavily than before. [http://www.forbes.com/sites/hollymagister/2014/04/30/5-6m-small-businesses-blindsided-by-obamacare/#fd60fda45ffe]
A small business may attempt to avoid and alleviate the increased costs of insurance coverage by opting out of employer-sponsored health care or increasing the employee contribution to coverage if possible with cost-sharing. Additionally, firms might also consider participating in the SHOP Exchange; negotiating on private insurance plan prices; and switching from group plans to individual employer-sponsored options, such as Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA), and direct primary care [12].
The SHOP (Small Business Health Options Program) Exchange, created by the ACA and intended to earn small businesses lower health insurance rates by using group plans and tax credit, did not open up to employers with fewer than 50 FTE employees until 2015 and only opened recently in 2016 for businesses that employ between 50 and 100 FTEs. SHOP offers increased employer choice functions, enabling employers to choose from a larger pool of available coverage options for employees [18] The financial advantage of purchasing insurance through the SHOP exchanges remains uncertain, however, because insurers in the marketplace will still be unable to charge premiums based on health status. Additionally, workers participating in SHOP will become ineligible for subsidies once they have to buy their own insurance [19]. Notwithstanding these limitations, SHOP offers small businesses increased buying power in the group-plan market - an advantage once possessed only by larger firms - and a simpler mechanism for comparing prices, coverage, and quality of plans [20].
A temporary health insurance tax credit is available to firms with 25 or fewer employees and making less than $50,000 in annual wages. However, many firms do not meet the strict requirements necessary for obtaining the tax credit that would cover up to 50 percent of employer contributions to employees' health insurance premiums and up to 35 percent for tax-exempt employers. According to Holly Wade, the director of research and policy analysis for the NFIB Research foundation, "the small business tax credit is a better talking point than it is a financial incentive for small businesses" [24].
