How the Affordable Care Act will benefit small businesses
By John Arensmeyer
The U.S. Supreme Court’s decision to uphold the Affordable Care Act will be written into the history books, not only for changing the way we view healthcare but also for the positive impact it will have on small business and the economy.
Prior to the reform law’s enactment, our nation’s health coverage market was unsustainable—particularly for small-business owners. Lack of affordability is the main reason many small-business owners don’t offer health coverage to employees. It’s not that they don’t want to provide it—we know from our research they do—but unlike big businesses, small firms face premium rates that are unpredictable in nearly every sense, except for the guarantee that they’ll always rise.
The Supreme Court ruling to uphold the Affordable Care Act protects a number of benefits offsetting small businesses’ costs as they brave the tumultuous coverage market. Provisions in the law such as rate review and a Medical Loss Ratio (MLR) have already brought lower premium costs and cash back for many small employers. In fact, millions of firms in 42 states will get rebates for part of their coverage costs in August because their insurers failed to spend 80 percent of their premium dollars on patient care and quality improvement (as opposed to administration, marketing and profits) as required by the MLR rule.
On top of that, tax credits for small businesses with fewer than 25 full-time employees are helping hundreds of thousands of entrepreneurs who offer coverage save money on healthcare costs. With those savings, they can reinvest in their businesses and even create new jobs. Now that the law’s fate is no longer up in the air, eligible small-business owners can look forward to 2014 when the maximum amount of the tax credit increases from 35 percent of their premium costs to 50 percent. However, the number of eligible small-business owners claiming the credit is not as high as it should be. A Small Business Majority opinion poll found more than half of all entrepreneurs don’t know it exists, and another recent survey had similar results. There’s also been a lot of hubbub over the complexity of claiming the credit, but trusted accountants should be a good source of information. In fact, many small-business owners who’ve claimed it first heard about the credit from their CPA. Tax laws change every year, and it’s an accountant’s job to keep up with those changes.
Another tax-related aspect of the law, the shared responsibility requirement, has drummed up similarly heated press in the wake of the Supreme Court ruling. But much of the information circulating about the provision—which requires businesses with more than 50 full-time employees to offer health coverage starting in 2014—is misguided. Many news reports seem to ignore the fact that only full-time workers are counted toward total number of employees, leading employers to think they’ll have to offer coverage when they won’t.
In reality, the shared responsibility requirement will affect very few businesses: 96 percent of all companies have fewer than 50 employees, leaving only 4 percent of businesses subject to the rule—and a whopping 96 percent of those firms already provide healthcare coverage.
For most small employers that don’t, there will be a new, more affordable way to purchase coverage in 2014: through the health insurance exchanges to be set up in every state. These marketplaces will give employers an online location to pool their buying power and negotiate better rates. Entrepreneurs are looking forward to these marketplaces, according to a recent poll by the Small Business Majority, which also found that only a third of small-business owners wanted the high court to overturn the Affordable Care Act.
Now it’s time to look forward and implement it with small businesses’ needs in mind. The moment President Obama signed the Affordable Care Act into law, countless small firms—from family-run farms in California’s Central Valley to Greenwich Village cafés just getting off the ground—began to see their hopes for more affordable healthcare become reality. Two-plus years later, we’re now a step closer to giving these entrepreneurs what they need. And it also means we’re giving would-be entrepreneurs the chance to follow their dreams of owning a business—without worrying about how to provide health insurance. 
John Arensmeyer is the founder and CEO of Small Business Majority, a nonprofit that has supported the enactment of the Affordable Care Act. |
