Confusion Undermines Health Reform Understanding

Is the Affordable Care Act good or bad for small business? Political chatter says it's bad, but a careful read of its provisions may change your mind.Since passage of the Affordable Care Act (ACA) in 2010, President Obama’s problem hasn’t been the law itself; it has been selling the law to the public, health care providers and especially small businesses.

Most business owners agree the key to business planning is predictability and clarity. While the ACA attempts to provide a clear framework that would allow small business to flourish under the law, many of those benefits are buried underneath the weight of 1,100 pages of text.

Should small business owners be out pounding the payment in support of Mitt Romney and repeal of Obamacare or will the market reforms in the ACA provide small business owners a respite from the notoriously dysfunctional and expensive small group health insurance market?

To date, discussion of this question has been fueled more by politics than facts.

Opponents of Obamacare contend the rising cost of excessive government regulation will force millions of employers to drop coverage for their employees, while also hindering job creation and economic growth. However, this contention overlooks substantial small business benefits contained in the law.

First, small business can currently take advantage of the Small Business Health Care Tax Credit, designed to encourage small business to provide coverage for their employees. This program offers special subsidies to businesses with fewer than 25 employees that want to offer health benefits. As long as the employees earn less than $50,000 on average (a target income designed to make law firms and medical groups, etc. ineligible), a private sector business can get a tax credit to defray 35 percent of the cost of the insurance. Nonprofits can earn a 25 percent credit.

When the law really gets going in 2014, those subsidies rise to 50 percent for for-profits and 35 percent for nonprofits.

It’s important to note that businesses with fewer than 50 employees are also exempt from the “employer responsibility” provision of the law, which has been vilified by large employers as an unfair burden.

Companies with up to 100 employees can benefit from the option of buying lower cost health insurance through employer-only exchanges, set up by each state. This has the potential to reduce costs for smaller firms if they add their employees to a much larger pool of insurance customers, mitigating risk and lowering individual cost.

Even with these benefits and opportunities for small business, costs are at the top of any employer’s mind. Are the tax credits and small business exchanges enough to prevent employers from dropping health care coverage all together? Although Obamacare made great strides in covering the uninsured, even its greatest supporters admit that more needs to be done to curb the skyrocketing cost of care. At the same time, businesses need to remain competitive, able to attract talent and maintain a strong workforce.

It’s likely, in the end, the answer will be: a little of this and a little of that. Businesses will likely move cautiously. Some may scale back on benefits to save on cost, while others may chose to move forward with a ‘business as usual’ attitude. It’s unlikely that employers will drop coverage full stop. With so many incentives through the ACA to provide coverage, that’s just not good business.

 

For a local perspective on health care reform, check out this Oregon Insider blog post on Coordinated Care Organizations and Governor Kitzhaber's push for reform in Oregon.

For a research-based look at how small businesses view the Affordable Care Act, check out this Measuring Minds blog post featuring a poll in Oregon Business magazine.