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Small Business Employee Benefits and HR Blog

Why Small Businesses Need Increased Employee Health Benefit Options

Underinsured and unaffordable health costs

Hint: It Goes Beyond Employee Recruitment and Retention

With more Americans purchasing health insurance, the Affordable Care Act (ACA) has arguably accomplished an important goal: to decrease the number of uninsured individuals.

In fact, the Department of Health and Human Services states that 16.4 million previously uninsured people purchased health insurance under ACA.

So how was the ACA able to accomplish this goal?

One reason is due to a key provision known as the individual mandate, which requires most Americans to obtain health insurance or pay a tax penalty. Along with the mandate, many individuals qualify for premium tax credits, which makes purchasing health insurance more affordable.

Healthcare Affordability Still a Struggle

Despite these efforts, the ability to afford health insurance is still a struggle for many. Some individuals choose to purchase individual health insurance plans that have lower monthly premiums, but with higher deductibles. This means that an individual will have to pay more out-of-pocket costs before their insurance coverage begins.   

This approach does not always fare well for the consumer. A recent Kaiser Family Foundation survey found that individuals who chose a higher-deductible plan so they can pay a lower premium were not satisfied with their coverage. Specifically, the survey found that people with higher deductibles are significantly more likely to say they feel vulnerable to high medical bills than those with lower deductibles.

These findings do not stop here. Families USA, a consumer health group, found that 1 in 4 adults who had insurance were forced to forgo medical tests or treatments, including purchasing prescription drugs or visiting the doctor due to their high deductibles and out-of-pocket costs.

A Troubling Scenario, Especially for Small Businesses

The scenario is troubling, especially for a small business who cannot afford a traditional group health insurance policy. Prior to 2014, small businesses were in a position to help their employees facing this financial conundrum. Businesses could offer Health Reimbursement Arrangements (HRAs) to reimburse employees for individual health insurance premiums and eligible out-of-pocket medical expenses tax-free.

Unfortunately due to recent IRS action, small businesses use of HRAs is limited and most can no longer use this as a vehicle to reimburse employees for out-of-pocket expenses.

With prescription costs increasing 55%, deductibles doubling over the last decade, and Americans spending 1.7 times more on their out-of-pocket costs (U.S. News Health Care Index), small businesses need increased health benefit options—such as HRAs—now more than ever.

Fortunately, lawmakers in Washington, D.C. are listening. Legislative efforts in Congress are working toward a solution to revive stand-alone HRAs for small businesses. With health insurance subsidies at risk in the face of the Supreme Court’s ruling in King vs. Burwell, the question of how individuals can afford their health costs is increasingly vital.

Conclusion

Despite more insured individuals, many are underinsured and cannot afford the out-of-pocket costs in their high deductible health insurance plans. Affordability is a critical issue. As Congress works toward a solution to give small business access to HRAs, any help to individuals forgoing treatment due to high costs cannot come soon enough.

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