Since the Affordable Care Act (ACA) became law in 2010, millions of Americans have been forced to obtain a new, often inferior health insurance plan; health insurance premiums have risen dramatically, especially for young adults; and many health insurance companies operating in the Obamacare exchanges have lost millions of dollars. For instance, UnitedHealth Group, the nation’s largest health insurer, recently announced it is expecting losses totaling more than $500 million on its 2016 Obamacare plans.
Although numerous groups are facing difficulties related to ACA, few are struggling as significantly as U.S. small businesses. According to an online survey produced by LevelFunded Health, a national health insurance agency “with a hyper-focus on Affordable Care Act ‘alternative’ employee benefit programs for the small employer market segment,” 87 percent of those small businesses who offer “group health care” saw health insurance premiums rise by 25 percent since 2014, with 12 percent seeing premium increases of 50 percent or higher.
Small businesses are at a significant disadvantage when competing against larger businesses because the latter can more easily absorb higher health insurance costs. This has led numerous small businesses to cancel their health insurance benefits completely, dumping an unknown number of employees into Obamacare exchanges. This is not only bad for the employees, it’s horrible for the businesses, who are now losing quality job applicants to large corporations that offer better benefits, according to the LevelFunded Health (LFH) poll.
The survey found 56 percent of the 2,500 small businesses polled say they are losing quality employee candidates because of the rising costs associated with employer-provided health care plans under Obamacare.
Written into the Affordable Care Act legislation was a provision to establish the Small Business Health Options Program (SHOP) marketplace, which ACA proponents said would help small businesses compete with larger employers. In November 2015, Kaiser Health News reported, “Employers with fewer than 50 full-time workers are eligible to buy coverage on SHOP. The federal government even offers businesses an incentive, a tax credit worth up to half of an employer’s share of their workers’ premiums. Among the conditions: The firm must employ fewer than 25 workers and their average salary cannot exceed $50,000.”
According to the Kaiser Health News story, only 85,000 people from 11,000 small businesses had coverage through SHOP. This is significantly less than the 1 million people the Congressional Budget Office expected to be enrolled in SHOP by the end of 2015.
The failure of ACA, and SHOP specifically, to provide small businesses with cost-effective health insurance options for their employees is not only causing small businesses to lose quality employees or potential employees to larger companies, it’s forcing small businesses to choose between offering health insurance for employees or raising prices for their customers.
Further, many small businesses who meet or surpass the 50-full-time-employee threshold but don’t provide health insurance are required to pay an “Employer Shared Responsibility” fine, according to HealthCare.gov: “Some employers with 50 or more [full-time] employees who don’t offer insurance, or whose offer of coverage is not affordable or doesn’t meet certain minimum standards, are subject to Employer Shared Responsibility provisions. They may owe a payment if at least one of their full-time employees enrolls in a plan through the Health Insurance Marketplace and receives a premium tax credit.”
Susan Wilson Solovic, a New York Times bestselling author and former ABC News business analyst, says to avoid any potential penalties associated with the 50-employee rule, small businesses are choosing to outsource many of their jobs to online freelancers, rather than hiring more staff.
Prior to 2016, many of the time-consuming regulations for small businesses with fewer than 100 employees but more than 49 employees were not enforced in order to give businesses more time to prepare for the rules. Now that many small businesses are going to be forced to comply with myriad health care rules and regulations they have been able to avoid in the past, many experts are expecting the number of Department of Labor audits to increase, adding to the growing confusion and costs being imposed on small businesses.
More regulations, additional costs, the possibility of fines, an increasing risk of being audited, and greater difficulty competing with larger companies for quality employees are just some of the many new challenges facing small businesses today in the new Obamacare-dominated business environment.
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