ACA Provisions and the Impact on Small Employers

Many argued that the reform law would help lower the cost of coverage for small employers and help employees keep their coverage if they liked it. Unfortunately, many provisions of the new law will actually have the opposite effect. For example:

Essential Benefits:

According to CBO, essential benefits buy ups (a “buy up” occurs when an individual or employer is forced to buy more comprehensive coverage than they would want or need to qualify as credibile coverage under the ACA) would increase premiums between 27 to 30 percent.

MIT’s Jonathan Gruber, a respected economist and consultant to the Obama Administration, estimated that “a 10 percent rise in the cost of the essential benefits package would increase the cost of government subsidies by 14.5 percent, or $67 billion, while reducing the share of the insured by 4.5 percent, or 1.5 million, through 2019.”

Health Insurance Premium Tax:

The CBO noted in testimony to the Senate Finance Committee in September 2009 that the health insurance premium tax along with other taxes on devices and pharmaceuticals “…would raise insurance premiums by roughly the amount of the revenue collected.” (Note: This tax will also be felt by seniors enrolled in Medicare Advantage and Part D plans, beneficiaries in some Medicaid managed care plans and individuals.)

According to Douglas Holtz-Eakin, a former director of CBO, “The premium tax alone means that American families will pay as much as $135 billion more in insurance premiums over the next 10 years.” Holtz-Eakin also released a new study on the health insurance premium tax that found “The anticipated impact is as much as 3 percent or nearly $5,000 per family over a decade.”

The MLR – Disrupting Coverage:

HHS has recognized the disruptive nature of the Medical Loss Ratio provision for individuals purchasing coverage on their own, by allowing states to have a transition period to the MLR for the individual market. Unfortunately, they have not done so yet for small employers who purchase coverage in what is known as the “small group market”. Without this transition, many small employers could lose their current coverage options as the MLR provision could cause some health plans to leave certain markets. Furthermore, the MLR provision also means that small employers could lose access to trusted health benefit advisors if the MLR is not adjusted to withhold certain fees from the MLR calculation.

See this NFIB Statement on the new law: “The fact is neither this law…will make healthcare more affordable for small businesses long-term.

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