According to findings published in health policy journal Health Affairs, few small businesses are likely to take advantage of two options allowing them to avoid new regulations under President Obama’s Affordable Care Act. Researchers believe that most small employers will likely eschew the two rules because opting to self-insure or maintain grandfathered insurance plans would leave them open to substantial financial risk should the medical expenses of their employees surge unexpectedly. Furthermore, researchers predict that the majority of small businesses won’t be able to grandfather existing health plans after 2014, as they will fail to meet the necessary requirements.
A report released by the Center for American Progress points out the momentous challenges small employers face in providing affordable, high-quality health insurance plans for themselves and their employees:
Small businesses, which employ 42 million Americans, continue to struggle with the rapidly escalating costs of health insurance. Over the past decade, small-business owners have watched their health insurance premiums rise 133 percent—the same kind of premium growth large businesses have experienced. But because of their smaller scale and thinner margins, they are less able than larger businesses to absorb these increasing costs.
Other factors make it more difficult for small businesses to offer coverage than large businesses. For instance, on average, small businesses pay 18 percent more than big businesses for the same coverage—often due to high broker fees, fixed administrative costs, and adverse selection, which is the upward price spiral that occurs when one plan or market disproportionately attracts high-risk employees.
To combat this obstruction, the ACA has introduced the Small Business Health Options Program (SHOP), which is intended to create a marketplace for small business owners to purchase health insurance for their employees. These proposed SHOP exchanges will allow small businesses to consolidate their buying power so they can purchase high-quality insurance with substantially reduced premiums. By spreading the financial risk associated with insuring high-cost enrollees across a wider pool of employers and employees, the exchanges will keep costs affordable, limit the burden posed by the insurance process, and reduce administrative expenses.
“The exchange is the most important component of health care reform for small businesses and it’s critical states set them up correctly so small businesses get the relief a strong exchange can provide,” said Terry Gardiner, Vice President of Policy and Strategy for Small Business Majority.
Under the ACA, open enrollment for SHOP exchanges should commence sometime in late 2013, while small employers and their employees can expect the exchanges to officially open for business on January 1, 2014.