A discussion of small businesses and the Affordable Care Act (ACA) requires determining definitions before assessing the impact of the law on the operations of a typical small business.
First, you need to recognize that there is no such thing as a typical small business. Everyone is different in one way or another. Those differences will be addressed shortly. However, all small businesses do have one common denominator.
That likeness is the need and ability to provide health insurance to their employees at a reasonable cost. That is where the ACA comes into play. It is a law passed by Congress in 2010 that was intended to provide that access. We will now delve further into the intersection of small business and health insurance through the ACA.
Definition of a Small Business
The Small Business Administration (SBA) provides a definition. It is any business with between 1 and 500 employees. That makes sense. Any company with fewer than 500 workers either has only a few locations or is extremely well-managed to provide goods and services with a few employees.
The SBA provides loans to small businesses, so the number of employees is important. These are loans the company may not be able to obtain in the normal banking process.
Of course, there is another method to define a small business. The United States Census Bureau offers three ways. One is the previously mentioned number of employees. A second way is the amount of revenue the firm creates. The final method is the number of locations.
The Census Bureau also points out that the majority of businesses have less than five employees. That is a very significant number. It is far fewer than the standard definition of a small business. It does highlight the need of the majority of companies to provide reasonable health insurance for their workers.
Spreading the Risk
Insurance is all about spreading the risk. This simply means that there are always going to be claims no matter the policy or area. However, the more people who purchase a particular type of insurance, the more the risk is spread out.
For health insurance, this means that the likelihood that a large claim can be absorbed is strengthened by a greater number of policyholders. The problem for those small businesses with a few employees is the inability to create more people. They only have a few workers which is all they need or can afford for their enterprise.
This is where small business and the ACA intersect. The law, as discussed below, is aimed at making health care insurance within the reach of a greater number of people. That includes employees of small businesses that previous to the enactment of the ACA were unable to provide health care insurance.
What is the Affordable Care Act?
We have referred to the Affordable Care Act, or ACA, throughout this post, but it is time to take a detailed examination of the law. This will benefit the discussion below about how the ACA and small businesses intersect.
The law was passed in March 2010. There were three main goals. One was to provide health insurance to more people by making it affordable. That was one of the main complaints about health insurance before the enactment of the law.
A second goal was to expand Medicaid, the health program for low-income persons. The final goal was to support programs to lower the cost of health care.
Intersection of Small Businesses and the ACA
For small businesses, especially those in the majority with 5 or fewer employees, cost was and continues to be an issue. It is very difficult to find traditional insurance that will cover a small number of people. As mentioned above, it is all about spreading the risk, and those five or fewer employees are just not enough to do that.
If a small business has an employee that qualifies for Medicaid, and they live in a state that allows this program, then that will benefit both the firm and the employee.
Finally, everyone benefits from lower healthcare costs. Any efforts in that direction by the ACA will help out companies and their employees.
Small Business Health Options Program (SHOP)
SHOP is a primary example of the intersection of small business and the ACA. This program applies to businesses with 1-50 full-time employees. It can be purchased through a private insurance company, or it can be obtained with the help of a SHOP agent or broker.
Using SHOP allows the business to qualify for the Small Business Health Care Tax Credit. That benefit has the effect of lower health costs for the employer.
There are other benefits that the ACA offers small businesses. One is rewards for the creation of what is known as wellness programs. These are benefits offered by employers that promote good health practices among employees. The purpose is to lower health care costs since the employees will need fewer trips to the doctor or hospital.
Incentives are a certain percentage of the health care costs. Tobacco carries the highest incentive for a program that encourages reduced usage of the product.
The above wellness programs also benefit employers by the fact that healthy employees miss less work, and they are more productive when they feel well.
This article shows how small businesses can utilize the provisions of the ACA when providing much-needed benefits to their few employees. This allows those firms to compete for competent workers along with larger firms that offer potentially greater worker benefits.
It is all about spreading the risk, leveling the playing field, and allowing small businesses to compete in the marketplace. Workers deserve health care benefits, and employers wanting to meet that need can utilize the ACA to bring affordable health care into the workplace.
