Small Businesses and the Affordable Care Act at Five Years

By at 23 March, 2015, 10:21 pm

Medicine and money

By Karen Kerrigan-

Small businesses were promised lower costs and more choices once the Affordable Care Act (Obamacare) was implemented. Five years after being signed into law, small businesses have not seen many of the benefits they were promised.

Higher Insurance Costs

Very little has changed for small businesses and the self-employed when it comes to costs. They keep going up. Yes, there are exceptions here and there, but for the most part, the promise of lower costs has been an empty one for small businesses.

According to a National Small Business Association survey in 2014, “91 percent of small businesses reported increases in their health plan at their most recent renewal while 96 percent reported increased health insurance costs over the past five years. The majority expect to continue seeing cost increases in the coming year.” Indeed, that has been the case for 2015.

You can’t load up health insurance plans and the health care system with mandates, regulations and taxes (like Obamacare does) and expect lower costs. Let’s make this clear: The law has not produced lower costs. President Obama promised a $2,500 decrease in insurance costs per family. This did not happen.

Choice and Access Have Not Improved

The performance and effectiveness of the health insurance exchanges for small businesses have been underwhelming, to say the least. In most states, the exchanges have been a sad and wasteful disaster. “One year in, the new small-business insurance marketplaces born out of the new federal health-care law have fallen short of their promise in nearly every state, both in terms of functionality and enrollment,” reads an October 2014 Washington Post article.

For 2015, small businesses have been promised bigger and better. The federal Small-Employer Health Option Program (SHOP) was delayed until this year and is now open. One of the original selling points was the offering of many plan choices that the employees of small businesses could select from. This feature will not be available nationwide until 2016, but some state exchanges do provide this option (albeit with limited choices). Exchange website “glitches” and lack of insurer participation have slowed SHOP down, and it remains a question mark as to whether small businesses will actually use the government exchanges. It’s a question mark as to whether more insurance companies will actually want to participate on the SHOP exchanges, thus undermining their whole purpose.

Obamacare stripped existing health care plans from many small businesses and the self-employed – most have not been (or will not be) able to keep the health care plans they liked. We knew this was going to happen, despite promises stating otherwise. Obamacare is upending Health Reimbursement Accounts (HRAs) as well, which are used by many small businesses. While the federal government announced it would delay the imposition of financial penalties on companies that use HRAs until July of this year, stripping this choice from small employers is going to hurt.

The bottom line is that small businesses and the self-employed are losing, not gaining, health insurance choices under Obamacare.

Obamacare controls the market; therefore health insurance choices are limited by government’s control, and dictates on plans. Obamacare has eliminated many preferred and affordable choices. The government exchanges are not real markets. These markets are not appealing for most small businesses, or insurers. That is probably why the federal government (HHS) will not fully release the data on the number of small businesses that are using the exchanges (despite repeated requests by former House Small Business Committee Chairman Sam Graves in 2014, and those shortly following the launch of the new The total numbers would be embarrassing, but we know the truth. Small business participation is abysmal.

Small Business Tax Credit a Dud

During debate on Obamacare, most members of the small business community did not see how the plan would lower costs or improve access. So the White House kept talking up the benefits of the health care exchanges (see how that worked out above?) combined with the small business tax credit. Unfortunately, and as predicted, the tax credit remains a big dud.

The tax credit is so measly and complex that only a tiny fraction of the small business sector qualifies for it, or dares to sift through the morass. To make matters worse, the tax credit is only temporary. As noted by the Government Accountability Office last year, “the credit may be too small and administratively complex to motivate many employers to enroll.” Indeed, another reason why small business participation in the health exchanges is so low.

The credit needs to be much more robust to minimally harmonize with the high cost of Obamacare and the reality of small business pay scales. Moreover, simplification, permanency and allowing more small business employees to qualify, could yield a higher adoption rate.

New Burdens, Uncertainty and Complexity

Remember when President Obama boldly claimed that buying health insurance on the exchanges would be easy peasy – as simple as purchasing something on Well, it did not turn out that way. There was the dreadful launch of, but bad websites are only one aspect of Obamacare’s false starts, complexity, confusion, and the burdens impacting small businesses.

Obamacare’s incessant changes and delays have been confusing for many small businesses. According to the Galen Institute, “more than 49 significant changes already have been made to the Patient Protection and Affordable Care Act: at least 30 that President Obama has made unilaterally, 17 that Congress has passed and the president has signed, and 2 by the Supreme Court.”

Obamacare’s administrative and compliance burdens are not insignificant either. They are imposing hefty costs on top of general frustration for small businesses.  In February, we also learned the Department of Health and Human Services (HHS) sent faulty tax information to 800,000 taxpayers – presumably many of these are small businesses and the self-employed. (House Small Business Chairman Steve Chabot has multiple requests into HHS about the incident.) Moreover, the complexity of Obamacare’s employer mandate (where, for example, a 30-hour work week is considered full time) and its sheer costs have forced small businesses to cut hours, wages and jobs.

The Struggle Continues for Small Businesses

From the small business perspective, Obamacare has exacerbated their 20-plus year struggle with health insurance – costs are too high and keep increasing, innovative choices are lacking, and buying coverage and administering health insurance is a burdensome hassle.

Obamacare supporters point to those getting insurance (though not all are newly insured) as the key measure of its success. Yet, those meager achievements could have easily been reached without disrupting the lives and health plans of millions of people, and without spending $1.7 trillion of taxpayer dollars, including the wasted billions on bad exchanges, consultants, technology and who knows what else.

Karen Kerrigan is President & CEO of the Small Business & Entrepreneurship Council.

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