House Small Business Subcommittee on Health and Technology Hearing
Federal Information & News Dispatch, Inc. |
The Patient Protection and Affordable Care Act (ACA) became law in 2010. The law is based on an individual mandate that requires every adult to own health insurance and an employer mandate that requires every employer with 50 or more full-time employees (FTEs) to provide health insurance to their employees. n1
Under the ACA, states are allowed to expand their
The ACA also attempts to establish an exchange marketplace for employers with less than 50 FTEs. The Small Business Health Options Program (SHOP) is designed to help "businesses provide health coverage to their employees." n2
Small businesses with less than 25 FTEs may qualify for tax credits if they pay at least 50 percent of the total health insurance premium cost for employees and the average wage of their employees is below
Phase I of the employer tax credit began in 2010. Eligible employers may qualify for a tax credit of up to 35 percent of their contribution toward employees' insurance premiums. The employer must pay at least 50 percent of the employee-premium.
Phase II of the employer tax credit began in 2014. Eligible employers may receive a credit of up to 50 percent of their portion of premium costs. However, these employers must purchase coverage through a
At least 70 percent of employees must be enrolled in the
Some state exchanges started accepting enrollees through a
Employers with more than 50 FTEs will be able to access SHOP on
The demand and interest level of employers in an exchange such as SHOP was never determined. There is speculation and anecdotal evidence that SHOP was placed in the ACA for political reasons and convenience, rather than at the insistence of the law's architects. n6
Enrollment in SHOP to Date
When the ACA became law in 2010, estimates showed that 1.4 million to 4 million employers were eligible for tax credits. Only 170,300, or 4 to 12 percent of employers, filed for credits that year. n7
Individual state exchanges have had varying success at SHOP enrollment.
The federal exchange has delayed online enrollment until November, 2014. n9
Officials in
A second insurance company, Moda, has applied to offer 14 plans state-wide starting in 2015.
The Director of the
The
Second, the GAO reports the tax credit is not a large enough incentive for many small employers.
Third, the majority of small businesses have never offered health benefits to employees.
In addition, insurance companies are seeing a drop-off in employer-sponsored health insurance for small businesses. The CEO of
Policy Analysis
Although the employer mandate is a critical part of the ACA, the SHOP marketplace for small businesses seems to be almost an afterthought in the law. There is no clear evidence of interest on the part of small companies to provide health insurance through a marketplace with tax credits.
Small businesses are typically start-up or low-margin companies where the added cost of employee health insurance can mean the difference between success and failure. The paperwork and regulatory burden in the SHOP exchange are definite hurdles for a small business employer.
There is no real free market in the individual exchanges or in SHOP. Proponents will claim that competition exists, yet all insurance plans offered in the exchanges must contain the ten government-mandated essential benefits. Insurance premium prices must be approved by the government. Consequently, individuals and employers only have government-approved plans and not meaningful choices or real competition.
The incentive of tax credits has not been significant enough to encourage employers to use SHOP. Obtaining the credit is so complicated that small businesses are unwilling or unable to spend the time and effort to complete the necessary forms.
Since employer interest and utilization of the tax credit is so small, the benefits of the
Recommendations
Designing an insurance exchange, whether it's private or government-run, offers each state, like
Done right, the exchange should be easy to use and should promote decreased health care costs. Insurance rates and benefit levels should be set by the insurance market and not by government regulations. The administration of the exchange should be done through a non-political, independent board, not by a politicized bureaucracy.
Under the ACA, all plans must contain the ten essential benefits that meet federal requirements.
Any subsidies in the exchange should flow to and be controlled by the patient, not by insurance executives or government officials. Tax credits or premium supports to purchase health insurance could also be offered in an exchange.
Each state can function as a laboratory to design the most efficient, cost-effective exchange for small businesses and individuals. Although the ACA includes hundreds of new mandates and regulations, states should have an opportunity to overhaul their existing programs, start fresh and establish a meaningful patient-directed, market-oriented health care system. The alternative is to submit to more government regulation and central planning with the attendant bureaucratic inefficiencies which will not increase competition, improve access, or decrease costs to patients and employers.
n1
n2 What is the
n3 What You Need to Know About the Small Business Health Care Tax Credit @ http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers
n4 It's Still Hard for Small Businesses to Shop Around for Health Coverage by
n5 Obamacare Small Business Facts @ http://obamacarefacts.com/obamacare-smallbusiness.php
n6 SHOP Flop: Obamacare for Small Businesses, by
n7 Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity @ http://kstp.com/kstpImages/repository/cs/files/SMALL%20EMPLOYER%20HEALTH%20TAX%20CREDIT.pdf
n8 Why We Still Don't Know How Many Small Businesses Signed Up Through Obamacare by J.D. Harrison @ http://www.washingtonpost.com/business/on-small-business/why-we-still-dont-know-how-many-small-businesses-signed-up-through-obamacare/2014/07/10/773d0cb6-0859-11e4-a0dd-f2b22a257353_story.html
n9 Obamacare's Online SHOP Enrollment Delayed by One Year by
n10 With Statewide Insurance Options,
n11 Ibid.
n12 See ref 5.
n13 But Small Employers are Walking Away From Coverage by
Read this original document at: http://smbiz.house.gov/UploadedFiles/9-18-2014__Stark_testimony.pdf
Copyright: | (c) 2010 Federal Information & News Dispatch, Inc. |
Wordcount: | 1640 |
House Small Business Subcommittee on Health and Technology Hearing
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News