Obamacare And Small Business – What Does The Future Hold?

Obamacare and the SHOP (Small Business Health Options Program) aims to create a solid health insurance market for small businesses by making tax credits available to businesses that …

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Obamacare and the SHOP (Small Business Health Options Program) aims to create a solid health insurance market for small businesses by making tax credits available to businesses that provide health cover for their employees and creating small-business exchanges where companies could more easily find low cost-plans.

With ‘open enrollment’ and the new website designed to make the process more accessible, will more business owners opt in?

Since it passed congress in 2010, the Affordable Care Act – more commonly known as Obamacare has been a hot topic of discussion in regards to its impact on the future of small businesses.

Whilst individuals have had over a year to become accustomed to the changes implemented by the Affordable Care Act, the next two years are particularly relevant to small businesses, with 2015 and 2016 being crucial years of change.

Many business owners are struggling to afford health care coverage for their employees as the cost of providing health insurance has climbed dramatically.

Starting in 2015, small businesses with over 100 full time equivalent employees (FTE) will be required by law to offer coverage to the majority (70%) of their full time staff, a percentage increasing to 95% in 2016. From 2016, this will also apply to employers with a workforce of between fifty to ninety-nine full time employees.

By next year the Employer Mandate comes into practice, officially part of the Employer Shared Responsibility provision.

This means businesses could face a substantial penalty fine of $2000-$3000 per FTE if they fail to comply. Ironically for some businesses the fine is considerably less than the forecasted total cost of providing cover.

This has led to some small business owners taking drastic measures, through cutting employees hours to avoid offering the obligatory payments.

Small businesses with under 50 full time employees don’t have to offer their employees coverage under the ACA.

As 96% of small businesses in America have under 50 full time employees this rules them exempt from the obligation.

The smaller the business the greater the benefits, businesses with fewer than 25 full time employees with annual wages below $50,000 qualify for tax credits, to help them pay for employee healthcare premiums.

The SHOP program – affordable new insurance choices?

As of November 14th 2014, the federal exchange launched an online marketplace called the Small business Health Options Program or SHOP, open to small businesses that are currently offering insurance plans or are thinking about starting.

This month the SHOP Marketplace opened to small businesses with less than 50 employees, its aim to advise businesses on how to comply with the ACA.  It will also open to businesses with fewer than 100 FTE’s in 2016.

SHOP was designed to simplify the process of buying health care insurance for small businesses – giving them option of controlling the cover and the premiums they pay each employee.

The marketplace also allows them to shop around for a good price, comparing and contrasting the standardized SHOP plans and private plans to find the most cost-effective outcome.

However, the number of small businesses participating in SHOP is much lower than the Congressional Budget Office’s initial estimate of 2 million by 2015.

According to an audit by the Government Accountability Office (GAO) in the 18 states just 12,000 businesses have opted in totaling approximately 76,000 employees.

One potential reason could be the program’s delay, postponed by a year due to glitches and an imperfect rollout. Another being that the tax credits used as an incentive maybe be too small to motivate the business owners.

With no obligation to cover their employees, what happens when smaller businesses opt in?

Approximately 5.8 million companies in the US have under 50 employees- with 96% of these firms already covering their full time employee’s health insurance.

However as the policies become due for renewal many small businesses are facing large increases in renewal rates. Forbes.com recently revealed that nearly ‘5.6 million small business owners in the US feeling the strain’.

WellPoint, one of the largest insurers in the US state that they have seen a significant decrease in Small Businesses continuing to offer coverage, with as many as 300,000 fewer renewals than previous years.

If a business with fewer than 50 employees, decides to opt into Obamacare rather than renew their already existing policies – they’re encountering the problematic factor that their small business is only eligible if they offer insurance to 100% of their employees, meaning offering plans with high deductibles.

Subsequently, many small business owners are sending their employees to the exchanges to buy their own individual coverage and employees are choosing to renew independently outside the SHOP exchange – because it didn’t offer them a more affordable option.

What does the changing health care landscape mean for Obamacare?

Being the largest overhaul of the American healthcare system since Medicare, it is no surprise that many small business owners are still trying to get to grips with the legislation and its nuances.

As a largely an unfavorable and highly criticized option there are still a great deal of misconceptions, often fueling a highly charged political rhetoric.

Earlier this month, the Republicans won the senate, by pledging to repeal Obamacare, and the reforms may face more challenges as a consequence.

Despite the fact that Obamacare is going nowhere – the Republicans efforts to change the program could mean significant consequences for the estimated 10 million covered under the program by 2016.

The proposed changes would include a cheaper ‘copper plan’, lower subsidiaries, changing taxes and abolishing the employer mandate. Retrospectively this could result in smaller businesses dropping their healthcare coverage.

They also propose a new definition of an FTE, increasing the required working hours per week, currently at 30 or more, to 40, enabling employers to hire more people who work less hours without having the obligation to cover them and thus making them exempt from employer offered plans.

The Affordable Care Act is by no means a perfect system; it won’t be able to satisfy the whole population, and will no doubt take time to establish itself. 

Nonetheless 2015 is looking like a crucial one for Obamacare, and with propositions to repeal federally subsidized insurance for millions of employers, employees and individuals, it remains the center of an ongoing political debate.

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