Small Business’s Introduction to the
Affordable Care Act
Part 1
October 2013
www.nfib.com/ACAreport
The NFIB Research Foundation is a small business-oriented
research and information organization affiliated with the
National Federation of Independent Business, the
nation’s largest small and independent business advocacy organization. Located in Washington, DC, the Foundation’s primary
purpose is to explore the policy-related problems small business
owners encounter. Its periodic reports include Small Business
Economic Trends, Small Business Problems and Priorities, and the
National Small Business Poll. The Foundation also publishes ad hoc
reports on issues of concern to small business owners.
1201 “F” Street, NW
Suite 200
Washington, DC 20004
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www.nfib.com/ACAreport
Executive Summary
•Small-business owners claim a reasonable degree of familiarity with the Affordable Care Act (ACA). Seventeen
(17) percent say that they are “very” familiar with the Act while another 49 percent report that they are “somewhat” familiar with it. The current degree of self-assessed familiarity has grown modestly over the past two years.
However, a question about one specific in the Act suggests that owners may be overly confident in their knowledge
of its contents.
•The survey divided the population into four segments by employee size-of-business, 2 – 9 employees, 10 – 19, 20 –
49, and 50 – 100. Significant firm size variations appear in almost every aspect of matters involving small business, the
ACA, and health insurance. It is almost as if each progressively larger size constitutes a different population.
•Just over half of small employers are satisfied with the information they have obtained about ACA; just under half
are not. The single most important source of information for small-business owners to date has been the general news
media (42%). Other single most important sources include: the insurance industry/carrier (15%), trade association/
business group (11%), a business advisor (10%), the health care industry/provider (8%), and government (4%).
• A majority of small employers (57%) use part-time help, but only 11 percent of the offering population extend
health insurance to part-time employees. Large contingents of part-time employees, defined here as more than half
of the labor force, are the exception (15%) rather than the rule. Part-time employees will push relatively few small
employers over the 50 full-time employee employer-mandate threshold.
•Fourteen (14) percent of non-offering small businesses provide reimbursement or some type of payment to employees
who purchase their own insurance.
•As many as 150,000 small businesses may be subject to the so-called “aggregation rules”, that is, rules requiring
owners of more than one business to consolidate employment in all of their businesses for purposes of reaching the
50 employee employer-mandate threshold.
•Eighty-four (84) percent of small employers have health insurance; 15 percent do not. The most common source of
coverage is the business’s plan (35%), followed by an individual plan (30%), and a spouse’s plan (19%).
•The modest overall decline in the percentage of small businesses offering (1 – 2% of the population) conceals a
much larger churning on a firm by firm basis. Nine percent offering last year (and still in business this year) dropped
coverage; 5 percent not offering last year (and still in business this year) added coverage.
•Small employers often pay the entire health insurance premium for their employees, 40 percent for individual
coverage, 27 percent for family coverage and 21 percent for plus-one coverage. A clear association appears between
employee participation and the size of the employer cost-share. The more employers pay (on a percentage basis), the
more likely employees are to participate.
•When small employers offer health insurance, substantial percentages of their full-time employees participate. Eightyfive (85) percent offering coverage report that half or more of their full-time employees are covered by their firm’s
plan. Thirty (30) percent claim total (100%) participation.
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•Employees requested small employers to begin offering employee health insurance in 4 percent of non-offering firms
in the last 12 months.
Small Business’s Introduction to the Affordable Care Act, Part 1
•There is no rush to self-insurance, despite ACA’s incentives to do so; but, interest is rising. Four percent of small
employers currently offering health insurance self-insure, with those employing 20 – 49 people doing so in 7 percent
of cases and those employing 50 – 100 people in 13 percent of them. Four percent say a switch from the fully-insured
market to self-insurance is “highly” likely in the next 12 months; another 7 percent say it is “somewhat” likely.
•The health insurance premium cost incurred by small businesses that offer averages $6,721 a month ($80,652 a year).
The median is $3,500 a month ($42,000).
•The cost of health insurance continues to climb for small employers. Sixty-four (64) percent pay more per employee
for health insurance this year than they did last; 6 percent report a decline and 29 percent indicate no change. The
median cost increase, incorporating in the calculation those with increased, stable, and lower prices, was about 6
percent, though the average increase was closer to 12 percent.
•The most common means of defraying these increased costs was lowered profitability, followed by increased productivity, and the delay, postponement or elimination of business investment. The increased costs were more likely to
impact small employers than either their employees or customers.
•The number of small businesses offering employee health insurance moved slightly lower from last year to this.
However, employee participation and the types of plans offered are virtually unchanged from the prior year.
•Small employers forecast the percentage of firms offering employee health insurance next year will increase modestly
from this year, reversing a long-term trend. An increase is dependent upon the choice of those who will “probably,”
not “definitely,” change.
•Thirteen (13) percent plan to cut the hours of part-time employees next year. However, no more than half of these
planned cuts are associated with the Affordable Care Act.
•Sixty-nine (69) percent of small employers are “very” or “somewhat” confident that they will be compliant with ACA
when it becomes effective. However, the July 2 announcement postponing the employer-mandate diminished, rather
than enhanced, small employer confidence. The exception was the group of small employers most directly impacted
by the delay. Their confidence in compliance with the Act was unaffected by the announcement.
•Small employers are notably uncertain on many aspects of the insurance they purchase, their plans for adjusting to the
ACA, and precisely how the ACA will affect them and their business.
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Small Business’s Introduction to the Affordable Care Act, Part 1
•This is the first report in a planned series of three annual reports based on a longitudinal survey of more than 921 small
employers. The succeeding reports are to be based on interviews of the same small employers in order to measure the
actual changes associated with introduction of the Affordable Care Act, rather than the net changes that are measured
using independent annual samples.
www.nfib.com/ACAreport
Small Business’s Introduction to
the Affordable Care Act, Part 1
William J. Dennis, Jr., Senior Research Fellow, NFIB Research Foundation
The following is the first report in a three year longitudinal study on small business’s1 introduction to the ACA. The first
year’s survey establishes a base to measure change occurring in the small business population over the next two years. The
two planned follow-ups intend to measure the change experienced.
The Affordable Care Act will be phased-in with the first near-universal requirement for small employers, the employee
notification requirement, scheduled for October 1, 2013. This requirement has been administratively modified so it now
has no associated penalty for failure to comply. Thus, with postponement of the employer-mandate, small employers have
no direct requirements until at least January 1, 2015.
