By Adam Rochon
December 5, 2018 at 5:00 am ET
Just when it seems the Trump administration has run out of policies intended to undermine the Affordable Care Act, it finds another way to weaken the law. And then another.
As both a small business owner and an expert in employee benefits including insurance, I’m deeply concerned.
The administration recently doubled down on incentives for individuals and businesses to abandon the ACA marketplaces, even though those incentives would draw people toward health care products that would lead to worse outcomes for most consumers, including small businesses.
First, the administration recently issued guidance to allow federal insurance subsidies to be used toward purchasing short-term insurance plans, which can now last up to 364 days and be renewed for up to three years. These plans do not have to comply with ACA requirements and cover almost nothing, including pre-existing conditions.
And while these plans are normally cheap because they are not ACA compliant, they typically come with very high deductibles. Or worse, they offer deceptive plan designs that include cheap or basic coverage but don’t cover major health events, potentially putting people at risk for massive health bills. For example, some plans may advertise a $500 deductible but max out at $50,000 in coverage.
Second, the administration proposed allowing small- and medium-sized businesses that don’t currently offer health coverage to use health reimbursement arrangements, which allow workers to use tax-free dollars to purchase health coverage, to reimburse their employees for what they spend on premiums for coverage purchased through the individual health care market. HRAs can be a tool for small businesses to help their employees with coverage, but it’s problematic when they are used to purchase ACA non-compliant plans. This move is yet another way to lure consumers away from ACA marketplaces because the proposal would allow reimbursements to be used for non-ACA compliant plans, which the Internal Revenue Service had prohibited during the Obama administration.
Beyond saddling consumers with health coverage that is nearly useless, plans such as short-term insurance also harm our economy. Since the customers for short-term plans tend to be younger and/or healthier, if short-term or other non-ACA compliant plans become popular, they will create an unbalanced risk pool that disrupts the individual marketplaces and raises costs for everyone else who remains in those marketplaces. An absence of healthy people in the ACA marketplaces will mean insurance companies won’t be able to offset the costs they incur to care for older or sicker people, so premiums will rise drastically, and many small businesses will be priced out of the market.
This is a big deal. More than 5.7 million small business employees or self-employed workers are enrolled in ACA marketplaces, according to the Small Business Majority, and more than half of all ACA marketplace enrollees nationwide are small business owners, self-employed individuals or small business employees. What’s more, many small businesses offering health insurance coverage have seen their premium increases stabilize under the ACA.
Since 2010, the increase in small business health care premiums has been at the lowest level in years, following regular double-digit increases prior to the law’s enactment. In fact, between 2011 and 2015, the average yearly premium increase in the small group market dropped by half, according to the Centers for Medicare and Medicaid Services.
Once again, the administration chose its political priorities over both our nation’s job creators and sound health policy, a trend that is likely to continue. The U.S. economy may be booming right now, but if small businesses can’t afford to keep their workers healthy, they will be far less productive. If the economy experiences a downturn in the near future, the administration’s attempts to destabilize the ACA will be partly to blame.
Adam Rochon owns Sequoia Employee Benefits and Insurance Solutions in Exeter, Calif., and is a member of Small Business Majority’s Small Business Council.
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