Let’s strip the politics and emotions away and focus on what matters: what should small businesses and the self-employed expect and what should they do regarding health care, expected cost increases, new regulations?
In 2010, Congress passed a health care bill, 2,700 pages large. On June 28, 2012, the Supreme Court decided that this health care bill was Constitutional – not within power given to Congress to regulate commerce, but through its power to impose taxes. This health care law is not technically a mandate. It’s a tax. So what now?
If you want to immerse yourself in the details of the Supreme Court decision, you can read every word of each Justice’s Opinion here.
If you want to just focus on what this means for you, please continue reading.
When will this all kick in?
Assuming the law isn’t somehow repealed or modified, most of the provisions in this law will take effect in 2014.
Which small businesses will be most affected?
The mandate to provide health insurance or have fines imposed is for companies with 50+ employees. Companies in the ActSeed community, are normally less than five years old and usually way under 50 employees, so for purposes of remaining focused, this company penalty won’t be much of a direct issue.
Indirectly, however, premiums are expected to continue rising for everyone, and this includes individual or family plan insurance premiums for the self employed. In 2010, when the law was first passed, many insurers increased their premiums by as much as 40% – in the middle of a deep recession. Until US health care finds an equilibrium, expect volatility and uncertainty in costs and coverage. We all know that insurers dislike uncertainty and merely price it into the monthly premium. The law introduces the concept of “health exchanges” to try to create an efficient marketplace for choices of plans from different carriers, which is theoretically designed to stimulate price competition. We’ll see, but don’t expect premiums to drop anytime soon.
The government (the “Small Business Administration” or “SBA”) defines “small business” in a very broad context, sometimes as many as up to 1,500 employees. (SBA Table of Small Business Size Standards). Most SBA small business definitions are either up to 100 or 500 employees, but this hardly sounds like a “small” business.
What’s the trend?
Maintaining a focus on the interests of the ActSeed community, most early stage businesses are less than 20 employees and most often less than 10. Less than half (48%) of companies with less than 10 employees offer group health insurance, according to the Kaiser Family Foundation. Almost two thirds of companies under 10 employees offered group health insurance a decade ago, so the trend is moving away from insurance benefits. Until there is a greater certainty on how a health plan will impact an early stage small business, expect the trend to continue downward.
Another reason that really small businesses may continue the trend of dropping group health plans is that this new law will allow individuals to get coverage even when they have a “pre-existing condition” (i.e. a health issue that today prevents them from getting coverage, kind of like trying to get a warranty for your car after it breaks – a known problem, not a hedge against the chance that a future problem may arise). Before this government-mandated access to health insurance for everyone, individuals with pre-existing conditions needed to find employers with group health plans that couldn’t deny coverage for a new employee, even one with a pre-existing condition (although it would affect the company’s premiums when recalculated each year).
What should we be thinking about?
For the typical small business owner in the ActSeed community that employs 2-20 people…
- Will you need to fire people to afford the Affordable Health Care Act? Nope.
- Will you seriously consider dropping your group coverage and requiring each employee to find an individual plan for themselves and/or their family? Highly likely.
- If you don’t have group coverage yet, will you likely avoid setting up a plan and requiring employees to find their own health insurance? Again, highly likely.
- Should you consider indirectly subsidizing your employees with a small increase in pay now that you will not be covering their health benefits (or at least a portion of it). Not a bad idea.
- Should you still explore group health plans as a possible benefit to provide your employees? Certainly. Sometimes, an attractive benefits package and a smaller base salary seem to have a psychological benefit to employees.
As the rhetoric escalates through the fall and reaches a crescendo in November, one thing seems certain: early stage small businesses shouldn’t expect much from government. We should plan to survive and succeed not because of government, but in spite of government. When we steel ourselves with this mental outlook, we don’t think like dependents, but like independents, and then we have the freedom to adapt and thrive regardless of what politicians, despite even their best intentions, throw in front of us.
Throughout the evolution of this issue, ActSeed will share thoughts with its community from experts in the field of insurance and health care. We will offer constructive guidance on how to navigate HR, benefits and insurance that fits early stage businesses and self-employed entrepreneurs.
Please also share your constructive tips and services. This isn’t a venue for a partisan debate – just a forum for creating value through disciplined business-building.
Stay tuned. We have more coming soon.