Still, a non-trivial number of small-business owners have already felt the impact of ACA. Insurers have been forced to
revamp policies issued to small businesses and their owners began to feel those impacts as early as the year following ACA
enactment.2 Promises to the contrary, many were unable to keep the insurance they had. Insurers have already begun to
adjust premiums to comply with the ACA’s significant requirements and will soon start passing a share of the so-called
$100+ billion Health Insurance Tax (HIT) on to its small-business customers. These premium changes will affect small
businesses across the nation very differently. Important influences on the size and direction of premium change will be
pre-ACA age and health of the workforce, state mandated requirements, and more competitors and products contrasted to
post-ACA community rating, a mandatory minimum benefit package, new taxes rolled into premiums, and a governmentsponsored SHOP exchange. In addition, the ACA requires that the government knows whether employees are being offered
adequate and affordable insurance in order to determine if these employees qualify for subsidies in the individual exchanges.
To fill this and other government information needs necessary for the Act, firms falling under the employer-mandate must
file extensive paperwork about their employees and the insurance they offer; offering small businesses with fewer than 50
full-time employees do not. Yet, the government still needs the information, meaning it is likely to go through the back door
and require insurers to collect it from offering small businesses having fewer than 50 employees. Finally, a modest number
of offering small employers have been able to take advantage of a small-business health insurance tax credit3 and others can
expect to do so in the next few years.
Many small businesses will first begin to feel the direct impact of the ACA with the introduction of the SHOP exchanges
beginning sometime next year, or so it would seem. Start dates keep slipping and the number of participating insurance
companies appears to keep shrinking. However, SHOP exchanges should eventually offer small employers greater choice
in the insurance they offer employees. The individual exchanges will also provide small-business employees without offers
of coverage, or without offers of affordable coverage, as well as the uninsured self-employed a place to receive subsidized
health insurance. Open enrollment began October 1, 2013.
1
For present purposes, “small business” means for-profit enterprises employing 2 – 100 people, not including the owner(s).
2
William J. Dennis, Jr., Small Business and Health Insurance: One Year After Enactment of PPACA, NFIB Research Foundation: Washington, DC,
July, 2011.
Government Accountability Office, GAO-12-549, Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity, James R.
3 |
3
Small Business’s Introduction to the Affordable Care Act, Part 1
All small employers have been and/or will be affected by the Affordable Care Act (ACA) of
2010 (ObamaCare). Some small employers will be impacted considerably more than will
others. Some will feel the primary impact directly while others will feel the primary impact
indirectly. Some will benefit; most unfortunately will experience the opposite effect. But
however impacted, the ACA fundamentally changes the relationship between small employers and their offer (or not) of health insurance as an employee benefit.
White, May 14, 2012.
www.nfib.com/ACAreport
Familiarity with the Affordable Care Act
Small-business owners claim a reasonable degree of familiarity with the Affordable Care Act (ACA). Seventeen (17) percent
assert that they are “very” familiar with the Act while another 49 percent declare that they are “somewhat” familiar with it
(Q#74). In contrast, 21 percent are “not too” familiar with ACA and 13 percent are “not at all” familiar with the new law.
The current degree of self-assessed familiarity has grown modestly over the past two years. An NFIB study conducted
one year after enactment of the ACA showed that 58 percent claimed to be “very” or “somewhat” familiar with the law
compared to 66 percent of a similar population today.4 The number claiming to be “not at all” familiar with it declined just
five percentage points (from 18% to 13%) despite its approaching implementation and all of the noise surrounding it.
Firm size is highly related to self-assessed familiarity. The larger the firm, the more likely its owner(s) or manager is to
think he or she is familiar with the ACA and vice versa. Those most often directly affected, that is, employers of firms with
more than 50 employees, most frequently express familiarity. Eighty-nine (89) percent in that group think that they are
either “very” or “somewhat” familiar with the law compared to 65 percent in the 2 – 9 employee group.
The strong, linear relationship between ACA familiarity and employment size-of-firm is typical. The firm size variable
is almost always highly associated with elements of the ACA and health insurance. On almost every variable presented in
this report, increasingly large (or small) firm size categories have a higher percentage (or lower percentage) than the category
that immediately preceded (or succeeded) it.
Small employers currently offering employee health insurance are no more or less likely to claim familiarity with ACA
than those who do not. Sixty-seven (67) percent of small employers who offer employee health insurance claim to be “very”
or “somewhat” familiar with ACA compared to 65 percent who do not. As will be shown subsequently, owners of nonoffering firms do not typically obtain their information about ACA from sources within the insurance industry. Since they
claim equal familiarity to those who offer, they must obtain their information elsewhere. This raises a question about the
difference between general familiarity with the Act and familiarity with Act issues specific to the owner’s business. They
were not differentiated in the survey; in reflection they should have been.
One check for claims of familiarity with ACA was added to the questionnaire. It asked whether the respondent’s
state currently had an operating health insurance exchange or marketplace. With the exception of Massachusetts and
Utah, the answer should be, “no.” However, 19 percent reply, “yes;” 28 percent, “no;” and 53 percent are “not sure.”
The more familiar a small employer claims to be with ACA, the more often he or she chooses a “yes” or “no” answer
(Q#81). Twenty-nine (29) percent saying that they are “very” familiar are also “not sure” about the existence of an
exchange compared to 48 percent who are “somewhat” familiar, 69 percent who are “not too” familiar, and 78 percent
who are “not at all” familiar. But even if the “very” familiar are more certain, they are not more accurate. Removing the
cases from the two states that have operating exchanges (N = 25) leaves the same basic relationship between familiarity and knowledge of an exchange due to the small number of cases involved. However, in only 15 of the 25 cases did
respondents correctly say that an exchange is operating in the state.
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Small Business’s Introduction to the Affordable Care Act, Part 1
Information Satisfaction
The Affordable Care Act is a very complex piece of legislation, over 2,000 pages in length with more than 10,000 pages of
rules to implement it and counting. The result is a warranted concern on the part of all parties that small-business owners
will not have enough information to understand their responsibilities under the Act. Even owners of the smallest firms have
legal responsibilities to inform their employees of their options under ACA, known as a Notice of Coverage Options document. While the requirement still stands, the penalties and fines for failure to comply have been administratively rescinded.
