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ACA’s hungriest large market goes begging for attention

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(Bloomberg) — Ron Nelsen used to cringe when one of his five employees got sick. The owner of an electric garage door company in Las Vegas, Nelsen knew he’d pay for it when insurance renewal time rolled around. “I’m ashamed to say it, but I would just have this sinking feeling in my gut.”

Nelsen is part of what should have been one of the ripest markets for the Affordable Care Act health coverage expansion programs. Small businesses have been clamoring for changes in the small policy market for 30 years, according to surveys conducted since 1986 by the National Federation of Independent Business. The cost and difficulty of insuring their workers topped the businesses’ list of concerns in every single survey. Not even taxes came close.

Related: ACA: CMS Talks SHOP

But Obamacare didn’t win over small enterprises, a misstep that cost the ACA crucial support in its fight for life. Small business interests got too little attention from an administration focused more on the individual market. So far, Republicans meeting to replace the law appear to be headed toward the same mistake. Congressional Republicans are not only focusing on individual health consumers like the Democrats did eight years ago, they’re looking at capping the federal tax breaks that workers and companies get for employer-provided health insurance, which would make coverage more costly for all businesses.

Individual market

The Obama administration concentrated almost exclusively on the individual insurance market and put small business on the back burner,“not recognizing that the majority of people were working and working overwhelmingly for small business,” said Barbara Otto, director of Health and Disability Advocates in Chicago, which advocates for health care access.

More than 56 million Americans work for small businesses, according to the U.S. Bureau of Labor Statistics, with businesses having fewer than 50 workers making up more than 90 percent of the nation’s employers. By comparison, more than 12.2 million people signed up for individual insurance through the ACA public health insurance exchange system for 2017, according to the Henry J. Kaiser Family Foundation in Menlo Park, California.

Employer-based health benefits are the largest source of insurance coverage in the U.S., although the percentage of employers offering them has been falling for almost two decades, led by employers with 50 workers or less, according to a 2016 Kaiser study.

The decline continued after the Affordable Care Act, which required employers with 50 or more employees to offer insurance benefits but exempted smaller employers from a mandate to offer benefits. The requirement was also delayed on larger employers, going fully into effect only last year.

Small business coverage

Even so, the majority of small businesses offered at least some coverage last year: 53 percent of employers with less than 50 workers and 89 percent of those with 50 to 99 workers provided it, according to the Kaiser data. Kaiser also tracked a roughly 15 percentage point increase in the number of previously uninsured small business workers who got insurance through Obamacare’s individual market since 2013.

As the Republican Congress and Trump target the health care law, they should make small business insurance coverage their focus, said Otto.

“Small business must have a seat at the table,” she said. “They were not central to the first round of health care reform. By making small employers the cornerstone of any ACA repeal and replace actions, the new administration can provide an economic boost to this sector while simultaneously meeting key health insurance coverage goals.”

Related: Witnesses: ACA small-group tax credit flopped [video]

The replacement plans floated before Congress took a break this week continue to emphasize the individual market, including who will get subsidies, how insurance will be sold, and when and how customers will be allowed to sign up for it. Republicans also are looking at putting caps on the decades-old policy that made employer-based health benefits the norm, by exempting them from income tax, and are considering lifting mandates that employers offer insurance that meets minimum coverage standards. managers never put much effort into marketing to small groups. (Image: managers never put much effort into marketing to small groups. (Image:

‘Patient-centered care’

Congress will “repair the damage Obamacare has done so employers can offer more personalized, patient-centered care” Republican Sen. Lamar Alexander of Tennessee said in a January floor speech. Calls and an e-mail to new Health and Human Services Secretary Tom Price were not returned.

The ACA did help small employers with relatively high claims in at least one key area — it grouped small businesses together into larger “communities” to expand the risk pool, thereby offsetting the kinds of premium surges that Ron Nelsen experienced when one worker would file a claim. That new risk pooling might have increased premiums for small employers with consistently low claims, but, in part because of the new rating system, typical small companies in many areas escaped the sticker shock afflicting many purchasers of individual major medical coverage.

Price increases

Kelly Conklin, who owns a 12-employee custom woodworking shop in Kenilworth, New Jersey, said his insurance costs have risen by single-digit percentages since the Affordable Care Act came into effect, compared with a 126 percent price increase in one previous year. “I never found out which worker caused that,” he said. “I think they were trying to dump us.”

But the Affordable Care Act also presented challenges for small business, in part because of the law’s focus on individuals.

Subsidies that were simple to access for individuals, for instance, were anything but for small businesses. A tax credit was so limited and complicated that few businesses ended up using it. A Small Business Health Options Program insurance exchange was delayed so long that it ended up being almost useless in many states. The Internal Revenue Service cited the law in nixing a popular workaround, in which employers made tax-preferred payments to help employees buy individual insurance. Businesses with just a few more than 50 employees ended up with more paperwork, as they strove to meet the ACA’s definition of affordable.

Failure to communicate

The Obama administration, meanwhile, failed to communicate the benefits of the law to small businesses.

Otto’s Chicago advocacy group, along with Chicago’s Women’s Development Center, surveyed small business owners in five Midwestern states in the week after the 2016 presidential election and found a stew of misinformation. Respondents complained about price hikes that predated the law’s implementation, for instance, or about the medical underwriting that the ACA actually ended.

“There’s just a huge lack of knowledge out there,” said Emilia DiMenco, president of the Women’s Business Development Center, who blamed the problems on a lopsided outreach to individuals.

DiMenco said she doesn’t believe either Congress or President Donald Trump should or can return small business health insurance to the pre-ACA days: “It just needs to be rebranded and improved, like an iPhone or any other first-generation product.”

In Las Vegas, Nelsen the garage door installer is hoping that’s the way it works out, and that the ACA gets fixed, not scrapped: “But as a small business owner, they’ve already given me that icky, gut-wrenching feeling again.”


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