6 Prominent Benefits of Affordable Care Act to Small Businesses
It’s clear that although there are no Affordable Care Act (ACA or Obamacare) subsidies for small businesses to qualify for so as to help pay their small business health insurance plan, ACA has several beneficial changes for small businesses. This law provides options for financial help as far as small business health insurance is concerned. There are extensive improvements to the healthcare system as well as the increased regulatory obligations of the employer mandate. Here are a few ways with which the Affordable Care Act can help small business owners.
1. Collective Buying Power
Small businesses have been paying as much as 18% more for health insurance coverage as compared to their competitors that have greater number of employees. In the old US healthcare system before the ACA, insurance providers would commonly charge small businesses higher premiums and their logic behind this increased charge was that it would cost more to insure smaller groups whose collective risk could be greater than that of a much larger group, where the risk is more spread out. This unevenness is brought to an end by the Affordable Care Act. Thanks to this Act, owners of small businesses, for the first time, get the opportunity to leverage their purchasing power together with other small business owners in the Small Business Health Options Program (SHOP) Marketplace. In other words, if the SHOP keeps getting new businesses, several businesses may experience an overall reduction in premium costs. Plus, insurance providers are also now given the task of openly explaining their actions if they choose to increase small business premiums by 10% or more and several states have now more power to stop unreasonable premium increases from being applied.
2. Small Business Health Care Tax Credit
Small business owners can get tax credits for providing health insurance to their employees and numerous businesses have claimed credits by now of over $1 billion. To qualify, you should cover minimum 50% of the expense of the employee-only health care coverage for all of your employees. There is one more criterion that you should have fewer than 25 FTEs i.e. full-time equivalent employees and they should have average salaries of less than $50,000 per year. To be eligible for the tax credit, you should buy health insurance via the SHOP Marketplace (or be eligible for an exception to this condition).
3. Targeted Premium Dollars
There is now the new 80/20 rule that maintains the focus of premium dollars of small businesses on health care and not on carrier overhead. If insurance providers fail to allot 80% of the premium dollars of your business to medical claims and undertakings that enhance the quality of care, they have to send your business a MLR (Medical Loss Rebate) check. This led to a saving of over $2.5 billion for small businesses in the form of rebates and lower upfront premiums from their insurance providers and three million Americans working for small businesses received an average rebate of more than $100 per year per family, from 2011 to 2013.
4. No More Exclusion for Pre-existing Condition
Before the ACA, insurance providers maintained a list of over 400 conditions (several common) for which they used to reject health coverage. Although this mainly took place in the individual coverage area, employer group plans too were not always excluded from pre-existing condition rejections. There are several examples of small business owners who had workers needing treatment or surgery and some insurance companies denied to take their businesses on and some others agreed to do so but only with a certain rise in annual rates, before the Affordable Care Act. However, after the ACA rollout, these small business owners obtained coverage for their businesses.
5. Free Preventive Care
Section 2713 of the ACA, health insurance plans should now cover an array of preventive services without charging a coinsurance or copayment to your employees. (This applies even if your employees haven’t fulfilled their annual deductibles). Requirements of the new preventive care involve routine immunizations, preventive health services for women, evidence-based screenings and counseling and preventive services for children. As per the estimation of the federal HHS ASPE (Assistance Secretary for Planning and Evaluation) around 137 million people (28.5 million children, 55.6 million women and 53.5 million men) have been given no-cost coverage for preventive services since the application of the policy.
6. Shrinking the Uninsured
When people having no health insurance get medical help, a part of services is paid by third party sources such as charities and government programs. The rest of the expenses are considered as uncompensated care. This needs to be balanced which is done by increasing the costs of health services and such increased charges are then passed to individuals and businesses as increased premiums. An average American family and their employer have to pay $1,017 extra per year as health insurance costs to balance the cover care for the uninsured. Since the ACA involved the uninsured into the system through the individual mandate, the number of uninsured persons has reduced remarkably. The rate of uninsured dropped to 9.2% from the previous 15.7% i.e. before the ACA was signed into law. This of course has benefited small businesses, along with individuals.
The ACA has improved quality, coverage and affordability, the three important goals it meant to achieve. Considering its legacy and the influence of the forthcoming shifts and possible amendments to the law, one thing is clear that the ACA has changed the way businesses of any size should consider their benefits and the long-term growth of the business.