As conditions in the labor market continue to improve, many small business owners are finding that they need to adjust currently existing policies in order to remain competitive—especially in light of Affordable Care Act mandates that now require large employers to offer comprehensive health coverage. Although small business clients that employ fewer than 50 full-time employees are not required to offer health coverage, many have discovered that failing to provide group health coverage can create a barrier to retaining the most qualified employees.
These clients are now looking for advice on the benefits and burdens of offering group health coverage, as opposed to forcing employees into the individual marketplace via the health insurance exchanges—and an advisor’s informed guidance can prove critical to small business clients reaching the best decision for the business.
The Small Business Health Insurance Marketplace
Though employers with fewer than 50 full-time employees are not required to offer group health coverage, those that choose to do so must now offer coverage that satisfies the ACA rules, including the requirements that the plan be affordable and provide minimum value. Because many small business clients want to avoid the increased costs and potential risks associated with offering group health coverage, they may have sought out other options for helping employees obtain coverage in a post-ACA world.
While employers are generally prohibited from directly reimbursing employees for the cost of individual health insurance that they purchase through the health insurance exchanges, many small business clients that wish to assist employees with purchasing health benefits (without offering group coverage) have simply decided to raise employees’ salaries. This strategy theoretically allows employees to purchase their own health coverage through the individual marketplaces, relieving the employer of the obligation of selecting the policy.
Other small business employers stopped offering group health coverage because employees were eligible for premium assistance in the form of ACA subsidies and tax credits.
Despite these moves, employees have often felt that individual plans offer less comprehensive coverage than group plans (in the form of narrower options for doctors and prescription drugs). The widely publicized exit of several major insurance carriers from the individual market has only added to that perception. As a result, many small business clients have sought to return to the group health insurance market in order to maintain employee satisfaction.
Benefits and Burdens of Group Coverage
Group health coverage is an important employee benefit for many potential employees (and is, in fact, now viewed as standard by many, especially in light of the ACA large employer mandate). This fact means that offering group health coverage may become critical to a small business client’s ability to attract and retain the most qualified employees possible.
As noted above, group health coverage must now satisfy ACA standards (transitional relief for certain small business employers offering noncompliant plans expires at the end of 2017), meaning that the cost of group health coverage will likely be higher than it was pre-ACA. Employers may, however, deduct the portion of the group health premium for which they pay.
Further, health insurance carriers are now prohibited from denying coverage to individuals with preexisting conditions, which may actually serve to lower the overall cost of a small business’ group health coverage if one or more employees suffers from such a condition.
Some insurance carriers have also developed options that could soon allow small business clients access to the carriers’ large group plans at a lower price point (through the use of professional employer organizations).