Two New Studies: Health Reform Benefits Small Business

Under the old health care system, many businesses found it difficult, if not impossible to provide health insurance benefits to their workers. Over the past decade the percentage of small firms offering coverage decreased and many businesses have suffered under the weight of high health care costs.

The Affordable Care Act helps make it easier for employers to provide health benefits. This year, small businesses are eligible for health care tax credits and starting in 2014, small businesses with up to 100 employees will have access to state-based Small Business Health Options Program (SHOP) Exchanges, which will expand their purchasing power. Additionally, the Business Roundtable estimated that provisions in the legislation could save $3,000 per person in health costs.    

In less than a day, two new studies have confirmed that the Affordable Care Act will deliver significant benefits to small businesses. Yesterday, the Rand Corporation released a new study in the New England Journal of Medicine that indicated that the Affordable Care Act will strengthen employer-based health insurance. Here’s how the LA Times summarized the report:

An economist and two health policy researchers at the nonprofit Rand Corp. conducted a simulation to predict what is likely to happen once employers are able to offer coverage through these exchanges. Overall, they estimate that the proportion of U.S. workers who will have access to health insurance through their jobs will jump from 84.6% to 94.6%. That works out to 13.6 million additional workers having the option to buy affordable health plans.

Most of that bump is likely to come from smaller businesses with 50 or fewer employees. Today, only 60.4% of these employees can get health insurance through their jobs. Once the exchanges are functioning, the Rand researchers forecast that 85.9% of small business employees will have the option of buying health plans at work – an increase of 10.5 million workers.

Part of the reason for that growth is that the policies that will be offered through the exchanges will be less expensive, the researchers said. Small companies will be able to band together to pool their risk, which will give them more leverage to bargain with insurance companies. It also means their premiums should be more stable from year to year.

Today, the Commonwealth Fund finds that millions of small businesses will benefit from the new small business tax credits included in the new law. The study notes that 16.6 million Americans work at firms that could be eligible for the tax credit in the next three years alone and predicts that the new law will extend employer-based coverage to up to 7 mil­lion people who are currently without employer health insurance. Check out the new study by clicking here.

Stephanie Cutter is Assistant to the President for Special Projects