Will Small Biz ACA Problems Be Saved by Association Health Plans?
Out of 75 Major Concerns, Small Business Owners Rank
Health Insurance Costs as the Number One Problem They Face
Between 2008 and 2015, the proportion of employers with fewer than 10 employees providing health insurance dropped by over one-third while the proportion of employers with 10 to 24 employees dropped by a quarter.
Why have small business been hit so hard? Because they lack the economies of scale enjoyed by big firms that can negotiate lower prices from insurers. Also, they do no have enough employees to mitigate health care risk, and their profit margins are generally lower than ‘big business’ … and cost hikes are harder to absorb.
Often the only option available for many small businesses is the individual marketplace, where costs rose by 35 percent in Missouri and 22 percent nationally last year. A family of three now pays $700 a month in premiums, not including the deductible and co-pays, for minimal coverage. For a small business this is costly!
Even in Today’s Up Economy the High Cost of Health Insurance
Stifles Small Business Creation & Expansion
Why risk starting their own firm in today’s health care environment when it means leaving good health care coverage for the costs and unpredictability associated with small business ownership?
Economists know that high health care costs have dissuaded some companies from surpassing the 50-employee mark, where they are required to purchase health insurance for the employees under the ACA employer mandate.
So, Is There Any Good News?
The Labor Department is considering offering small businesses relief from these high costs by expanding Association Health Plans (AHC). These health plans would allow small businesses to co-op with others to receive the bulk health care prices along with the risk mitigation the same as big business competitors.
Historically promising health care solutions for small businesses, AHPs have been a promising health care avenue but have been heavily regulated by the ACA. A new Labor Department rule would make it easier for associations to improve this roadblock.
Ways of Improving the Status Quo:
1- Regulate AHPs at the federal level, thereby allowing them to avoid a patchwork of different state regulations and operate across state lines. This freedom, now only enjoyed by big businesses, would increase choice, as small businesses could pick among many more offerings than the current status quo where they are limited to just their state. The health care supply increase would drive down costs in the same way that the increased air travel following deregulation in the 1980s dramatically reduced air travel cost.
2- Proposes relaxing the regulations under which AHPs can be formed. Now, AHPs can only be formed if they conform to a stringent set of classification criteria. i.e.: an association currently cannot form a health plan if creating a health plan is its primary purpose.
3- Sole proprietorships, reflecting most of small businesses in the country, often cannot access AHPs because they don’t have employees. Allowing all small businesses – regardless of industry classification or size – to access AHPs will result in many more health insurance options, further increasing supply and reducing price.
Small businesses are the backbone of the American economy. The Labor Department’s rule could end the health care status quo and eliminate the what currently hamstrings them.
Source: The Western Journal