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Small Business Employee Benefits and HR Blog

Small Businesses Concerned with ACA Compliance and Cost-Mitigation

September 26, 2014
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Small businesses face unique challenges and concerns when offering healthcare benefits to their employees. According to the 2014 Small Business Health Care Survey conducted by the National Small Business Association, cost-mitigation and compliance with the Affordable Care Act are major concerns. Here are the findings from the survey.

Background on the 2014 Small Business Health Care Survey

The National Small Business Association (NSBA) conducted their 2014 Small Business Health Care Survey online among more than 780 small business owners with fewer than 500 employees. They selected samples representing every industry in every state in the nation. A majority of employers surveyed (88 percent) had less than 50 full-time employees.

Small business Health Care Demographics

A majority of those surveyed (67 percent) reported that offering health insurance as an employee benefit was “very” important to their employee recruiting and retention strategy. Another 20 percent reported that it was “somewhat” important to their recruiting and retention strategy.

In addition, a majority (72 percent) of small business owners reported that they are primarily responsible for handing the healthcare benefits offerings, while 24 percent have designated a member of their staff to handle benefits. Only four percent of pollees reported outsourcing their healthcare benefits.

The smallest businesses reported the lowest rates of offering healthcare benefits to their employees:

  • Over half (51 percent) of businesses with one to five employees reported offering healthcare to their employees

  • Three quarters of businesses with six to nine employees offer healthcare benefits to their employees

  • Only six percent of employers with more than 50 employees do not offer healthcare benefits

Among the small businesses not offering healthcare, most did not plan on offering any healthcare benefits to their employees within the next 12 months.not_offering_healthcare

Source: National Small Business Association

Small Business Health Insurance Costs

The small business owners surveyed reported cost as the number one factor for not offering healthcare benefits. According the to the survey, the average monthly per-employee cost of health insurance premiums for a small business is $1,121. In addition, an astounding 91 percent of small businesses reported an increase in their per-employee health insurance premiums.renewal_rate_increases

Source: National Small Business Association

A quarter of small businesses reported that their health insurance cost increases exceeded 20 percent at their most recent rate renewal. Over half (53 percent) of small businesses reported renewing their healthcare plan early. Of the small businesses who chose to do an early renewal, 70 percent reported that they did so in order to avoid increased costs due to the Affordable Care Act.

Other cost-mitigating methods included increasing employees’ contributions, reducing the benefits offered to employees, dropping coverage and giving employees money to purchase individual health insurance.

  • Twenty nine percent of small businesses reported increasing employees’ contributions to healthcare in the last 12 months, while 42 percent plan to increase employees’ contributions within the next 12 months.

  • Over a quarter (29 percent) of small businesses plan to reduce their benefit offerings within the next 12 months, while 19 percent have already done so.

  • Three percent of small businesses have dropped their group health insurance to give money directly to their employees to purchase individual health insurance, while 28 percent plan to do so within the next 12 months.

Small Businesses and the Affordable Care Act

Most small employers had a very limited or no understanding of how the Affordable Care Act will affect their business. Only 42 percent reported having a “clear understanding,” while 46 percent reported a “limited understanding” and 12 percent reported having “no understanding” of how the healthcare law will affect their small business.

Small businesses reported spending an average of 13 hours and $1,274.16 per month to ensure their continued compliance with the law. A third of small businesses reported that they will purposely stop their growth as a result of the Affordable Care Act, while 48 percent will not restructure their workforce due to the law.

Read the full survey from the National Small Business Association.

How does your small business plan on cutting healthcare costs while remaining in compliance with the ACA?

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