Small business owners and operators understand that the Affordable Care Act (ACA) has significantly changed the future of providing health coverage to employees.
One major change involves state-run healthcare exchanges, which go online in January 2014. States have the option to either set up an exchange themselves or to allow the federal government to set up an exchange in their state. New York, for example, has chosen to set up its own exchange, while New Jersey will default to a federally-facilitated health insurance exchange.
The exchanges are comparable to websites like Travelocity or Orbitz. Anyone who wants to buy private health insurance will be able to use the state-run exchanges to find better deals.
“A health insurance exchange is a marketplace that brings buyers and sellers together to create competition and efficiency,” says Joseph Berardo, Jr., President and CEO, MagnaCare, a firm that specializes in providing self-insured health plans. “Exchanges will offer a number of options, usually from multiple carriers, which employees can choose from based on comparisons of fixed monthly premium and out-of-pocket exposure. For the most part, individuals will continue to require help in making their selection in order to find the right plan for their needs.”
Berardo warns that small businesses should be careful when deciding whether or not to continue to provide healthcare benefits.
"Employers of fewer than 30 employees will not face penalties if they choose to drop coverage once exchanges are up and running," Berardo says. "Many employers of this size currently do provide coverage, and might be tempted to, for example, give their employees raises rather than continue to provide healthcare benefits. This would leave employees to turn to the healthcare exchanges. The potential problem is that individuals who would be eligible for subsidies might not have the financial resources to pay for insurance up front. "
Berardo adds that most of the middle-class, and particularly the lower-middle class, will struggle to pay premiums in advance, creating the risk of having more uninsured people. Ultimately, for the employer the decision will come down to a cost-benefit analysis. Likewise, employers of more than 50 people must decide if it's better to pay a $2,000-per-employee penalty for not providing health insurance or to contribute toward an insurance plan.
Another point to consider is that, with higher premiums, more paperwork, and competition from the government’s individual subsidies, employer health plans could end up costing employees more. Because of the way subsidies are structured, there is the potential that employees and their family members could be blocked from getting a tax credit through the new market places being created by the federal and state governments.
That said, health benefit packages that include healthcare coverage remain a key factor in attracting and retaining top talent. Berardo recommends that employers consult with their insurance broker or other trusted advisor in order to ensure that, once all the guidelines are fully vetted, the plan they choose makes sense for the bottom line – and the future of the company.
(1) District of Columbia Health Exchange http://dc.gov/DC/Health+Reform/Insurance+Coverage+Options/Health+Insurance+Exchange; accessed May 17, 2013.
 Jost, Timothy; Implementing health reform, the role of agents and brokers in the exchanges; Health Affairs; May 2, 2012; http://healthaffairs.org/blog/2013/05/02/implementing-health-reform-the-role-of-agents-and-brokers-in-the-exchanges/; accessed May 17, 2013.
 Health Partners of America; May 27, 2013.