The Affordable Care Act mandates that at the start of next year, all companies with 50 or more employees working 30-plus hours per week must provide those workers with health insurance coverage. This law has led many to wonder just how these small businesses will be impacted, and a survey of the state of Michigan recently showed some possible emerging trends.
In Michigan, small businesses (those with fewer than 100 employees) made up 78 percent of all companies at the end of 2011, compared with 7 percent for those mid-sized with between 100 and 1,000 workers, and 15 percent for big businesses with 1,000 or more, according to the Center for Healthcare Research and Transformation's study "The Affordable Care Act and Its Effects on Small Employers." Interestingly, while the federal government defines a small business as any company with fewer than 100 workers, between 2014 and 2016, states also have the option of setting the standard as being those with fewer than 50 employees.
Currently, slightly more than 60,000 smaller companies in the state offer health insurance to their workers, accounting for a little less than two in five of the nearly 155,000 similarly sized companies within its borders, the report said. However, the rates at which workers at companies of middling and larger sizes insure their workers is, perhaps predictably, far higher. In all, just short of 100 percent of the nearly 13,200 mid-sized businesses in the state provided their workers with such coverage, as only 26 did not. This was true, to a slightly lesser extent, of large firms, as 99.3 percent of its nearly 29,800 large employers did the same.
Perhaps not surprisingly, companies with fewer than 10 employees were far more likely to not provide those workers with coverage – likely because they were so difficult for the businesses to afford, the report said. The problem is that companies of this size made up 96 percent of all small businesses in the state in 2011.
A troubling trend that could be reversed
Another problem that employees of small companies have likely seen in the last several years, and which the ACA is ostensibly designed to reverse, is that the rate of insurance offerings among independent businesses has declined appreciably since 2001, the report said. At that time, about three in five small businesses offered health insurance to their employees, but that number has declined steadily since, slipping to less than two in five in 2011, and with increases in rates noted in just two of those years (2005 and 2008).
Because the ACA mandates coverage for workers at many small businesses, but not all of them, it seems likely that by 2016 (two years after the law goes into effect), 88 percent of small firms that are now grandfathered into their current plans will have turned to other sources for insurance coverage, the report said. Currently, only 11 percent of small businesses in Michigan are self-insured, but it's believed that number will stay more or less the same going forward, despite speculation that the amount of companies falling into this designation would increase. Overall, estimates on how many small employers will offer coverage as a result of the ACA range from a decline of 10 percent to an increase of 11 percent, and experts note it may take some time to see the full effects of the law take hold.
As the ACA coverage mandate becomes law, many companies will have to reconsider their costs for all types of small business insurance to become compliant. This might include those for workers' compensation and general liability insurance, which can sometimes carry considerable price tags.