A discussion of small businesses and the Affordable Care Act (ACA) requires determining definitions before assessing the impact of the law on the operations of a typical small business.
First, you need to recognize that there is no such thing as a typical small business. Everyone is different in one way or another. Those differences will be addressed shortly. However, all small businesses do have one common denominator.
That likeness is the need and ability to provide health insurance to their employees at a reasonable cost. That is where the ACA comes into play. It is a law passed by Congress in 2010 that was intended to provide that access. We will now delve further into the intersection of small business and health insurance through the ACA.
Definition of a Small Business
The Small Business Administration (SBA) provides a definition. It is any business with between 1 and 500 employees. That makes sense. Any company with fewer than 500 workers either has only a few locations or is extremely well-managed to provide goods and services with a few employees.
The SBA provides loans to small businesses, so the number of employees is important. These are loans the company may not be able to obtain in the normal banking process.
Of course, there is another method to define a small business. The United States Census Bureau offers three ways. One is the previously mentioned number of employees. A second way is the amount of revenue the firm creates. The final method is the number of locations.
The Census Bureau also points out that the majority of businesses have less than five employees. That is a very significant number. It is far fewer than the standard definition of a small business. It does highlight the need of the majority of companies to provide reasonable health insurance for their workers.
Spreading the Risk
Insurance is all about spreading the risk. This simply means that there are always going to be claims no matter the policy or area. However, the more people who purchase a particular type of insurance, the more the risk is spread out.
For health insurance, this means that the likelihood that a large claim can be absorbed is strengthened by a greater number of policyholders. The problem for those small businesses with a few employees is the inability to create more people. They only have a few workers which is all they need or can afford for their enterprise.
This is where small business and the ACA intersect. The law, as discussed below, is aimed at making health care insurance within the reach of a greater number of people. That includes employees of small businesses that previous to the enactment of the ACA were unable to provide health care insurance.
What is the Affordable Care Act?
We have referred to the Affordable Care Act, or ACA, throughout this post, but it is time to take a detailed examination of the law. This will benefit the discussion below about how the ACA and small businesses intersect.
The law was passed in March 2010. There were three main goals. One was to provide health insurance to more people by making it affordable. That was one of the main complaints about health insurance before the enactment of the law.
A second goal was to expand Medicaid, the health program for low-income persons. The final goal was to support programs to lower the cost of health care.
Intersection of Small Businesses and the ACA
For small businesses, especially those in the majority with 5 or fewer employees, cost was and continues to be an issue. It is very difficult to find traditional insurance that will cover a small number of people. As mentioned above, it is all about spreading the risk, and those five or fewer employees are just not enough to do that.
If a small business has an employee that qualifies for Medicaid, and they live in a state that allows this program, then that will benefit both the firm and the employee.
Finally, everyone benefits from lower healthcare costs. Any efforts in that direction by the ACA will help out companies and their employees.
Small Business Health Options Program (SHOP)
SHOP is a primary example of the intersection of small business and the ACA. This program applies to businesses with 1-50 full-time employees. It can be purchased through a private insurance company, or it can be obtained with the help of a SHOP agent or broker.
Using SHOP allows the business to qualify for the Small Business Health Care Tax Credit. That benefit has the effect of lower health costs for the employer.
There are other benefits that the ACA offers small businesses. One is rewards for the creation of what is known as wellness programs. These are benefits offered by employers that promote good health practices among employees. The purpose is to lower health care costs since the employees will need fewer trips to the doctor or hospital.
Incentives are a certain percentage of the health care costs. Tobacco carries the highest incentive for a program that encourages reduced usage of the product.
The above wellness programs also benefit employers by the fact that healthy employees miss less work, and they are more productive when they feel well.
This article shows how small businesses can utilize the provisions of the ACA when providing much-needed benefits to their few employees. This allows those firms to compete for competent workers along with larger firms that offer potentially greater worker benefits.
It is all about spreading the risk, leveling the playing field, and allowing small businesses to compete in the marketplace. Workers deserve health care benefits, and employers wanting to meet that need can utilize the ACA to bring affordable health care into the workplace.
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