Small-business owners are generally lukewarm over the value of the information that they have obtained about their
responsibilities under the new law, almost evenly divided between those satisfied and those not. Just 16 percent report
being “very” satisfied with the information obtained and another 38 percent being “somewhat” satisfied (Q#76). Fortyfive (45) percent express some degree of dissatisfaction with 22 percent being “not at all” satisfied.
Small employers more familiar with ACA are also more satisfied with the information obtained. Still, just 38
percent who claim to be “very” familiar with the new law are also “very” satisfied with the information they have
obtained to date. Sixty (60) percent who are “not too” familiar are generally dissatisfied with the information they have
obtained. (The question was not posed to owners who claim to be “not at all” familiar with ACA.)
A difference appears by business size with the 50 employee plus group 11 percentage points either “very” or “somewhat” more satisfied then the 2 – 9 employee group. The least satisfied owners fall in the 10 – 19 employee size group.
They are 15 percentage points less satisfied than owners of the largest. The emergence of 10 – 19 employee group from
the usual ascending or descending order by firm size appears with no explanation for it readily available.
4
Dennis, op. cit. Today’s “similar” population includes only those small employers having fewer than 50 employees.
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Information Sources
The single most important source of information about ACA for small-business owners has been the general news media.
Forty-two (42) percent say that the general news media is their single most important source followed by the insurance
industry/carrier (15%), trade association/business group (12%), a business advisor (10%), the health care industry/provider
(8%), and at the bottom, government (4%) (Q#75)(Table 1). Eight percent find another source most helpful, are not sure
which source is most helpful, or do not find any source helpful. These data are an indictment of the institutions that have a
responsibility for keeping small business owners abreast of what they are required to do under the law. Clearly, involved institutions, most notably government, have performed poorly in their outreach efforts. Government’s best excuse for its poor
performance is that so many issues critical to business decision-making were not decided until recently or still have not. That
problem has also made it difficult for others, particularly when they attempt to deliver the specifics to those directly affected
by the Act. Still, given the time remaining before the law’s implementation and the cartoon pabulum offered as information,5
it is difficult to think that government can recover and become a primary information source for its own program.
Employee size-of-business significantly changes a small employer’s most important information source (Table 1).
Owners of the largest firms, 50 employees or more, most frequently cite the health insurance industry/carrier (30%) and
the health care industry/providers (22%) as the most important. Those two numbers fall to 28 percent and 15 percent
respectively in the 20 - 49 employee classification. The sharpest business size distinction appears among those citing the
general news media. That source is most important for just 9 percent of those employing 50 or more, 22 percent of those
employing 20 - 49 people, but 48 percent among owners employing fewer than 10 individuals. A business advisor is also
directly related to firm size, with the largest category twice as likely to cite this source as the smallest.
Trade associations/trade groups are largely invariant by size category. Government is not a noticeable contributor in
any size group. Not a single respondent from the 50 employee and above group, the group most affected by ACA, identify government as their most important information source.
Small-business owners claiming to be “very” familiar with the Act most frequently note the general news media as
their most important information source (31%), followed by trade associations/business groups (23%), and health insurance industry/carriers (15%). Here again the author notes the potential difference between knowledge of the Act in
general and the Act’s requirements specific to the business.
Table 1
Single Most Important Information Source About ACA by Employee Size-of-Businesss
Total
N
5
12%
Employee Size-of-Business
10 – 19
20 – 49
50 – 100
Employees Employees Employees
All Firms
22%
28%
30%
15%
6
8
4
12
12
3
15
15
3
22
17
0
8
10
4
12
4
8
5
13
12
13
12
31
4
22
4
9
4
42
5
1
4
1
2
0
1
0
4
1
3
100.0%
231
100.0%
224
100.0%
238
100.0%
228
100.0%
921
See, for example, https://www.healthcare.gov/small-businesses/ Accessed July 12, 2013.
www.nfib.com/ACAreport
Small Business’s Introduction to the Affordable Care Act, Part 1
Health Insurance
Industry/Insurer
Health Care
Industry/Provider
Business Advisor
Government
Trade Association/
Business Group
General News
Media
Other
No Useful
Information
Unsure
2–9
Employees
5 |
Information
Source
Even small-business owners who currently offer health insurance are more likely to find the general news media
their most important information source (31%). The health insurance industry or a carrier is the next most likely source
(24%) for those who offer, though it still places second by seven percentage points. Fifty-two (52) percent of small
employers who do not offer identify the general news media. Small employers who do not offer also seem to be the relatively more frequent customer of government information. Six percent of them cite government compared to 1 percent
of offering small employers. Where the health insurance industry has its strongest relationships, it is the information
source most likely to usurp the information influence of the general new media.
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Small Business’s Introduction to the Affordable Care Act, Part 1
Health Insurance Offers
Forty-six (46) percent of survey respondents offer employee health insurance, a somewhat smaller estimate than found
in a comparable survey conducted by the Kaiser Family Foundation,6 though somewhat larger than found in the establishment-based survey of the Department of Health and Human Services’ (HHS) annual Medical Expenditure Survey
(MEPS) (Q#11).7 The principal difference between the NFIB and Kaiser estimates are that NFIB’s 2 – 9 employee size
stratum offer coverage in 34 percent of cases compared to 45 percent in Kaiser’s 3 – 9 employee size stratum. NFIB’s
and Kaiser’s estimates for the other three size strata are similar.
The likelihood of a small business offering health insurance increases as the employee size of firm rises. Thirty-four
(34) percent employing 2 – 9 people offer; 74 percent employing 10 – 19 offer; 80 percent employing 20 – 49 offer;
and, 92 percent employing 50 – 100 offer.
Offering firms and years in business are also associated when controlling for firm size. Small employers who have
been in business a greater number of years are more likely to offer than those who have been in the business a fewer
number of years. However, that relationship is driven primarily by those in business less than four years. They are one
and one-half times less likely to offer than the rest of the small business population, other factors equal. This is particularly significant for coverage questions given the turnover in very young firms. Not even half of employing small businesses reach five years of age, meaning that many have turned over before they have reached an age where the offer of
employee health insurance becomes relatively common.
