Since the implementation of the Affordable Care Act, experts have attempted to analyze the cost effects on American employers. While broad generalizations cannot be made since results can vary by state and industry type, the largest differentiator seems to be group size. Larger employers may tell you that the cost impacts have not hurt their businesses, however small employers report a drastically different perspective. In summary:
- Small employers (50 employees or less) are already feeling the cost impact of the ACA
- Mid-size employers (50-99 employees) will most likely not see the impact until 2016, when the mandate begins requiring employers to provide coverage or pay a tax penalty for each uninsured employee beyond the first 30. Many of these employers are already complying with many provisions of the mandate and may not see much of a cost impact.
- Large employers (99 employees or more) have seen very little effects since most are already in compliance. The cost impact associated with the ACA is a small fraction of what they pay overall for employer-sponsored health insurance.
Although those large groups may not have yet seen a large cost impact, provisions such as the Cadillac tax in 2018 on the most generous health plans may cause some employers to re-evaluate their plans. If they haven’t felt the cost impact like smaller groups have, they most likely did experience some transitional headaches accompanying the need to change their benefit structure to be in compliance with the ACA.
To read more about why large groups are not feeling the pain associated with the costs of the Affordable Care Act, click on the following link:
http://www.insurancejournal.com/news/national/2015/02/19/358049.htm
Small employers are exempt from the mandate, and could potentially drop group coverage without a financial penalty. However, they also know that having a benefit package helps to attract and retain good employees. They may find themselves weighing the need to attract a good workforce with the increasing costs of health insurance and the impact on their budget.
According to a 2014 survey conducted by Morgan Stanley, small groups in many states reported that their premiums increased substantially. In Colorado, renewal premiums spiked by an average of 29% and many employers opted to “grandmother” their plans in order to delay the financial impact of the transition to ACA-compliant plans.
What makes this transition especially difficult for small employers that already have a tighter budget than larger companies, is that they could be faced with the difficult choice of dropping group coverage altogether or passing some of the cost increases to employees in the form of higher out-of-pocket costs or higher employee premium responsibility. A subset of small employers, particularly in certain industries, is going as far as reducing employee hours to limit their eligibility on the group plans. A survey by the Society of Human Resources Management found that 1 in 5 small businesses are reducing workers’ hours to less than 30 hours per week, making them ineligible to participate in the group plan, but possibly eligible for subsidized coverage through the individual Exchanges.
To read more about the effects of the ACA on small businesses, click on the following link:
As the effects of the ACA continue to evolve in the coming years, Fall River is positioned to help our clients navigate each step of the way. If you have any questions about the impact of the ACA on your business, This email address is being protected from spambots. You need JavaScript enabled to view it.!
