2012 Options Small Businesses should Consider as Health Insurance Reform Kicks In
The Affordable Care Act, passed in 2010 and is being rolled out in stages. Many reforms, most notably the individual health insurance exchanges, won’t go into effect until 2014, but some small-business owners are experiencing sticker shock already and blame the new law for the rising health insurance rates they’ve seen over the past 2 years.
Supporters of insurance exchanges argue that they can be a game-changer for small-business owners in particular. Insurance exchanges can offer new options for covering employees at competitive and more realistic prices, they argue. Currently, small-business owners typically pay much higher premiums than large employers because they don’t have a large enough pool to spread out risk and reduce the cost of coverage.
Here are a few options small businesses can consider as they wait for healthcare reforms to kick in:
1. FIND OUT IF YOU QUALIFY FOR A SMALL-BUSINESS TAX CREDIT.
Businesses with fewer than 25 full-time employees paying staffers an average annual salary of less than $50,000 may now be eligible for tax credits of up to 35% of the cost of their premiums. Employers need to pay more than half the premium to qualify. It is difficult for many employers in a higher-wage market such as Chicago to qualify, but for those smaller businesses that fit the narrow definition, pursuing the credit may be well worth the effort. Tax experts estimate only half of small businesses even realize there’s a health care tax credit that they could qualify for.
2. ANALYZE WHETHER YOUR BUSINESS SHOULD CONTINUE OFFERING COVERAGE UNDER HEALTH REFORM.
Under the new law, employers with staffs of 50 or more could face penalties of $2,000 per employee if they don’t provide insurance. Some business owners say their coverage already exceeds that, so a penalty could be a more affordable option. If you run a mid-sized business, start analyzing whether it would make sense to continue offering coverage or to pay the penalty and send employees to a state exchange.
Illinois is among 17 states that have made significant progress toward developing health insurance exchanges, the new markets on which individuals seeking insurance will be able to purchase it that begin January 1, 2014, according to the AP analysis. Thirteen states have already adopted a plan, but are home to only 25% of the uninsured. The 20 states lagging behind account for the biggest share of the uninsured, 42 percent.
3. ADOPT A WELLNESS STRATEGY.
While a wellness incentive plan for employees may not pay big dividends right away, the plans help employers qualify for significant discounts on overall coverage. By providing employees with tools, resources, and incentives to make and maintain healthy lifestyle choices, health insurance premiums become lower over time as the overall health of the company improves. Insurance companies such as United Healthcare, Humana, and BlueCross BlueShield are also trying to provide a more robust solution around wellness by offering rewards-based programs to their members. Members have to do something for a healthy lifestyle to earn an incentive. For example, if a smoker attends a smoking cessation program, an insurance company may reward them with a gift card.
4. LOOK CLOSELY AT STATE-RUN HEALTH INSURANCE CO-OPERATIVE PLANS.
The ability of states to develop non-profit, member-run health cooperatives that could compete for better rates is part of the health reform legislation, and some advocates feel this aspect of reform hasn’t gotten the spotlight it deserves. While cooperatives have produced mixed results in the past, they can reduce costs when done right, particularly for small-business owners. Health cooperatives are a great opportunity, and hardly any small businesses know about this option. For small group employers, this could mean finding whole new ways to bring competitiveness to the table.