Small businesses with fewer than 50 employees—which aren’t subject to Obamacare’s employer mandate taking effect in 2015—are discovering a silver lining to federal health care reform: They can drop their current health plan and send their employees to the public health insurance exchanges.
This has long been a predicted side effect of Obamacare. But now, it’s actually appearing to come true.
Keith Perkins, owner of a small electrical contracting company in Greencastle, Pennsylvania, told The New York Times that many of his employees will save money now that his company is dropping its employer health plan and having employees buy individual coverage on the exchange. That’s because many of his employees earn low enough income to qualify for subsidies that greatly reduce the price of insurance on the public exchanges.
“We took the amount of money we were paying for health insurance and dumped it into their paychecks instead,” Perkins told the Times. “And this way, they get to make the choice, not me.”
Insurance brokers are also hearing far more questions from small employers about this option. “It’s a question we get every single day,” Thomas Harte, an insurance broker with Landmark Benefits in Hampstead, New Hampshire, told the Times. “Employers are seriously considering walking away from their [health] plans.”
The decision by small employers to drop health coverage isn’t exactly a new one. A study by the Robert Wood Johnson Foundation found that the number of businesses with fewer than 50 employees that offer health insurance fell to 38 percent in 2011, down from 47 percent in 2001. However, Obamacare now makes dropping coverage more attractive—particularly if employees can find lower-priced coverage on the exchanges.
Experts say the trend toward small employers dropping health insurance will likely continue. A 2011 report by the American Action Forum, an economic think tank, predicted that 43 million Americans will lose employer health coverage due to Obamacare. A Forbes article last month explains why that prediction isn’t so far-fetched: The price of insurance for small employers, especially those with low-wage workers, has gone up dramatically. These companies can’t lower employee wages to cover the costs of insurance—so dropping coverage and leaning on the public exchanges ends up making the most financial sense.