Affordability of Health Insurance to Small Business

It remains to be seen whether the Patient Protection and Affordable Care Act (ACA) will cause more small businesses to insure their workers.

ACA offers a tax-credit of up to 35 percent to small businesses that purchase health insurance coverage for their employees; still, the subsidy may be insufficient to coax small businesses into buying insurance.

This qualitative literature review provides a succinct discussion of how the ACA could affect small businesses and their employees. Under ACA, each state must create its own insurance exchange; these exchanges will become the insurance markets for employers and individuals (who also will be eligible for tax-credits).

Key Findings:

  • Research suggests that employers are unlikely to take up insurance plans unless they receive subsidies well over 50 percent of their contributions.
  • The ACA will force employees to choose among health plans at a value level—bronze, silver, gold, or platinum—chosen by their employer.

This article, citing the work of numerous researchers, outlines foreseeable consequences of the ACA with respect to the purchase of health insurance coverage by small businesses. While the number of small businesses providing coverage may decline, the ACA will cover a large proportion of individuals through Medicaid and insurance exchanges.