Two Major Facts about Small Company Healthcare

by Michael Haberman on September 14, 2012 · 5 comments


As the PPACA (Patient Protection and Affordable Care Act) moves along and deadlines approach it is important to understand two major facts about small company healthcare.

First Fact

According to the U.S. Census Bureau, in 2010, by my addition, there were about 143 million people who worked for companies with fewer than 20 employees. You could probably add another 10 million for firms up to 50 employees. Additionally, according to a 2008 survey by the Kaiser Family Foundation,  “…about half of businesses with 3–9 workers offer health benefits to their employees. The ratio grows to about three-fourths for firms with 10–24 employees, to almost 90 percent for firms with 25–49 employees…”

These numbers are important because they figure into the PPACA.

Second Fact

The healthcare coverage that employers will be required to provide under the PPACA only applies to companies that have 50 or more fulltime equivalent employees. Under recent determination an employee who works an average of 30 or more hours per week is considered a full time employee. Part-timers are accounted for by adding up their hours and dividing by 30 to get the number of “full time” employees there would be in the establishment.

Companies that have fewer than 50 FTEs will not be required to provide healthcare coverage under the PPACA and CANNOT be penalized for doing not doing so.

Conclusion

Adding these numbers and reviewing the facts means that we could conceivably end up with 155 million workers, many that currently have healthcare, losing that healthcare coverage. Of course that would assume that their employers would drop their coverage, which makes financial sense, and tell each of their employees to go to the State or Federal healthcare exchanges. No all employers will do that, after all it healthcare provides a recruitment advantage. But many may do so, or provide cash payment for the employee to use to purchase insurance from the exchange. As a result of this, which goes into effect in 2014, we could have 155 million workers getting their healthcare coverage from a government run program.

I will let you decide whether this is a desirable outcome. I think many employees will be less than pleased with this turn of events.

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{ 5 comments… read them below or add one }

Michael Haberman September 14, 2012 at 10:01 am

This comment was received through LinkedIn from Gerrad James (Sales Executive / Private Exchange Expert at Brown and Brown Insurance) . I thought it was important to post it here.

Michael, Great article, however I believe that you failed to mention the fact that only a small portion of those 143 million will get a subsidy from the feds to buy on the public exchange, making the public exchange less attractive to consumers. Small businesses can still seek out coverage through a private exchange and fix their benefit spend. JD power released a study earlyier this year showing that 47% of employers are looking to this as an the future of their employee benefits offering, and only 14 of employers anticipate dropping coverage…check the study out here: http://www.jdpower.com/content/press-release/fFZdNI3/2012-employer-health-plan-study.htm

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Michael Haberman September 14, 2012 at 10:06 am

Thank you Gerrad for your input.

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renee September 15, 2012 at 8:46 am

it will be interesting to see how all this plays out. I dont know much about how the public and private exchanges will work, but my fear is two fold. 1. I really dont want the goverment running my health care and 2. will small companies with high claims be the ones to switch to the private exchange to save cost? If so, how will the private exchange be able to keep cost down if they are paying out a lot in claims?

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Michael Haberman September 16, 2012 at 4:21 pm

Renee:
The is the big unknown that will become somewhat clear, though not entirely, after the election.

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Greg September 18, 2012 at 10:50 am

Mike,
As always, great post and very thought provoking. We fit the larger employer, 1,200 ee’s but are still going to be saddled with increased costs and so forth. The unknowns are what are most troubling. This bill, which believe it or not, I have read, contains so many funding mechanisms that are completely outside the realm of healthcare, it is scary. When these provisions finally get the publicity they should have gotten early on, I fear what employers, large and small, will do. We are making plans to do everything we can to provide adequate coverage for our employers and their families but at a cost that balances the needs of the business and the employee.
It will be interesting, that I am assured of.
Thanks for the continuing education you provide!

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