Health Reform is Good for Small Business Employees

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Despite what you may have heard from Republican critics of health care reform, the new law may actually be good for people who work for small businesses. I’ve written about this previously, but the view is bolstered by a study out today from the RAND Corporation, which used a microsimulation model to predict how employers will react to health care reform.

According to the study, funded in part by a contract from the U.S. Department of Labor, once the Affordable Care Act is fully implemented, 95% of American workers will have health insurance through their jobs, up from 85% today. This increase, say the authors, will be largely driven by more small businesses offering coverage. “Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform,” asserts the study.

This is very noteworthy because businesses with fewer than 50 employees will be exempt from the employer mandate. These companies, in other words, won’t have to provide health benefits but they will anyway. One major reason: that pesky individual mandate. Post-reform, say the RAND authors, there will be “greater demand for coverage by workers due to individual penalties for being uninsured and the availability of new, often low-cost insurance options (because of administrative savings, for example) for small businesses that offer coverage on the exchanges.”

Two major lobbying groups that purport to represent small businesses – the National Federation of Independent Business and the Chamber of Commerce – insist that health reform is a death knell for small business. When I’ve asked them to give specific reasons why, they always come up short. The one argument from these groups that does have credence is about new requirements in the Affordable Care Act that increase paperwork. Paperwork may sound innocuous, but for a small business owner, it can be overwhelming, expensive and distracting. The new requirements that businesses issue tax forms on every vendor that provides at least $600 in services is meant to cut down on tax cheats, but it will be arduous.

A second study out today indicates that more of the smallest small businesses may already be offering health insurance to workers. The annual Employer Health Benefits Survey from the Kaiser Family Foundation shows that in 2010, 59% of small businesses provided insurance to workers. That’s a 13% increase from 2009. Gary Claxton, of Kaiser, co-authored the report and told me, “We’ve never seen a jump this big before and we can’t explain it.”

The survey was conducted between January and May 2010, mostly before health reform’s tax credit to small businesses that offer coverage went into effect, which makes the dramatic increase even more perplexing. Claxton said one explanation might be that small businesses that went under due to the recession may have been newer, less stable companies that were less likely to offer benefits in the first place.

Despite the good news for small business employees contained in the Kaiser study, not all the data on the current situation is rosy. The study shows that several trends continue – employees have higher deductibles, higher co-payments, and are paying a higher percentage of their premiums than ever before. In 2010 premiums for job-sponsored family health insurance coverage increased 3%, which is fairly modest, but the share that employees pay jumped 14%.