Potential Drawbacks of ACA Repeal for Small Businesses
What The Potential ACA Repeal Means For Small Business
President Trump said in a recorded interview that aired on Super Bowl Sunday that any “replacement” for the Affordable Care Act (ACA) might take until 2018. U.S. House of Representatives Speaker Paul Ryan (R-Wisc.) has said he expects things to happen more quickly. In the middle are small business owners and their employees who wonder what changes to expect – in the short and long term.
There’s been no shortage of suggestions on ways to change the ACA, almost from the day it was signed into law seven year ago. But, recently, there’s been more talk in Washington, DC, about “repairing” Obamacare rather than replacing it. By the president’s own admission, it is a complicated process to go about overhauling a program that delivers health insurance to millions of Americans.
Let’s look at some potential drawbacks for small businesses if the ACA is repealed.
Since the ACA was enacted, millions of previously uninsured individuals have been able to get health insurance, albeit some with high deductibles and other out-of-pocket costs. Some of those with new coverage have it because they’ve been able to join a parent’s plan (often through an employer) under the dependent provision of the ACA.
Some who may have been denied health insurance in the past because of a pre-existing health condition have coverage today because the ACA does not allow insurers to refuse coverage (or charge someone a higher premium) because of their health.
Others may have insurance today because they work for an Applicable Large Employer (ALE) required to offer health insurance to full-time equivalent employees.
If the employer mandate is eliminated, some businesses may drop their current group coverage, while others may move to replace the comprehensive benefits required by the ACA in favor of less-expensive plans that don’t offer the “minimum essential benefits” required by the health care law.
ACA repeal/repair/replacement could also reduce the number of insurers in the health insurance market. It all depends on the extent of the changes made by Congress. On the heels of its rejected proposal to merge with Aetna, Humana has said it will not be a participant in the ACA exchanges in 2018. However, its plans are not yet known for coverage outside of the ACA marketplaces.
Increasing medical costs, higher premiums
Since the ACA became law, the escalation in health care premiums (for individual and group coverage) has slowed. According to one analysis, three years before the ACA took effect, health insurance premiums were increasing by 10-12 percent annually. It was reported last year that individual premiums were lower than for comparable coverage available in 2013. On the group health front, a Commonwealth Fund analysis published in December 2014 shows an average annual growth rate of 5.1 percent in the seven years before the health care law, as compared to a 4.1 percent growth in premiums from 2010 to 2013.
In mid-February 2017, Health Affairs published a Centers for Medicare & Medicaid Services (CMS) report that projects a 5.6 percent annual increase in future health care spending. That’s up from 4.8 percent last year. That could foreshadow an increase in health insurance premiums as insurers react to higher health care and drug costs in the next decade.
ACA opponents have suggested any replacement plan will cost less, maybe even significantly less depending on the updated law’s final provisions; however, others are expecting higher premiums – at least in the first year of Trumpcare – as insurers pull back and wait to see what the enrollment and claims numbers might look like.
More high-deductible health plans and HSAs
President Trump has repeatedly voiced support for increased future use of Health Savings Accounts (HSAs), which offer tax-advantages to those enrolled in high-deductible health plans. There is no federal tax on HSA contributions and no tax due on funds (or earned interest) when used for qualified health care expenses.
Critics say HSAs are very helpful to high-income people, but offer fewer benefits to lower-income individuals who may not have the ability to contribute. A 2015 report by the Small Business Administration found the median income for individuals in California at their own incorporated small business was $56,029 in 2013.
Your employee benefits broker can help you stay up to date on what’s likely ahead for the ACA, its possible repeal (or repair), and what will and won’t change. If you don’t already have an employee benefits broker, we’ll help you find a local CaliforniaChoice broker to speak with about your group health insurance needs.