Will the Affordable Care Act (ACA), also known as “Obamacare,” batter or bolster your bottom line? 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,” says 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 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, which are 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,” says 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,” he notes.
• 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 won't be able to set premiums based on health status, sex or claim history,” says Julie Stich, director of research at the International Foundation of Employee Benefit Plans, a research organization based in Brookfield, WI. “That will help small group plans where one catastrophic claim can cause health costs to go up.”
• Penalty exemption. If you have 50 or fewer fulltime employees, you're exempt 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/employee that does so, excluding the first 30 employees from the assessment.
• Tax credit. Finally, the law provides a tax credit for businesses with 25 or fewer employees if the company pays at least half of the employee premiums (see “Figuring the tax credit”).
• Downward pricing pressure. The law may also encourage more transparency in fees for medical services, Ahlrichs says. In consumer-driven health plans, people will be given a set amount of money to shop for services. They'll be able to go to a website, enter a service such as an “appendectomy,” and get a list of physicians who perform the procedure, a quality rating and a cost. “Comparison shopping should put downward pressure on prices,” Ahlrichs notes.
• Transparency. Do you know how much your broker is being paid for arranging your insurance? Today, such commissions are buried in your premiums. This may change under the new law as pressure mounts to reduce administrative costs. Brokers may start charging fees for their services, which may well dampen overall costs while promoting accountability and performance.