Eighty-six (86) percent of small businesses offering employee health insurance offer it only to their full-time people
(Q#15). Another 11 percent offer it to both full- and part-time employees. Three percent do not recall. Size-of-firm
bears no relationship to the inclusion of part-timers, but businesses in industries such as health and social services and
professional, scientific and technical services appear more likely to do so than those in other industries.
The Affordable Care Act requires that all employers with 50 or more full-time or full-time equivalent (FTE)
employees must offer “adequate and affordable” employee health insurance coverage or be subject to a penalty. Ninetyfive (95) percent of small businesses employing 50 – 100 full-time people currently offer coverage, most of it presumably adequate and affordable, though the survey subsequently shows that some will probably need to increase their
cost-share (or raise wages) in order to qualify. The percent offering falls to 92 percent when the employer has 50 – 100
full- and/or part-time employees. Assuming for the moment that part-time employees do not push any employers above
the 50 employee threshold, approximately 5 percent of 50 employee and over population or 5,600 small employers
therefore must introduce an offer of employee health insurance coverage by January 1, 2015 (postponed from the legislated January 1, 2014) or face a penalty.
Since the ACA contains a threshold of 50 full-time employees before the employer-mandate becomes effective,
the manner of counting to 50 becomes a matter of considerable interest. The survey addresses the full-time employee
count in three ways: an examination of part-time employees, seasonal employees, and the so-called aggregation rules
which require combining the employees of separate businesses owned by one individual or a group of individuals into a
single firm for purposes of the Act.
Part-time Employment
Part-time employment is an issue under ACA for two reasons: calculation of the 50 full-time or full-time equivalent
(FTE) employee threshold for the employer-mandate uses the monthly total of part-time employee hours to create a
full-time equivalent employee. The number of hours logged by part-time employees must reach 120 per month in order
to qualify as one full-time equivalent. Those hours could be distributed among two to 120 employees. A full-time equiv-
Kaiser Family Foundation, 2013 Employer Health Benefits Survey, August 20, 2013. http://kff.org/private-insurance/report/2013-employer-
6
health-benefits/ Accessed August 30, 2013.
U.S. Department of Health & Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey. http://meps.
7
ahrq.gov/mepsweb/data_stats/summ_tables/inst/national/series_1/2012/tia2.pdf Accessed August 30, 2013.
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alent employee counts toward the 50 employee threshold. Second, employers must offer health insurance to full-time
employees, but are not required to offer it to part-time employees. The ACA defines full-time employee as working 30
hours per week or more (or a 130 hours per month or more), a ridiculously low figure given that the Fair Labor Standards Act defines the standard work week for purposes of overtime pay as 40 hours, though 37½ or 35 hours per week
are not unusual. Part-time employees under ACA therefore work less than 30 hours per week.
To illustrate, if an employer has 40 full-time employees and 50 part-time employees, whose total monthly hours are
the ACA equivalent of 20 full-time employees (FTEs), the business would have 60 total employees for threshold calculation purposes. But, the business would be obligated to offer coverage to only the 40 full-time employees.
A majority of small employers (56%) use part-time help (defined here as fewer than 30 hours) (Q#6). Eleven
percent do not know the number of part-time employees they have. Large contingents of part-time employees however,
are the exception rather than the rule. Just 16 percent of small businesses with part-time employees or 9 percent of the
population have enough people working less than 30 hours per week (excluding seasonal employees) to constitute half
or more of their of their labor forces. More than two in five of those are very small firms with nothing but part-time
employees. Just 1 percent of employing small businesses have more than 20 part-time employees.
The most vulnerable firms to part-time employees pushing them over the 50 employee threshold is the 20 – 49 fulltime employee group (N = 216) that also employ people part-time. Two-thirds (67%) of the 20 – 49 full-time employee
group have part-time workers. Fourteen (14) percent more did not provide a number for their part-time employees,
though in most cases it appears to be zero, (an assumption extended in the following numbers.) Ninety-four (94) percent
of firms with part-time employees (53% of the population) have just 2 – 9 of them, meaning that unless these businesses
are now close to the 50 employee threshold, part-time employees are not likely to drive them over. Still, 12 percent of
small employers with 20 – 49 full-time employees have 20 or more part-time employees. Two-thirds of businesses with 50
or more full-time employees have part-time employees thereby compounding any efforts their owners intend to make in
order to contract to fewer than 50 employees. An estimate of the actual number of businesses in either of these latter two
groups whose status under the employer mandate could be determined by the number of part-time people they employ
is difficult to make. Published Census employee size-of-business counts do not distinguish between full- and part-time
employees. However, the number is likely closer to 75,000 than it is to 25,000 or 125,000.
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7 |
The Cash Flow Problem, National Small Business Poll, (ed.) William J. Dennis, Jr., NFIB Research Foundation: Washington, DC. Vol. 1, Iss. , 2001.
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Small Business’s Introduction to the Affordable Care Act, Part 1
Seasonal Employees
The status of seasonal employees in the count to reach the 50 employee threshold for purposes of the employermandate is currently one of the more incomprehensible portions of the Act’s rules. Hopefully, the problem stems from
the failure to yet define a seasonal employee for purposes of ACA. Discussion has focused on 120 days or four months
for a seasonal worker exception to the employer mandate, reasonable definitions, but the final definition will doubtfully be that simple. However, a final determination of the definition for seasonal employee does not mean that they
will be exempted from the employer-mandate count. One possibility under consideration is that the hours of seasonal
employees will be counted in the same manner as those of part-time employees. Regulators seemingly understand that
seasonal work is not limited agricultural and retail employees.
One often assumes that the summer season is the principal time of year that small-business owners hire seasonal
labor. That is not correct. While about half of small-business owners claim that their sales are spread evenly throughout
the year (with their employment levels presumably steady), the remainder encounter notable variation.8 Seven percent
even report a majority of their sales occur in a single quarter. Further, not all seasonal activity occurs during the summer
or at Christmas. One-quarter of owners claim that their high season begins in the January – March period, a time frame,
for example, likely familiar to businesses in accounting and tax preparation.
To estimate seasonal employment in small businesses, the survey asked respondents for the number of people that
they employ who are seasonal and will leave at the end of the summer. The question assumed a general understanding
of the word, seasonal. Since the survey was conducted from mid-June through late July, the end of the summer is a
reasonable time to expect that most seasonal employees would end their employment.
