A Healthy Choice For America’s Small Businesses

By Meredith K. Olafson, Senior Policy Advisor, SBA
Posted April 05, 2013

Ed. note: This post was first published on the official blog of sba.gov. You can see the original post here.

Small businesses are the backbone of our communities. And, in an economy where small businesses create two-thirds of jobs, owners and employees deserve a health insurance market with fairer prices, better choices, and greater certainty. With the implementation of the Affordable Care Act, that market is on its way.

In recent years, the number one concern for millions of small business owners has been health care. Because they had less bargaining power, small businesses paid an average of 18% more for the same health insurance plan offered to their bigger competitors.

As America’s economy continues to get stronger, small businesses across the country are playing a critical role in creating jobs, driving innovation and fostering economic growth.  Now, more than ever, they need every tool available to help their businesses grow and thrive—including a way to give their employees access to quality, affordable health insurance.

In 2014, employers will be able to choose a plan through a new Health Insurance Marketplace and in 2015 and beyond, employers will be able to let their employees choose from a number of plans.

Marketplaces

Beginning in 2014, small business owners will have access to a Marketplace—which opens for enrollment on October 1st—that will allow them to make side-by-side comparisons to find a plan that fits their budget and that’s right for their businesses and employees.

Each Marketplace will operate a Small Business Health Options Program, or SHOP, focused just on small businesses, where employers will be able to choose from a range of affordable plans to offer their employees.  In 2014, employers will be able to choose a plan, from a variety of Marketplace options, to offer their employees.  In States like California in 2014 and in all States starting in 2015, employers will be able to choose a variety of plans to offer to their employees—empowering each employee to choose the plan that best suits his or her needs.

Although we have heard some claims that the opening of our SHOP marketplaces will be delayed, this is not the case—these marketplaces will open for enrollment, as planned, on the first of October.  

With SHOP, every small business owner will be able to:

  • Access a single place to learn about health insurance and get accurate information on different plans;
  • Make apples-to-apples comparisons of the prices and benefits of private insurance plans for their employees; and,
  • Use their existing insurance broker to access the SHOP, or shop for plans themselves, without a broker—choosing a plan that works for their budget, their business, and their employees.

You can learn more about the Marketplaces by visiting www.healthcare.gov/marketplace.

Tax Credits

Small businesses are also seeing savings thanks to new tax credits available to help them cover their employees.

Many small businesses with fewer than 25 employees have already received a tax credit of up to 35% of their health insurance costs. And beginning in 2014, this tax credit will go up to 50%. 

Increased Transparency

Insurance companies must now publicly justify every rate increase of 10% or more, which has led to a sharp decline in double-digit rate hikes. The proportion of double-digit rate hike requests plummeted from 75% in 2010 to 14% so far in 2013.  Starting in 2014, insurers will have to transparently report every proposed rate increase, even if it’s a 1% bump.

Additional rules require insurers to spend at least 80% of small employer premium dollars on employees’ actual health benefits, instead of the insurer’s own administrative costs.  These limits, along with those in the individual market, have already resulted in more than $1 billion being returned to business owners and other consumers.

By making the health insurance market work better for America’s small businesses, the Affordable Care Act will help our small business owners and entrepreneurs get back to the business of being in business, and focus on what they do best: delivering great products and services, creating jobs, and growing our economy.