How Health Insurance Reform Will Transform Small Businesses

According to a recent study by the Urban Institute, only 30% of small businesses (less than 50 full-time employees) offered group health insurance. Small business owners and their employees found some relief in the individual marketplace, now accounting for half of all enrollees. While encouraging, small business employees also make up 36% of the uninsured in America. We suggest reform that 1) supports small businesses, 2) helps them to compete with large companies offering health insurance, 3) makes insurance more affordable for small business employees and 4) solves a significant portion of the uninsured problem.

Currently, small businesses are not subject to the employer mandate and have no obligation to provide health insurance. To encourage them to do so, Gusto suggests allowing small employers who offer Affordable Care Act (ACA)-compliant plans to collect

the premium tax credits their employees would have received in the marketplace. A second option is to reform Health Reimbursement Arrangements (HRAs) for small businesses. This would give owners more flexibility to provide tax-free funds to employees while still supporting the individual marketplace and helping to make plans more affordable. This reform would mean all small business employer HRA contributions would be additive to premium tax credits that individuals receive in the ACA marketplace.

Here is the full report.