Obamacare Is Killing Small Business. Here's How To Fix It.
"Small employers are increasingly responding to the rising cost of health insurance by dropping it ... More altogether," writes health policy expert Sally Pipes.
Obamacare was back on trial this month, as the U.S. Supreme Court heard a challenge about the constitutionality of the panel that determines which preventive care services health plans must cover.
According to the Commonwealth Fund, 'The case has consequences for the Affordable Care Act's guarantee of coverage for a wide range of free preventive care.'
Preventive care is not free, even if Obamacare attempts to paint it as such. We all pay for mandated benefits in the form of higher premiums and out-of-pocket costs. And a new report from the JPMorganChase Institute shows that small employers are increasingly responding to the rising cost of health insurance by dropping it altogether.
One-third of businesses with fewer than 50 employees drop health insurance coverage year over year largely because of rising insurance costs, the financial firm's research outfit found.
Restaurant employees were hit the hardest. Thirty-six percent dropped insurance coverage between 2018 and 2019. Thirty-five percent of repair and maintenance businesses dropped coverage in that window, as did 34% of construction firms.
The JPMorganChase study found that a 10% hike in monthly premiums increases the probability that a firm will drop health insurance coverage by just over 1%. For restaurants, a 10% premium increase raises that probability by 5.5%.
And while some small businesses stop offering health insurance coverage as they prepare to close their doors, the study found 'most small businesses that stopped paying health insurance premiums continued to operate in the following years.'
That's bad news not just for American workers but for the country. As the JPMorganChase study notes, 'inconsistent health insurance coverage can hinder the success of small businesses by potentially stifling entrepreneurship, with implications for aggregate job and economic growth.'
Fortunately, there are several things lawmakers can do to help businesses struggling to provide health coverage to their employees. Namely, they can expand access to two types of health insurance plans that are exempt from Obamacare's costly rules and regulations—and as such are considerably cheaper.Association Health Plans allow small businesses to join with self-employed individuals and independent contractors in their industry and purchase health plans in the large-group market.
Because associations function like large employers, they have more leverage to negotiate with insurers. More importantly, AHPs are exempt from Obamacare's mandates. That gives them the freedom to tailor their offerings to members' needs—offering bare-bones catastrophic coverage to a group of young waiters, for instance—which in turn lowers costs for enrollees.
In 2018, the Trump administration relaxed Obama-era restrictions on association health plans in an effort to expand access to them. Under the 2018 rules, employers could form associations with any small business in their geographic area, regardless of whether they were in the same industry.
The Biden administration reversed those rules shortly before President Trump returned to the White House. Now that he's back, the president has a chance to reimpose his earlier guidance.
The Trump administration could also loosen Biden-era restrictions on short-term, limited-duration insurance. These health plans are also exempt from Obamacare's cost-inflating mandates and so are much more affordable than the coverage for sale on the exchanges, with premiums that can be half as much.
During his first term, President Trump green-lit rules that extended the maximum term for these plans to 364 days and allowed insurers to renew them for up to three years. Biden also rolled back those rules, capping short-term plans at 90 days with an option for a one-month renewal.
It's time for a return to the Trump 1.0 regulation of short-term plans. Doing so would expand access to affordable coverage—something that would be particularly valuable to the increasing number of small-business employees whose employers have discontinued coverage.
Whether by expanding options for small businesses or for individuals, lawmakers have plenty of avenues to relieve the burden of the increasingly expensive insurance coverage brought about by Obamacare. For workers' sakes—and for the good of the American economy—let's hope they seize the moment.
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