The American Health Care Act, approved last week in the House and awaiting action in the Senate, could have an impact on small business owners who want to provide health insurance to their employees. The House version of the healthcare bill removes a prime incentive for entrepreneurs to purchase group insurance under the Affordable Care Act.
As it now stands, the AHCA proposes eliminating the small business tax credit in 2020, which was the ACA’s inducement for entrepreneurs to participate in the Small Business Health Options Program, a health insurance marketplace for companies with fewer than 25 employees. By eliminating the tax advantage, small business owners may bypass purchasing health plans on SHOP altogether and seek coverage from private insurers, or not offer insurance at all, industry experts say.
Small business advocates say that although the AHCA does not explicitly end SHOP, it would be detrimental to the future of the program if the GOP bill becomes law.
The tax credit “is one of the biggest selling points for SHOP. This would be harmful to small businesses overall, since many benefit from the tax credit and like to have extra enrollment options through SHOP,” says John Arensmeyer, founder and CEO of Small Business Majority, an advocacy group for entrepreneurs. “We would much prefer to see the small business tax credit strengthened and streamlined, with more attention placed on the success of the SHOP marketplaces.”
Under the ACA, employers with fewer than 25 full-time employees could qualify for the Small Business Health Care Tax Credit worth up to 50% of their contributions to premium costs. Since 2014, the tax credit has been available only for plans purchased through SHOP marketplaces, according to the Centers for Medicare & Medicaid Services.
Also see: "One SHOP exchange thrives with aid from brokers."
SHOP opened in November 2014 as part of the Healthcare.gov portal in 33 states. By May 2015, approximately 10,700 small employers participated in SHOP and 85,000 American workers were covered under a health plan provided by SHOP. The Department of Health & Human Services, CMS and the Small Business Administration all declined to provide updated SHOP participation numbers or comment in this article.
No carriers left?
In general, “House passage of the AHCA is creating uncertainty for the federal marketplaces overall, which could lead to more carriers pulling out of the marketplaces,” says Arensmeyer. “In some areas, this could mean that there are one or even no carriers left in SHOP.”
Emily Bremer foresaw this. As a member of the National Association of Health Underwriters and an employee benefit adviser at Bremer Conley, a brokerage based in St. Louis, she visited the White House in 2014 when SHOP was unveiled. Since then, she has seen the program underperform for small business owners in her region.
Along with a confusing interface for the SHOP portal, Bremer sites a plethora of second tier or “silver” health insurance programs, instead of a variety of gold, silver and bronze-level health plans. “If all the plans are essentially the same because they're all silver level, then you don't really feel like you've got that many choices,” she says.
Plus, the tax credit that was meant to spur SHOP participation had an expiration date. “It wasn't an unlimited tax credit that [small business owners] could get every year for years on end. It was only for two years at which point it shut off,” she says. Bremer adds that none of her clients participate in SHOP.
“SHOP is an area that we don't see discussed a lot,” Bremer adds. “One of the reasons for that is because I don’t think the program did a great job from the beginning of creating relevance for itself within the framework of the existing employee benefits market.”
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