Zane Benefits salutes the backbone and job creators in our economy during National Small Business Week (May 4-8, 2015). In our continued mission to reinvent employee benefits for small businesses, we want to help ensure they remain strong and competitive by offering affordable benefits. Our featured blog provides an overview of how small business owners can benefit from the ACA and work toward this goal.
The Affordable Care Act (ACA). Many small business owners have been asking the same question since the law’s introduction. The question, of course, is “How does the ACA benefit my small business?” This question is now coming into focus as more research becomes available. Michael Kleinrock, the director of research for IMS Institute and co-author of a report titled Medicine Use and Spending Shifts, offers information on exactly how the ACA benefits small business owners in a recent article featured in www.entrepreneur.com. In this article, we’ll discuss three ways Kleinrock says the ACA is benefiting small business owners according to his research.
3 Major ACA Benefits for Small Business
Whether you’re for or against the ACA, it’s the law. And with every law, adjustments must be made in order to adapt. With the ACA, Kleinrock says there are three major changes for small business owners. These changes benefit both the employer and the employee, but small business owners must adapt.
Recruiting top talent: According to Kleinrock, one of the most beneficial aspects of the ACA for small business owners is that they can now compete for top talent within their industry. Gone are the days when only the big guys could offer the benefits it took to recruit the best employees. Now, because of the ACA, small business owners are able to offer employees access to discounted health insurance benefits such as individual health insurance which provides qualifying individuals access to premium tax credits.
Kleinrock says, “If you’re small enough, you’re not required to offer benefits, but for growing organizations the law requires health insurance offerings. The insurance exchanges at the state level provide a cost-effective health insurance option for most businesses, which is an important consideration for potential employees who are considering joining a company.” Kleinrock adds, “The exchanges also benefit workers directly by giving them a variety of options and flexibility to choose the kind and types of coverage they want, which were previously unavailable from smaller-sized employers.”
Now, more than ever before, small business owners have the opportunity to provide access to affordable health insurance.
Streamlined health insurance offerings: When speaking of affordable health insurance offerings, Kleinrock talks about a shift from “defined benefits” to a “defined contribution.” With defined contribution, small business owner to commit a fixed dollar amount to their employees with which they can purchase health insurance coverage of their choosing. This option allows employees to choose coverage that best fits their lifestyle. With “pure” defined contribution, there are two options for small business owners:
Option 1: Taxable stipend
Employees receive a fixed, taxable stipend to purchase individual health insurance, whether or not they actually purchase health insurance. The employee's monthly contributions are typically added to his or her paycheck. With this option, employers and employees must pay payroll taxes on the reimbursement and there is no guarantee employees are using the money on health insurance.
Option 2: Tax-Free Reimbursement Plan
With a tax-free reimbursement plan, employees receive a fixed allowance amount to purchase individual health insurance, but only receive money if they actually purchase health insurance. Employees purchase their own individual health insurance policy and submit proof of their expense. Employees receive monthly reimbursements up to their allowance amount that are typically added to their paycheck tax-free.
Affordable health insurance coverage options like defined contribution support Kleinrock’s point of small business owners being able to recruit top talent. Whereas before small business owners had limited options for providing health insurance to employees such, nowadays employers can simply send their employees to the Individual Health Insurance Marketplaces and then reimburse all or a portion of their premiums.
Improved productivity: Lastly, one compelling conclusion Kleinrock came to was that employees who have enhanced access to health insurance services and options tend to be healthier, more productive, more reliable, and have fewer sick days. This, of course, is great news for small business owners.
The bottom line is, employees who are healthy are costing the business less. Healthy employees are able to come to work more and produce at a higher level of productivity versus an employee who does not have access to health insurance services and is constantly sick.
Kleinrock says, “Some of the unforeseen costs of having sicker absentee employees are their replacement costs. The expense of finding a new worker, training them, allowing for their learning curve, et cetera. Beyond those hard expenses is the fact that the hiring process takes time, which is an intangible cost to your business but a real one nonetheless that's frequently left out of the health insurance discussion.”
Now, with more research readily available regarding the ACA, small business owners have their first look into how the ACA can benefit them and their employers. And according to Kleinrock, the ACA helps small business owners recruit better, gives employees a more streamlined access to healthcare, and improves an employee’s productivity -- all answering the ongoing question, “How does the ACA benefit my small business?”
Do you agree or disagree with Kleinrock? How has the ACA benefited your small business? Comment below.