For years, we had a health insurance market that was broken for small businesses. Because they had less bargaining power, small businesses paid an average of 18 percent more for the same health insurance plan offered to the bigger business down the street, and their premiums could skyrocket if a single employee got sick. That made it hard for many small business owners to keep offering coverage and grow their businesses.
But because of the Affordable Care Act, New York’s small businesses and their employees are getting better choices, starting with new protections that limit the outrageous rate hikes many small business owners faced in the past.
Insurance companies must now publicly justify every rate increase of 10 percent or more, which has led to a sharp decline in double-digit rate hikes. Starting in 2014, insurers will have to justify every proposed rate increase, even if it’s a 1 percent bump.
Additional rules require insurers to spend at least 80 percent of small employer premium dollars on employees’ actual health benefits, instead of the insurer’s own administrative costs. These limits have already resulted in more than $1 billion being returned to small business owners and other consumers.
The law has also begun to slow rising costs across the system by reducing waste and fraud and promoting higher quality care that emphasizes coordination and prevention. These changes in care delivery have contributed to the slowest sustained national health spending growth in 50 years.
Small businesses are the backbone of New York’s economy. Across the state, nearly 349,000 businesses employ 25 or fewer workers. They are also seeing savings thanks to new tax credits available to help them cover their employees. Many of them have already received a tax credit of up to 35 percent of their health insurance costs. And beginning in 2014, this tax credit will go up to 50 percent.
And, in an economy where small businesses create two-thirds of jobs, owners and employees deserve a health insurance market with fairer prices, better choices and greater certainty. Thanks to the Affordable Care Act, that market is on its way.
Beginning in 2014, New York small business owners will have access to a new Health Insurance Marketplace – the New York Benefit Health Exchange, which opens for enrollment on Oct. 1 – that will allow them to make side-by-side comparisons to find a plan that fits their budget and that’s right for their businesses and employees. Each Marketplace will operate a Small Business Health Options Program, or SHOP, focused just on small businesses.
And while many small business owners have questions about the employer responsibility provision, it is important to note that businesses with fewer than 50 employees – that’s 96 percent of small businesses – are not required to purchase insurance. Of the remaining 4 percent of small businesses with more than 50 employees, most already provide insurance. So the number of businesses that will have to begin offering employee health insurance or pay a penalty is very small.
No business owner wants to drop coverage for his employees. For many, the employees are like a family. For others, offering health insurance is critical to attracting the kind of workers they need to succeed.
By making the health insurance market work better for New York small businesses, the law is letting them focus on what they do best: delivering great products and services, creating jobs and growing our economy.
For more information, visit www.sba.gov/healthcare or healthcare.gov or contact your local SBA or Health and Human Services office.
Jaime R. Torres, M.D., is regional director of U.S. Health and Human Services. Bernard Paprocki is acting regional administrator of the U.S. Small Business Administration.