Its too early to tell how healthcare reform will affect small business health insurance. Based on some of the proposals that have been put forward, it is possible to list some of the benefits and challenges that might face small businesses with respect to their group health plans.
The reason the outcome is so uncertain is that proposals and counter-proposals have come from a variety of sources, including President Obama and various factions in the House and Senate. By the time all the horse-trading is done and a bill is passed--if one is passed--it could represent any one of several possible combinations of these proposals. Meanwhile, there are some major themes in these proposals which warrant discussion.
Overview: Current Challenges for Small Businesses Wanting Group Health Insurance
Small business owners know that group health insurance is a valued employee benefit, but in seeking to provide it they face at least four major challenges:
- Start-ups dont have the profit margin for additional expenses. The challenge for any business start-up is to become profitable on an operating basis, and from there, begin to recoup the initial investment in the business. Adding a layer of expense in the form of a group health plan too soon can be a serious setback
- Smaller risk pools mean higher premiums. Companies with small employee bases tend to face more expensive pricing for group health insurance
- Healthcare costs have been rising faster than the general rate of inflation. Not only do cost issues pose an immediate challenge, but they can become a bigger problem given the rate of increase of group health insurance premiums
- There is an administrative burden on top of the direct expense. Premiums are only part of the problem. In a lean organization, finding someone with the time and expertise to handle the paperwork involved in providing insurance can be difficult
Major Healthcare Reform Themes Affecting Small Businesses and Group Health Insurance Plans
Will healthcare reform help with these challenges or make them more difficult? It depends on which of the following elements makes it into the final legislation:
- Creation of a health insurance exchange to facilitate the purchase of insurance by individuals and small businesses. Ideally, this should give small businesses more purchasing power than theyve had in the past when dealing with group health plan providers singly
- Requirement for employers to provide health insurance. Proposals for how much of the premium employers would have to contribute range between 50 percent and 72.5 percent. This would take the discretion away from business owners, forcing them to provide the benefit whether they can afford it or not
- Exemption to the health insurance requirement for small businesses. Proposed exemption levels range from $250,000 to $500,000 in payroll, or 25 employees. Depending on which, if any, of these exemption proposals passes, employers below those thresholds would not have to provide health insurance
- Various proposals to address the cost of healthcare. From tort reform to technological investment incentives, there are various ideas to address the spiraling cost of healthcare. Ideally, these could benefit all healthcare consumers
Its a mixed bag. Theres enough uncertainty that any business already contemplating group health insurance should not put their plans on hold while waiting for the government.
The Henry J. Kaiser Family Foundation (PDF)