Eighty-two (82) percent of all small employers report that they have no full-time seasonal employees and another
10 percent say that they do not know (Q#5). Most of those who do not know own the smallest firms (13%), the 2 –
9 employee size group. Over 80 percent in each of the three size categories with fewer than 50 employees do not have
full-time seasonal help. That number falls to 73 percent among the group with 50 employees or more, the one whose
members will be most concerned by the ACA’s seasonal employee definition. Many of these larger firms have seasonal
workers, but employ just one or two of them (8%), suggesting summer work for local teen-agers. However, another
8 percent hire 10 or more people for full-time seasonal work, including 4 percent who hire 20 or more people. These
latter businesses appear potentially dependent on a seasonal workforce, and might not have the luxury of eliminating it
should ACA’s definition of seasonal employee prove adverse. Of only somewhat less concern is the 20 – 49 employee
stratum. About 84 percent of that group have no full-time seasonal employees with another 8 percent employing just
one or two. None report hiring 20 or more full-time seasonal employees. Relatively few firms in this size category appear
reliant on full-time seasonal labor, at least during the summer season.
Only about 13 percent of small employers have summer seasonal part-time help, 20 percent of those having any
part-time people (Q#7). Virtually all of those employ just 1 – 9. The Christmas season could exhibit a different pattern
with a substantially larger portion of part-time employees.
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Small Business’s Introduction to the Affordable Care Act, Part 1
Employee Aggregation
One of the lesser recognized rule sets, at least anecdotally, that many small employers must comply with is the so-called
aggregation rules. These rules were established to bring as many employers as possible up to the 50 employee threshold
and to prevent larger, small businesses from splintering into separate firms in order to escape the employer-mandate.
They effectively require that small employers owning more than one business combine the employees from all firms into
a single unit for purposes of reaching the ACA’s 50 employee employer-mandate threshold. However, such a simple
concept has led to a nightmare in practice as the rules drawn to implement it likely require legal interpretation from
authorities in employee benefits law.
The problem arises because the world consists of many single firms with multiple owners and many single owners
with multiple firms. For example, just 35 percent of small businesses employing 20 or more people have a single owner
(counting a husband/wife combination as a single person).9 Reverse the situation and one finds that 39 percent of people
owning a small business with 20 or more employees also hold a 10 percent or more share in at least one other venture,
separate and distinct from the enterprise about which they were initially interviewed. Adding to the complication is the
degree of control owners have over each business. Seventy (70) percent who have family member co-owners (41% of
employing businesses) indicate that these family member/owners actively participate in the firm’s critical decisions.10
At the same time, owners are likely to participate in the critical decisions of a second firm they own, though they are
somewhat less likely to participate in the critical decisions of a third firm owned.11
The rules proposed to handle these complexities and determine the meaning of a single business entity is the ERISA
rules, a highly intricate body of law, destined for interpretation by legal specialists in employment benefits law, not
for the general public or even for attorneys generally. The implication is that a non-trivial number of small businesses
should seek an interpretation from a specialist in employee benefits law to be confident about his or her status. That is
not likely to happen.
The survey asked respondents whether the total number of full-time employees in the small business about which
they were being interviewed and any other in which they owned at least a 50 percent share added to 50 employees or
more. In other words, would the full-time employees in all the firms owned reach the employer-mandate threshold?
Ownership for purposes of the aggregation rule is vastly more complex than represented in the question, but the exact
rule could not possibly have been conveyed to lay people in a sentence or two. Furthermore, the question’s purpose was
simply to provide an order of magnitude rather than a precise estimate.
Four percent of small employers (150,000) who were interviewed owned other businesses whose combined employment is more than 50 full-time employees (Q#77). The largest contingent comes from the 20 – 49 employee group
that has 8 percent moving to the 50 employee or above category. Various factors could influence the direction of the
150,000 firm figure. For example, the inclusion of part-time employees in the question adds to the total. A more precise
ownership definition probably would subtract from it. Still, aggregation rules present a potential problem for a sizeable
number of small businesses and many of their owners do not appear aware of it.
High-Paid, Low-Paid Employees
Family income was to be a major determinant of the subsidy that lower income families were to receive when purchasing
their health insurance in an exchange. It also was to be a critical factor in determining whether the insurance an employer
offers is affordable.12 The offer of affordable insurance is important to both the employer and employee because an employee
Business Structure, National Small Business Poll, (ed.) William J. Dennis, Jr., NFIB Research Foundation, Vol. 4, Iss. 7, 2004.
9
Businesses Within Families, National Small Business Poll, (ed.) William J. Dennis, Jr., NFIB Research Foundation, Vol. 12, Iss. 4, 2012.
10
Ibid.
11
“Affordable” is a legal term for present purposes, that is, a term defined by rule or law, not the relative and more commonly used economic term.
12
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can refuse an employer’s offer of coverage and receive subsidized coverage on the individual exchanges if the employee
cost-share constitutes more than 9.5 percent of the employee’s income; if it does not, the employee must participate in the
employer’s program or purchase unsubsidized insurance elsewhere. Should the employer’s insurance not be affordable the
employee has an incentive to refuse the employer’s offer and go into the exchange because he or she can receive a subsidy
to purchase insurance. That subsidy, particularly for low income employees, likely makes the out-of-pocket insurance cost
lower than if the employee participated in the employer’s plan. The employer’s offer and the employee’s choice, therefore,
has significant financial consequences for all parties involved – employers, employees and government.
The wage distribution of small businesses is difficult to elicit in a survey of this nature. So, the questions posed
focused on the number of full-time, non-seasonal employees who earn more and less than a specified amount per hour
or per hour annualized. The amounts chosen are tied to levels important to ACA. The poverty level for an individual is
currently a wage of about $8 an hour or a salary of $16,000 annualized. Subsidies in the exchange end at four times the
poverty level or about $23 per hour or $46,000 annualized. These figures increase as the number of dependents rise.
Relatively few small businesses have employees that they pay less than $8 an hour or its annualized equivalent.
Eighty-six (86) percent have no such employees (another 2 percent are not sure), and most of those appear to have
relatively few (Q#8). For example, 8 percent have fewer than one in ten of their employees earning that low wage
compared to 3 percent that have 90 – 100 percent of their employees earning it. Most of the latter group appear to be
in the food services and accommodations industries, and to a much lesser extent, in retail. The data therefore artificially
depress income on the lower end because they fail to account for tips.
