Introduction to the Affordable Care Act, Part 2

Small Business’s Introduction to the Affordable Care Act, Part 2

A healthcare longitudinal survey by the NFIB Research Foundation 2014

December, 2014 — NFIB’s Research Foundation issued new research based on a survey of 900 small business owners and operators from around the country

The new healthcare study is the second segment of the three-year longitudinal look at how the healthcare law will impact the small-business community. (See part 1) The same owners will participate in each survey over its three years course; this unique approach to researching will allow NFIB to measure the impact of the law on small firms throughout the implementation process.

Download the Study (PDF)

Highlights from the Study:

Self-assessed familiarity with the Affordable Care Act (ACA) continues to grow among small employers. Seventy eight (78) percent now claim familiarity with the ACA, 12 percentage points more than in mid-2013. Those employing 50 – 100 people have greater familiarity, 40 percent “very” familiar and 56 percent “somewhat” familiar, than those employing fewer people.
Industry sources, particularly health insurance industry sources, have become an increasingly important place for small employers to obtain information about the ACA. Still, the general news media is the single most important source for more small employers than is any other followed by the health insurance industry and the healthcare industry (providers, hospitals, etc.). Small employers currently offering health insurance are much more likely to rely on industry sources while those who do not offer lean heavily on the general news media.
Twenty-five (25) percent of small employers visited Healthcare.gov in the last 12 months, 13 percent to search for personal insurance, 4 percent for business insurance and 8 percent for both. Just 4 percent consider government as their most important information source on ACA.
A majority of small employers are satisfied with the information they have obtained about the ACA by a 61 – 38 percent margin, a 5 percentage point tick upward from the prior year. Some sources yield more satisfactory information than others. Those most satisfied cite a business advisor, such as a lawyer or accountant, a trade/business association, and an insurance carrier (in that order) as their most important information source.
Fifteen (15) percent of small employers did not carry health insurance on themselves in mid-2013. The Affordable Care Act requires everyone (with limited exemptions), including small-business owners, to be covered, effective January 1, 2014 (delayed), or pay a penalty. The number of uncovered small employers dropped to 8 percent in mid-2014.
Forty-three (43) percent of the small employer population carrying personal health insurance obtain their coverage under their firm’s employer-sponsored health insurance plan, 39 percent under an individual insurance market plan, and 19 percent under a spouse’s plan.
Nine percent of all small employers report that their personal health insurance had been terminated or cancelled (for any reason other than non-payment) in the prior 12 months. Terminations, therefore, affect about one-half million small employers on a personal level. Most appear able to find insurance coverage elsewhere, but the new policies come with a comparatively hefty price increase.
Non-offering small employers are receiving little employee pressure to offer health insurance despite employees now being required to have coverage or to pay a fine. Just 4 percent received a request from five percent or more of employees (usually no more than one person) in the last six months to institute an employer-sponsored health insurance plan, the same number as last year at this time.
Fourteen (14) percent of small employers not offering health insurance reimbursed or otherwise provided employees financial support to help them pay for health insurance that they purchased on their own, about the same number as in the prior year. However, 21 percent of those offering, but not currently providing financial incentives have considered, 9 percent seriously, helping employees pay for purchasing their insurance on the open market in lieu of the business offering it. Financial incentives to help employees purchase health insurance as a substitute for an employer sponsored plan is an employer option substantially more likely to be pursued than it is as a means to help employees newly acquire insurance on their own.
Small employers perceive little change in insurance carrier competition for their health insurance business over the last two years. If anything, they perceive less (net 12 percentage points less) competition for it. The perceived competitive situation among health insurers does not differ between offering and not offering small employers.
Forty (40) percent of small employers report offering employer-sponsored health insurance, down 6 percentage points from the prior year. Firm size is closely associated with offer rates. Small employers with 50 or more employees increased their offer frequency while those with 20 or fewer employees saw theirs decline.
Few small employers now self-insure and there is no stampede to do so. Even among those with 20 or more employees, the group most likely to be able to purchase re-insurance, just 10 percent of the offering population pursue this course. Another one in ten projects switching from fully-insured to self-insured in the coming year. However, equivalent projections last year yielded no net increases in self-insured small businesses.
