The Obama administration made big news this week when it announced that it will delay until 2015 the requirement in the new health care law that employers with more than 50 employees provide their workers with health insurance. This requirement has generated huge amounts of interest since the law passed in 2010. One talking head after another has bemoaned it as a job-killing requirement that impacts the most vulnerable of job creators: small businesses.
If there's one good thing about the announcement to delay this requirement, it's that it may shine a light on just how little an impact this requirement has on small businesses.
Lets look at some statistics:
• Ninety-six percent of businesses in this country have fewer than 50 employees.
That's right. The vast majority of businesses are already exempt from having to offer their employees health insurance. For these employers, delaying the requirement a year means absolutely nothing.
• Ninety-six percent of businesses with more than 50 employees already offer insurance.
Health insurance is called a benefit for a reason, and companies that can provide that benefit have a competitive advantage over companies that can't. Some people stay at jobs they don't like simply for the health insurance. (It happens so often it even has a technical term: "job lock.") What's more, there's a confirmed connection between the size of a company and its ability to offer insurance. The respected Kaiser Family Foundation found the larger a business is, the more likely it will offer insurance. Here are some figures from Kaiser's study:
• Forty-nine percent of firms with three to nine workers offer insurance.
• Seventy-one percent of firms with 10 to 24 workers offer insurance.
• Eighty-five percent of firms with 25 to 29 workers offer insurance.
• Ninety-six percent of firms with more than 50 workers offer insurance.
• Ninety-nine percent of firms with more than 200 workers offer insurance.
See the trend? Bigger businesses are better able to afford insurance. Larger firms with more employees have more bargaining power with the insurance companies, allowing them to get better rates. The policy makers who wrote the Affordable Care Act didn't pick the 50-employee cutoff out of a hat. They knew that most businesses with more than 50 employees already offer insurance. Now, just one more stat:
• Only the 4 percent of larger employers that do not offer health insurance will be impacted by the delay.... or by the requirement in general, for that matter.
What these stats show is that the employer requirement that is getting so much attention impacts a tiny sliver of businesses in this country. This requirement, and the decision to delay it, doesn't affect the vast majority of small businesses. Not one bit. Granted, delaying this requirement will allow larger businesses that will be impacted time to adjust and provide additional input to the Treasury on how the proposed requirements will work best.
But the most important provisions in the ACA for small business owners, such as health insurance exchanges, are still moving full-steam ahead. The exchanges haven't gotten nearly the same play as the employer responsibility requirement, but they impact small businesses much more significantly. These marketplaces, coming online in January 2014, will allow small businesses to pool their buying power to help drive down coverage costs. Those larger businesses I mentioned earlier that are more likely to offer insurance because it's more affordable? The exchanges will give small businesses that same kind of buying power, so they can better afford to offer benefits and compete with their larger counterparts for talented employees.
Maybe, just maybe, that will become the big news now. It sure wouldn't hurt for the millions of small business owners who will be able benefit from the exchange to hear all about it.