Forty-seven (47) percent of small businesses have no employees who earn more than $23 an hour or $46,000 annualized, though 3 percent do not know (Q#9). That varies considerably by employee size of firm with smaller firms
having a higher percentage who do not and larger firms a lower percentage. For example, 55 percent of small businesses
in the 2 – 9 employee stratum have no employees earning $23 an hour or more. In contrast just 8 percent of the 50 –
100 employee stratum have none. The same relationship appears when examining the proportion of employees who
earn higher wages. Twenty five (25) percent of the largest have at least half of their work force earning $23 an hour or
more while just 7 percent of the smallest do.
A modest three-point scale was developed from these data in order to subsequently determine if the behavior of
small-business owners ties to behaviors associated with offers of health insurance. The result of the calculation13 is
that 12 percent are higher-paying firms, 79 percent medium-paying firms, and 9 percent low-paying firms. For current
purposes, the scale illustrates a direct and strong tie between wages in firms and the offer of health insurance.
One means to help employees obtain health insurance coverage other than a direct offer is extending cash payments
or reimbursements to employees in order to purchase coverage on their own. This option is likely to become increasingly attractive for many employers and employees under ACA due to the premium price adjustments caused by the
Act’s generally expanded community rating system, minimum benefit package insurer taxes that will be rolled into
higher premiums, and subsidies within the exchanges. The relative advantages of reimbursement/financial support will
vary significantly among employers and employees, but some of both will be big winners by substituting a reimbursement/cash payment system for an employer offer of health insurance. The following is how that might work: a small
employer paying relatively low wages drops employee health insurance, pushing employees into the subsidized individual exchange. The employee then pays the non-subsidized portion of the premium and the employer reimburses
the employee’s share or gives the employee a flat amount to compensate. Employees would often prefer this arrangement because they no longer pay a cost-share for the employer’s plan and get paid/reimbursed for the employee costshare (unsubsidized portion) in the exchange plan. They may even pocket some money. Employers would often prefer
the arrangement because they only make the contributions they would like and it allows them to rid themselves of the
administrative hassles in offering. This system is particularly attractive when the firm has a relatively low income labor
force which is eligible for substantial subsidies. Though the reimbursement is taxable income for employees, the beneficiaries are likely to fall in the lowest income tax brackets or pay no income tax at all.
Fourteen (14) percent of non-offering small employers currently provide such financial support (Q#13). Owners of
smaller, small firms are the most apt to use this option. Fifteen (15) percent in the smallest stratum, 2 – 9 employees,
offer reimbursement/payment compared to 11 percent in the 10 – 19 employee group, 7 percent in the 20 – 49
A high paying firm has 25 percent or more of its employees earning more than $23.00 an hour or its annual equivalent, the point at which subsidies
13
9 |
are terminated, and none less than $8.00 or its annual equivalent. A low paying firm has employees earning less than $8.00 an hour and none above
Small Business’s Introduction to the Affordable Care Act, Part 1
Reimbursement
$23.00. The remainder are classified as middle paying firms.
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employee classification, and none in the 50 employee plus category. Since direct financial assistance substitutes for
coverage offers, owners of smaller firms are most likely to use it as are those who report stable earnings, stable at least
compared to the prior year.
The criterion on which such financial support depends varies considerably and the number of cases is too small
(N = 31) to draw conclusions (Q#14). However, it appears that a defined contribution, a flat amount, is the most
common form. Percent of the premium, percent of the employee’s wages or salary, the employee’s length of service,
and other potential criterion appear less frequently used.
10 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Self-Insurance
Self-insurance can be a good deal for some small employers because it allows them to escape many of ACA’s requirements, including its community rating provisions and certain taxes. Proponents of ACA express concern that many small
offering employers will exit the fully-insured market and switch to self-insurance.14 Such withdrawals from the fullyinsured market, presumably taken by the best risks, will cause the SHOP exchanges to go into an adverse-selection stimulated death spiral, thereby undermining an essential part of the Act. Small-business advocates should be concerned
if the lion’s share of good risks suddenly opts for self-insurance. However, the data indicate that ACA proponents’
concern is vastly over-blown at this point.
Just 4 percent of small employers currently offering employee health insurance say that they self-insure (Q#19).
Though simple explanations of self-insured and fully-insured were provided respondents in the survey questionnaire,
another 9 percent say they are not sure if they are self-insured or not. This uncertainty surrounding self-insurance is
reinforced by the surprising number of owners employing 2 – 9 people who either report that they self-insure (3%)
or are not certain if they do or not (9%). Small employers with 10 – 19 employees claim to self-insure in 8 percent
of cases and are uncertain in another 5 percent. Since it is virtually impossible as a practical matter to self-insure if
a business has fewer than 10 employees and highly unlikely among those employing between 10 and 19 people,15
the survey reveals considerable confusion among small employers with respect to self-insurance and related matters.
The Employee Benefit Research Institute (EBRI) shows, based on MEPS data, that between 10 and 15 percent of
employees are covered in self-insured establishments with fewer than 20, a number that has held remarkably steady
over the last decade.16 However, employees covered is not the same as firms offering; establishments (places of business) are not the same thing as enterprises (businesses). Larger firms (with more employees) are more likely to pursue
this route than smaller ones, even within an employee-size stratum. Establishments can be part of a larger enterprise,
thereby inserting larger firms, the most likely to self-insure, into a smaller firm size group. The data collected here
among the smallest businesses therefore does not yield a result noticeably different from an official source. Still, given
the uncertainty surrounding self-insurance among small-business owners and the minimal opportunities to self-insure
among the smallest, it is highly likely that those who claim to be uncertain do not self-insure and some that claim they
do, actually do not.
The more relevant size group to ascertain the prevalence of self-insurance among small business consists of firms
employing 20 – 100 people. The 20 – 49 employee stratum has 7 percent self-insuring (4% uncertain) and the 50 –
100 employee stratum has 13 percent (4% uncertain). Merging the two strata produces 9 percent of offering firms
employing 20 – 100 people that self-insure and another 4 percent whose owners are uncertain (N = 405). Of that 9
percent, about 1.5 percent volunteer that they are self-insured but carry no reinsurance. Since reinsurance acts as a stoploss for the business, its absence, even among such a small number, raises the why question.
