It’s no secret that the Affordable Care Act (ACA) has meant a lot of changes for small businesses. There are the increased regulatory obligations of the employer mandate, as well as far-reaching improvements to the healthcare system. On the 6th anniversary of the ACA, we celebrate this landmark law and its role in transforming our healthcare system.
Here are 6 ways the Affordable Care Act helps small businesses today.
1. Collective Buying Power
Small businesses have historically paid as much as 18% more for health insurance coverage compared to competing businesses with higher headcounts. U.S. Small Business Administration (SBA) spokeswoman Caroline Ciccone says: “The Affordable Care Act helps level the playing field for small businesses. For the first time, small business owners now have the opportunity to leverage their buying power with other small employers in the Small Business Health Options Program (SHOP) Marketplace.” In addition, insurance companies are also now tasked with publicly justifying their actions if they seek to raise small business premiums by 10% or more—and many states have more power to block unreasonable premium increases from taking effect.
2. Small Business Tax Credits
Many small employers can receive tax credits for offering health insurance to their employees, and hundreds of thousands of businesses have already claimed credits of more than $1 billion. To be eligible, you must cover at least 50% of the cost of employee-only health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs), and those employees must have average wages of less than $50,000 annually. Note: to qualify for the tax credit, you have to purchase health insurance through the SHOP Marketplace (or qualify for an exception to this requirement).
3. Targeted Premium Dollars
We now have the new 80/20 rule that keeps small business’ premium dollars focused on health care—not carrier overhead. If insurance carriers fail to allocate 80% of your business’ premium dollars to medical claims and activities that improve the quality of care, they must send your business a Medical Loss Rebate (MLR) check. As a result, between 2011 and 2013, small businesses saved more than $2.5 billion in lower upfront premiums and rebates from their insurance companies, and three million Americans who work for small employers got an average rebate of over $100 per family per year.
4. Shrinking the Uninsured
When people without health insurance receive medical care, a portion of services are paid for by third party sources like government programs and charities. The remaining amount is considered uncompensated care. To balance this, the costs of health services increase, and these higher charges are then passed on to families and businesses as higher premiums. The average U.S. family and their employer pay $1,017 a year extra in health insurance costs to cover care for the uninsured. As the ACA brought the uninsured into the system via the individual mandate, the rate of uninsured individuals has dropped significantly. According to the CDC and census data, for the first three months of 2015, the uninsured rate was 9.2%, down from 15.7% before the Affordable Care Act was signed into law.
5. Free Preventive Care
Under Section 2713 of the Affordable Care Act, health insurance plans must now cover a range of preventive services without charging your employees a copayment or coinsurance. (This is true even if your employees haven’t met their yearly deductibles). The new preventive care requirements include evidence-based screenings and counseling, routine immunizations, preventive services for children, and preventive services for women. The federal HHS Assistant Secretary for Planning and Evaluation (ASPE) estimates that approximately 137 million people (55.6 million women, 53.5 million men, and 28.5 million children) have received no-cost coverage for preventive services since the policy went into effect. View the full list of covered preventive services for adults, women, and children.
6. No More Pre-existing Condition Exclusions
Pre-ACA, insurance companies maintained a list of more than 400 conditions (many common) that they used to deny health coverage. Although this predominantly happened in the individual coverage landscape, employer group plans were not always immune from pre-existing condition denials. Vivek Puri, founder of Classic Homes in Woodbridge Virginia, got the raw end of the deal when, prior to the Affordable Care Act, insurers denied his company coverage. With four of his workers needing surgery or treatment, two insurance companies refused to take his business on, while another would do so only with a 140% increase in annual rates. Following the ACA rollout, Puri obtained coverage for his small business, and said: “If the ACA had not gone into effect, it would have made it impossible to provide insurance to my employees.”
The ACA is improving coverage, quality, and affordability—the three goals it set out to achieve. Ready to tackle the employer mandate? Find out how Zenefits can keep your company ACA compliant—for free.