Change among individual firms is much greater than net change across the small business population. Eleven (11) percent changed offer status within the last year, more dropping their employer-sponsored health insurance than adding it. Those percentages represent an 4 percentage point escalation (both adds and drops) in offers status change over the last 12 months.
About 12 percent of offering small employers adjusted their insurance renewal date in order to avert higher premium costs and/or loss of a plan due to ACA rules that were effective January 1, 2014.
Eighty-nine (89) percent of small employers offer just one type of health insurance plan. That falls to 70 percent among firms with 50 – 100 employees. The most common type of plan used is a conventional PPO (40%), an increase of 8 percentage points over the last year. The use of HMOs as the most used type in small businesses fell 7 percentage points in a year to 19 percent. However, small employer choices among primary types of health insurance blur as plan types lose their distinctiveness and morph into one another.
A recurrent theme in this report is a recent emphasis on employee-only (individual) coverage over the past year and a de-emphasis on family and employee plus-one coverages. The evidence for these changes appear in the relative frequency of offers, employee take-up, employer premium contribution, premium costs, and even the decline in employers who obtain their personal coverage from a spouse’s plan. The employee appears increasingly the focus of coverage and family members less so.
The size of the employer cost-share fell notably for family and employee plus-one coverage over the past year while rising modestly for employee-only coverage. The number contributing 75 percent or more of premium fell 7 percentage points for family and 4 percentage points for employee plus-one coverage. Meanwhile, contributions of that size for employee-only coverage increased 4 percentage points.
Employer-sponsored health insurance premium costs per employee continue to climb for small employers, though at a reduced rate. Sixty-two (62) percent claim per employee premium costs were higher in mid-2014 than in mid-2013 compared to 64 percent the prior year. Another 31 percent experienced no change (29 percent the prior year) and 8 percent premium decreases (6 percent the prior year). Per employee premium costs rose more for family than for employee plus-one coverage, but declined for employee-only coverage. These data do not account for benefit changes, either desired by the small-employer plan sponsors or forced on them by the ACA.
Employee participation in employer-sponsored health plans appears to be rising. Sixty (60) percent of offering firms have 75 percent or more participation among full-time, non-seasonal employees compared to just 54 percent one year ago. Greater employee participation (more people) in addition to premium increases caused the per firm cost of health insurance to rise substantially.
Small employers faced with health insurance premium increases took an average of 2.4 business actions to offset (pay for) them, the number increasing as the size of the premium increase rose. The most frequently taken actions were swallowing the increase (lower profits), delayed, postponed or reduced business investment, and raising productivity. Forty-five (45) percent resorted to measures that affected employee pay checks.
Between 35 and 40 percent of small employers reduced benefits in their employer-sponsored health insurance; somewhat less than 10 percent increased them. That net frequency of benefit cuts was offset by ACA compelled benefit increases, increases that small employers may not have known about, let alone approved. The result likely approximates intent rather than actual outcomes of which no one can be certain. Small employers who added health insurance as an employee benefit within the prior 12 months report that sustained business profitability allows them to now offer. Market competition for employees is a second important reason for their action.
Small employers who dropped health insurance as an employee benefit within the prior 12 months most often report the cost of insurance was an important reason for doing so. A notable number from that group dropping their insurance also indicated that employees were better off purchasing it on their own.
About 90 percent of small employers in mid-2013 accurately forecast on a longitudinal basis whether they would carry employer-sponsored health insurance in the following 12 months. Thirty-eight (38) percent in mid-2014 expected to sponsor an employee health insurance plan in mid-2015 and 60 percent did not. Expectations dropped 10 percentage points in the last year.
This is the second of three surveys conducted for the NFIB Research Foundation by Mason-Dixon Polling & Research on the introduction of small business to the Affordable Care Act. Nine hundred (900) small employers participated in this year’s edition, 288 having also participated the year before. The survey sample was selected using a random stratified pattern with the approximately four equal strata representing small employers having 2 – 9 employees, 10 – 19 employees, 20 – 49 employees, and 50 – 100 employees.