Straight talk on health care reform: More small businesses likely to offer health benefits under state's exchange

More small businesses say they will offer health insurance for their employees once the Colorado Health Insurance Exchange is up and running in 2014, according to a Kaiser Permanente survey of business owners.

The survey found that, after hearing a short description of the exchange, the number of employers who said they would offer health benefits to some or all employees jumped to 59 percent, up from 52 percent currently.

More striking was the change in the percentage of employers who don't plan to offer coverage. Currently, 48 percent do not provide coverage. After coverage is available through the exchange, only 25 percent said they would not offer health benefits.

However, too many employers remain unaware of benefits under the exchange. More than half (56 percent) of eligible business owners were not aware of tax credits available to them.

The health insurance exchange will begin operating in 2014. It will enable small businesses to shop for health insurance among competing companies online or through a broker. It has been compared to shopping for the best fare on an online travel website. Under the Affordable Care Act, many small businesses are eligible for tax credits, good between 2010 and 2013 and any two years after 2014, to help pay for employee coverage.

The survey polled 300 businesses with two to 50 employees and was conducted in May. The maximum sampling error was +/- 6 percentage points.

Here are other findings:

• Only 5 percent of all Colorado small businesses are taking advantage of tax credits available now. About three-quarters of businesses eligible for credits do not offer health insurance. Many small business owners are not sure if they are eligible or mistakenly believe they are not eligible.
• 63 percent of all Colorado small businesses are eligible for tax credits under the Affordable Care Act but do not offer health benefits. These owners were asked if they were likely to shop for insurance through the exchange if they knew their company qualified for tax credits; 58 percent said yes.
• 71 percent of business owners who expect to provide coverage in 2014 favored a provision in the exchange that would allow them to set an amount they would pay for each employee's health insurance and receive a single consolidated bill. Employees then would choose their insurance through the exchange. (Among all small business owners, the percentage is 56 percent.)
• 58 percent of all employers favor coverage through the exchange that offers greater prevention and wellness services. For those who expect to offer coverage in 2014, favorability jumps to 71 percent.
• Business owners prefer a smaller number of plans to make comparisons to a greater number that made comparisons more difficult – 56 percent of all small businesses vs. 61 percent that expect to offer coverage.

We think the survey produced some interesting findings, notably that small businesses are generally receptive to Colorado's health exchange as a mechanism for providing and expanding coverage to employees. This is important because the Colorado Health Benefits Exchange was created by the Colorado General Assembly and is not directly tied to the constitutionality of the Affordable Care Act. Colorado's exchange would likely continue regardless of the court's ruling.

Based on the survey results, however, it is clear more small business must learn about the exchange and how it can help them. The survey indicates, for instance, that a large number of Colorado employers are not aware of tax credits available to them. It may be that information simply is not getting through.

Or it may be that some complexities accompanying the credits discourage some businesses from signing up. The ACA offers a 35 percent tax credit to eligible small businesses that apply between 2010 and 2013. After that period, the law provides a 50 percent tax credit for any two-year period after 2014. The limited duration of these credits might be too short to lure some employers. Also, eligibility for the tax credits is based on company size, average income for full-time employees and other criteria that may not apply to all employers. Based upon this formula, not all eligible employers would receive the full tax credit.

Whatever the reason, if the survey is correct and 56 percent of employers eligible for credits are not aware of them, it shows that much more work needs to be done to explain the benefits of this provision – for businesses as well as employees.

The survey also shows that many employers favor a flat amount paid per employee (or defined contribution) toward health insurance, with employees choosing the type of coverage they want. This approach provides flexibility, but we caution that without adjusting payments to keep pace with insurance costs, employees could face increasingly burdensome costs for covering themselves and their families.