The increased attractiveness of self-insurance caused by ACA appears to have generated limited interest among
those who are currently in the fully-insured market. Just 4 percent indicate that it is “highly” likely that they will switch
from the fully-insured market to self-insurance the next time their policy comes due (Q#20). Another 4 percent say
that it is “somewhat” likely. The critical groups are again those larger, small employers. Small-business owners in the 50
employee and over stratum are substantially more likely to express interest than those in the 20 – 49 employee stratum
Typical examples include M. Calsyn and E.O. Lee, “The Threat of Self-Insured Plans Among Small Businesses.” Center for American Progress,
14
June 19, 2013; T. S. Jost and M. A. Hall, “Self-Insurance for Small Employers Under the Affordable Care Act: Federal and State Regulatory Options,” Washington & Lee Public Legal Studies Research Paper Series, Accepted Paper No. 2012-24, Washington and Lee University School of
Law, Lexington, VA, June 27, 2012.
Self-insured businesses, even those that have several thousand employees, typically purchase reinsurance in order to protect themselves from an
15
extraordinary large claim or several of them occurring in the same year. State insurance rules often prohibit reinsurance from being sold to small
groups and many insurers simply will not sell it to them.
Paul Fronstin, “Self-Insured Health Plans: State Variation and Recent Trends by Firm Size,” EBRI Notes, Vol. 33., No. 11, November 2011.
16
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(14% to 9%). However, half of those in the two 20 employees or more strata claim a switch is “not at all” likely and
another 20 percent report it “not too” likely.
The limited interest in self-insurance may in part be tied to owners’ lack of immediate attention to health insurance
renewal. Perhaps they recently renewed; perhaps they just have not yet focused on the next renewal. Regardless, 19
percent have not thought about renewal to date, meaning they have also not thought about the possibility of switching.
The data cumulatively therefore do not show a pending avalanche of small businesses heading to self-insurance. They
do suggest increased interest.
A major issue for many small employers is the individual attachment point in the reinsurance they purchase, that is,
the dollar amount of claims for any one individual after which reinsurance becomes effective. The lower the point, the
less an owner will have to pay out-of-pocket in the event of any single employee incurring extremely large claims. The
survey posed a question among those who are self-insured about the level (amount) of their individual attachment point.
Too few cases are available to be comfortable with results (N = 54). However, self-insured small employers often seem
unfamiliar with the topic. One-third (36%) say they do not know the individual attachment point for their reinsurance
and another one-third plus (39%) could not provide a plausible answer to a question that allowed them to respond in
$10,000 increments (Q#21).
Employee Requests for Insurance
The ACA requires most individuals to carry health insurance (individual-mandate) or pay a penalty. Despite the subsidies, the individual requirement means that millions of previously uninsured Americans will have at least some new
payment for health insurance that they will have to absorb beginning in January, 2014. Fourteen million people who
work in employing small businesses are uninsured.17 Since most Americans obtain their health insurance through their
employers, it is not a stretch to think that many currently not covered by their employer will ask their employers to
offer in light of the individual-mandate.
Employees or employee representatives in 4 percent of small businesses that do not now carry insurance requested
in the last six months that their employer begin to offer (Q#12). The question defined a request as coming from
more than 5 percent of employees, or representatives of more than 5 percent of employees. That amounts to a single
employee in a firm of 20 or fewer, a relatively modest test.
The 4 percent number is rather small, likely not far from the number receiving them in a more conventional time.
The critical point comes next year when the individual-mandate is effective and the new premium costs reach currently
uninsured employees.
Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2012 Current Population Survey, EBRI
17
Issue Brief, No. 376, Employee Benefit Research Institute: Washington, DC, September 2012, Figure 13.
Fronstin, 2012, op. cit.
18
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11 |
Eighty-four (84) percent of small-business owners have health insurance coverage (Q#10). The most common source
of that coverage is the business’s plan (35%). An individual plan is the next most common source (30%) followed by
a spouse’s plan (19%). A substantial number of small employers (15%) do not have coverage. If one assumes a small
employer population of seven million, then just over 900,000 small employers have no insurance. Since firms with
multiple owners are likely to be larger than those with a single owner and larger firms are more likely to offer health
insurance, the 900,000 figure should be scaled back. Just how far it should be scaled back is another matter.
EBRI calculations based on Census data show 3.5 million uninsured self-employed people in 2011 out of 12.4
million self-employed.18 However, about five and one-half million of those self-employed employ no one but themselves. Those data imply that about 40 percent of the non-employer, self-employed population is not covered.
There are also strong ties between an owner’s personal coverage, a firm’s offer of insurance, and where the owner
obtains personal coverage. If a small employer offers, there is a two in three chance that he will obtain his personal insurance through the business. If a small employer is personally covered, there is a 50 – 50 chance that he offers employee
coverage. If a small employer is not personally covered, there is a 1 percent chance he offers employee coverage.
The person interviewed for the survey is not always the owner. In 25 percent of cases, particularly among larger,
small firms, the person interviewed is a paid manager who has no ownership interest in the business (Q#1), though they
are uniformly involved in the decisions about employee wages and benefits (Q#2). These managers effectively substitute for the owners, but do not always have the same insurance coverage. Managers are 6 percentage points less likely
to be covered than owners. However, if managers have coverage, they are about 12 percentage points more likely to get
Small Business’s Introduction to the Affordable Care Act, Part 1
Owner Coverage
coverage through the business than are owners. That means when a business does offer, managers are likely to take it
and less likely than owners to find insurance elsewhere.
Plans Offered
The most common type of plan small-business owners currently offer is a PPO (32%), followed in frequency by an
HMO (26%), a high-deductible PPO (25%), and a POS (5%) (Q#16). Twelve (12) percent are not certain which type
of plan their firm extends. PPO and POS plans are somewhat more common among larger, small firms than smaller,
small ones. For example, 39 percent of those with 50 or more employees offer a PPO compared to 28 percent of those
with fewer than 10. The question moving forward is whether owners of offering small businesses will gradually start
moving into the cheaper alternatives, that is, HMOs and high-deductible PPOs.
Fifteen (15) percent offer a second plan (Q#17), larger, small firms doing so two and one-half times (25%) as often
as smaller, small firms (10%). The second plan’s distribution is similar to first’s, except for POS plans, which seem more
frequent. The distribution is: a high-deductible PPO (24%), PPO (23%), HMO (19%), POS (15%) and 18 percent do
not know (Q#18).
