Will Small Businesses Stop Offering Health Insurance to Employees?
The deadline for implementing the Affordable Care Act (ACA), or Obamacare, is less than a year away—but the majority of small-business owners are still in the dark about exactly how the new law will affect them and what they’ll need to do.
The eHealth Small Business Survey of small-business owners with fewer than 50 employees, conducted in February, finds that a majority (56 percent) of small-business owners incorrectly believe the ACA requires them to provide health insurance for employees in 2014 or be taxed. (That percentage has shrunk a bit since a similar eHealth survey in October 2012 found 69 percent of entrepreneurs were confused.) In reality, the ACA won’t require businesses with fewer than 50 workers to provide insurance.
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But even those small-business owners who understand the law’s basic requirements are struggling with the details of how it will be implemented. For example, while health insurance exchanges (which are supposed to be set up in each state by October) will be a primary way for small businesses and individuals to buy insurance, some 62 percent of small-business owners admit they don’t understand health insurance exchanges at all. Just 18 percent say they can define or explain what an exchange is, while 20 percent have a vague understanding.
While one goal of the ACA was to bring skyrocketing health insurance costs under control, a majority (59 percent) of small-business owners are skeptical that will happen. Instead, they expect to see their health insurance costs increase—and they may be right, according to a separate eHealth survey recently released.
eHealth’s Cost of Comprehensive Benefits report predicts that when the ACA is fully implemented in 2014, health insurance premiums will rise a whopping 47 percent. To fulfill ACA requirements, all health insurance plans will be required to offer 10 Essential Health Benefits. On the plus side, this will improve benefits for most people; on the downside, it will cause major sticker shock that could either drive up employers’ costs or convince them to stop offering insurance altogether.
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But will small businesses really stop offering insurance? Even when the ACA takes effect in 2014, two-thirds (67 percent) of small-business owners in the Small Business Survey say they will still offer employees health insurance. Twenty-seven percent say they might stop offering insurance under certain circumstances; of those, 91 percent say cost would be a major factor in the decision. Only 6 percent of entrepreneurs are already planning to stop offering insurance.
Despite the uncertainty and costs, small-business owners believe offering health insurance is important. Forty-four percent say they feel morally obligated to offer it (although that sense of obligation may lessen once employees have more options for buying their own insurance, such as exchanges). However, 31 percent say they offer insurance primarily as a benefit to attract qualified workers, and 70 percent think that if they stopped offering insurance, their employees would start looking for new jobs.
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