Finding Small Business Health Coverage for 2017

By at 23 June, 2016, 5:34 pm

By Barbara Weltman-

The start of next year may seem like a long time from now, but it’s not too early to be thinking about health coverage for 2017. Whether you’re required to do so because you’re an applicable large employer (ALE) with 50 or more full-time/full-time equivalent employees or you’re a small employer that chooses to provide coverage, it’s probably going to be more difficult and more costly to buy coverage.

Here are the factors impacting coverage for next year and some of the options you have for finding a health care solution.

Factors Impacting Premiums Next Year

Despite the purpose of the Affordable Care Act to extend health coverage to all at lower cost, the result has been poor. There are fewer health care choices and higher prices. An analysis by the Kaiser Family Foundation regarding changes in premiums and insurer participation for 2017 paints a bleak picture. The analysis focuses on the individual market, but many of the factors apply to the small group market.

Premiums. It is expected that the premiums for the small group market will increase in most locations, some by double digits. For example, Crain’s New York Business reported that the request for 2017 rate increases for the small group market in New York range from a low of 5.4% (for MVP Health Plan Inc.) to 66.6% (for Crystal Run Health Plan LLC).

Participation. The number of insurers offering coverage may be dwindling and, as Victoria Braden of Braden Benefit Strategies, Inc. notes, fewer insurers means less competition, which inevitably means higher premiums. For example, Anthem has proposed acquiring Cigna Corp., and Humana is being purchased by Aetna. Both transactions are now before the FTC for approval.

Strategies for Coverage in 2017

So given the prospects of higher coverage and less choice, what is an employer to do? Here are some thoughts.

SHOP changes. The Small Business Health Options Program (SHOP), an exchange for small employers, is one online marketplace to explore. Employers using SHOPs contribute to the cost of employee coverage and employees choose their health coverage from one of several carriers and plan designs, simplifying the administration of health coverage for companies.

Small employers for SHOPs are companies with one to 50 employees. The definition of a small employer had been set to expand in 2016 to 100 employees, but the Protecting Affordable Coverage for Employees Act last October retained the 50-employee definition. Thus, the federal SHOP is open to employers with up to 50 employees. However, the law allows states to open their SHOPs to employers up to 100 employees, but to date only California, Colorado, New York, and Vermont have done so. It is unclear whether and if so, to what extent, this law change will impact premiums; it depends on the insurer’s expectations of how a larger market (that is now only in four states) would have affected premiums.

Note: Employers with fewer than 25 employees who purchase coverage through a SHOP may be eligible for a tax credit of up to 50% of their premiums, which helps to defray some of the cost. However, the credit cannot be claimed in 2017 if it was claimed in 2015 and 2016.  There are also income thresholds associated with the credit.

Health reimbursement arrangements. Historically, many small businesses provided health coverage for staff by reimbursing the cost of premiums for coverage that workers found on their own. In February 2015, the IRS said this reimbursement arrangement violated ACA and would trigger a $100 per employee per day penalty, although it postponed the penalty until July 1, 2015; technically the penalty is in effect now.

Congress is working on a solution to permit these reimbursements. The Small Business Health Care Relief Act (H.R. 5447) would exclude a qualified small employer health reimbursement arrangement (QSEHRA) from the definition of a group health plan under ACA. This plan would be funded entirely by employer contributions, the amount of which would be capped. This measure is supported by many advocacy groups, including the Small Business & Entrepreneurship Council. The U.S. House passed H.R. 5447 by a voice vote on June 21, and the bill is now in the Senate where the “Rule 14” process has just begun. This is a good thing as it means legislation can be immediately placed on the calendar for a vote.

If signed by President Obama, the measure ensures small employers that want to pay for coverage without having to shop for and maintain a company plan will be able to do so, treating their contribution as an expense and eliminating the tax penalty.

Working with an Insurance Agent 

If you want to go for SHOP coverage, work with an ACA certified agent or broker. ALEs not eligible to use a SHOP, and small employers that don’t find SHOP offerings suitable, must find alternate health care solutions:

-Start early to assess your options for the coming year.

-Work with an insurance agent who is knowledgeable about coverage options and ACA (i.e., an ACA-certified agent).

Final Thought

If there is a new administration and a new makeup of Congress after the November election, the health care laws could change and the health care landscape could improve. Reforms plans are being offered by both presidential candidates and Speaker Paul Ryan and a GOP task force just released a “Better Way” agenda to reform America’s health care system.

However, even if changes are made soon, they likely won’t impact 2017 coverage so entrepreneurs and small businesses unfortunately have to deal with what’s available now.

Barbara Weltman is a member of SBE Council’s Advisory Board, and provides complimentary resources to small business owners and entrepreneurs through various platforms.  She is the publisher of Idea of the Day® at Barbara also co-hosts Business Leaders radio. Follow Barbara on Twitter @BarbaraWeltman. 


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