Sunshine Sentinel

Obamacare, COVID-19 restrictions and inflationary government spending have made it harder than ever for small businesses to offer affordable health coverage to employees. It’s time for Congress to provide regulatory and tax relief to sustain the small group market and stem the flow of workers into costly government health programs.

The Affordable Care Act (ACA) failed to keep its promise to small business. Proponents touted its Small Business Health Insurance Tax Credit and Small Business Health Options Program (SHOP) but few employers found those options useful. Eligibility for the tax credit was so mired in red tape that fewer than 1% of small businesses used them. The SHOP program only applied to plans enrolled in Obamacare and drew so little interest that most state exchanges dispensed with it years ago.

Obamacare hurt small businesses by luring millions of insured, low-income workers into government plans. When fewer people enroll in company health plans, it’s harder to negotiate decent rates with insurers. Meanwhile, many workers who switched to low-premium ACA plans face higher overall costs and deductibles twice as large as those in commercial plans. Its been a classic bait-and-switch that’s only served to increase the size and costs of government programs.

A better approach is a Small Business Relief Plan that incentivizes local employers to offer high-quality, affordable coverage. Over 30 million people work for small businesses, but only a third get coverage at work. For small business owners, cost is the biggest factor when deciding whether or not to offer coverage. They won’t offer benefits unless they can afford to sustain them over the long run (the Obamacare credits only last two years).

Offering a permanent, 50 percent health insurance tax credit to small employers and a flat dollar credit to their employees (e.g., $50/month per employee and $25/month for family members) would expand coverage, lower premium and out-of-pocket costs, help local businesses compete for workers, and cost taxpayers far less than swelling enrollment in government health programs.

For this to work, the tax credits must reflect the needs of the small business marketplace. The Obamacare credits were only available to companies that had 25 or fewer employees, paid low wages, and enrolled in exchange plans.

The new credits should be available to any business with 200 or fewer employees (including the self-employed), regardless of wages or which health plan they choose. They should apply to all plans including major medical, account-based plans (HRAs and HSAs), and COBRA plans so laid-off workers can keep their benefits while looking for another job. People shouldn’t have to opt into Medicaid or Obamacare after losing a job, especially since finding new work typically takes last six months or less.

To reduce the cost of the tax credits, we need a federal reinsurance program that helps small businesses cover expenses of the small number of patients with unusually high health costs. Insurers raise premiums to hedge against the risk of covering these expensive outliers. Creating a reinsurance program to absorb those costs will drive down premiums, thereby reducing the costs of the tax credits, too.

States that adopted reinsurance programs have reduced costs and helped employers offer better benefits. Obamacare advocates want reinsurance restricted to exchange plans, but it should be available for all the plans small businesses offer.

Finally, we need to remove barriers that prevent small businesses from self-insuring. Self-insurance means businesses pay their own claims and exempts them from costly state and federal mandates on fully-insured plans.

Some states only let big companies self-insure but many small businesses can easily self-insure with the help of third-party administrators (TPAs) and stop-loss policies that reduce exposure to high-cost claims. Small business should have access to the same coverage options as big businesses like Amazon and Microsoft.

For the past 30 years, our health policy debate has focused on helping the uninsured. Now that over 90% of Americans have coverage, it’s time to promote job-based health plans and reduce workers’ need to consider government health programs. Congress must shore up private sector health care where it needs it most – in the small group market.

Joel White is the President of the Council for Affordable Health Coverage, a non-profit advocacy organization that supports policies that lower the cost of coverage so it is affordable for all.