PPACA One Year Later: Small Business Owners Expect Costs to Rise
New NFIB study shows that small employers are negative about the impact of the law on their businesses
One year after the passage of sweeping health-insurance reform legislation, the lasting impact of the Patient Protection and Affordable Care Act (PPACA) on the small business community remains to be seen. A new study by the NFIB Research Foundation indicates that the overwhelming majority of small business owners do not expect the law to reduce cost or regulatory burdens, and nearly two-thirds agree that the law will result in premium increases but not in better care.
Other highlights of the study include:
- One year after passage of PPACA, 42% of small employers– defined as businesses employing 50 or fewer people other than the owner(s) – offer employee health insurance. In the last 12 months, 1% of offering small employers added health insurance as an employee benefit while 4% of non-offering employers dropped it.
- The number of small employers offering employee health insurance is likely to change little over the next 12 months. Virtually no small employer now offering expects to drop health insurance in the next year and virtually no nonoffering employer expects to add it in that time frame.
- 20% of small employers currently offering expect to significantly change their benefit package and/or their employees’ premium cost-share the next time they renew their health insurance plans. Almost all significant changes expected involve a decrease in benefits, an increase in employee cost-share, or both
- Since enactment, one in eight (12%) small employers have either had their health insurance plans terminated or been told that their plan would not be available in the future. Plan elimination is the first major consequence of PPACA that small-business owners likely feel.
- 18% of small employers think they are “very familiar” with PPACA and another 40% think they are “somewhat familiar” with the new law.
- By overwhelming margins, small employers who have some knowledge of the new law think that PPACA will not reduce the rate of health care (insurance) cost increases, will not reduce the administrative burden, will increase taxes, and will add to the federal deficit. They agree that PPACA will result in more people having health insurance coverage, but do not think it will yield a healthier American public.
- The principal factor explaining the PPACA outcomes that small-business owners expect is their current offer/nonoffer status. Those offering employee health insurance are notably more pessimistic about the new law’s projected outcomes. Neither the degree of familiarity with PPACA nor employee size-of-business is associated with their expected outcomes.
- Low-wage employees, particularly those experiencing a large premium cost-share, have a powerful incentive to bolt an employer’s health plan for the newly established and heavily subsidized exchanges. Should employees begin to leave for an exchange, 26% of currently offering small employers are very likely to explore dropping their health insurance plans and another 31% are somewhat likely to do so.
- A key factor in a small employer’s decision to drop a current health insurance plan will be the proportion of employees who leave their health plan for an exchange; 43% report that a majority of employees would have to leave before they would drop their plan and 35 claim it would require all of them.
- An estimated 245,000 (out of 5,228,000 employers with fewer than 25 employees) are eligible for a full PPACA tax credit. Another estimated 1.165 million are eligible for the partial credit.
- The PPACA tax credit acts almost exclusively as a windfall for small employers who currently offer health insurance rather than as an incentive to encourage its purchase. Considering eligibility and awareness issues, the full credit incents, but does not necessarily change behavior, of only about 2% of small employers having fewer than 25 employees.
- 57% of small employers express interest in contributing to defined contribution-type health plans. Their interest assumes employees benefiting from their contributions receive equitable tax treatment compared to that in employer-sponsored plans.