An employee’s ability to choose from a variety of health insurance plans is a highly attractive feature of the SHOP
exchange. Unfortunately, choice is another casualty of ACA administrative problems in the federally-facilitated SHOP
exchanges. The delay in SHOP choice is presumably a year, or in some states, until officials can persuade more insurers
to participate.
12 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Coverage Available
Small businesses subject to the employer-mandate under ACA must offer health insurance coverage to their employees,
but are under no obligation to contribute to family coverage or plus-one coverage that benefits employee family members.
Many small businesses, as a practical matter, have offered family coverage for a considerable period and continue to
do so. However, small employers often treat coverage for their employees and coverage for their employees’ families
differently. The cost of family coverage is higher than it is for individual coverage, leading many small employers to
share a lower portion of their costs than for individual coverage. Plus-one coverage is a more recent market insurance
product, but small employers tend to treat its higher costs (compared to individual coverage) more like family coverage.
The pending question is whether ACA will change any of this, particularly cost-sharing and offers of family and plusone coverage.
There is a second consideration. Currently, the employer’s cost for an employee’s health insurance premium is
excluded from federal and state income tax. Beginning in 2018, any employer-paid premium above $10,200 for employeeonly plans and $27,500 for family plans will become taxable income. The effect is to tax recipients (employees) of Cadillac
(very generous) health insurance packages. While this provision of ACA impacts high-paid employees with Cadillac packages more than others, the tax can easily reach into the middle class. The current study is too brief to assess any consequences from taxation of Cadillac plans. But that does not mean small businesses and their employees will be unaffected.
The survey instrument presented a one sentence background and posed the following question to small-business
owners reporting that they currently offer health insurance to their employees: The sequence begins: “There are typically three types of health coverage policies: family, individual and plus-one. Does your business offer:?” Some small
employers say they offer, but no employee uses that type of coverage; others appear to respond that there is coverage
only if one or more employees take it. Therefore, for purposes of consistency and clarity, a business offers individual,
family or plus-one coverage only when at least one employee takes it.
Seventy-one (71) percent extend individual coverage, also known as employee-only coverage (Q#27), 65 percent
family coverage (Q#23), and 27 percent plus-one coverage (Q#31). Should employees (or new employees) want a
different coverage than the one(s) currently used, it may or may not be possible to access it.
Table 2 presents the distribution of coverage combinations. Sixteen (16) percent offer all three. That percentage
is strongly tied to firm size. Almost half (48%) with 50 or more employees offer all three while just 6 percent of those
with fewer than 10 employees do. Thirty-eight (38) percent of offering small firms purchase two of the three types of
coverage. That percentage is largely invariant by employee size-of-business. The smallest are most likely to have one
type of coverage (46%) while the largest are the least likely (13%). Eight percent cannot or will not identify the type
of coverage they offer.
a. Individual Coverage
Individual coverage is closely tied to firm size. Just 65 percent of those owning businesses in the 2 – 9 employee size
stratum offer it compared to 82 percent in the 50 – 100 employee group. While 5 percent are not certain if they offer
individual coverage, the principle reason that only just over seven in ten report offering individual coverage is that
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many employees use the other two types of coverage. That is particularly likely in the numerous firms with the fewest
employees. It also suggests that many people without families are opting out. Given the individual-mandate in ACA, it
is likely that the 71 percent having individual coverage will rise over time.
The median cost for employee-only coverage (employer and employee share) is about $550 a month (Q#29). Twothirds report costs of less than just over $725. Less than one-in-ten report costs of less than $300 a month. About the
same number says that their individual coverage is $1,000 a month or more. The largest share of these more costly policies are purchased by small employers with fewer than 20 employees.
Table 2
Types of Health Insurance Plans Offered in Small Businesses
Three Types
Ind., Family, Plus-One - 16%
Two Types
Individual, Family - 29%
Individual, Plus-One - 4
Family, Plus-One - 5
One Type
Individual - 22%
Family - 14
Plus-One - 2
Eight percent could not identify the type of plan(s) offered.
Thirty (30) percent indicate that all of their full-time employees have individual coverage (Q#30). The proportion
with all of their employees having employee-only coverage is related to employee size-of-business as 36 percent of the
smallest have all of their employees individually covered while only 11 percent of the largest do. However, another 24
percent report that most of their employees have individual coverage. The distribution by size-of-firm is the opposite
than it is for all employees. Thirty-seven (37) percent of the largest have most employees in individual coverage while
20 percent of the smallest do. Eleven (11) percent report about half of their employees use employee-only coverage and
33 percent have just some employees covered in this manner.
Small employers contribute more for individual coverage on a percentage basis than other forms of employee health
insurance. Forty (40) percent say that they pay the entire premium (Q#28) (Table 3). Another 50 percent say that they
pay between 50 – 99 percent. Thus, 90 percent of small employers who offer employee-only coverage pay at least half
of that coverage. Just 2 percent say that they make no contribution.
Twenty-seven (27) percent offer plus-one coverage, that is, coverage for an employee and one other person, typically a
spouse. Owners of the largest, small businesses are about three times as likely to offer plus-one coverage as the smallest,
small firms (57% - 18%).
The median cost (employer and employees shares) for plus-one coverage is just over $725 a month (Q#33). Twothirds pay about $975. Just 6 percent report coverage costing more than $1,500 a month. The distribution of costs
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13 |
c. Plus-One Coverage
Small Business’s Introduction to the Affordable Care Act, Part 1
b. Family Coverage
Sixty-five (65) percent offer family coverage; 21 percent don’t; and 1 percent are not certain. Employee size-of-business
is again highly related. Ninety-one (91) percent of the largest small businesses offer family plans while just 56 percent
of the smallest do.
The median cost for family coverage (employee and employer shares) is about $800 a month (Q#25). Two-thirds
pay less than $1,000. Still, 6 percent report their premiums of $2,000 or more a month, virtually all of which appear in
the 2 – 9 employee size stratum. The surprise is that 16 percent cannot or will not provide a cost estimate. More will
be said about this later.
The most common amount of employees participating in family plans is “some”, that is, between about half and
none (Q#26). Fifty-three (53) percent fall in this group. However, 14 percent say that all employees have family policies. Virtually every one of these lies in the 2 – 9 employee size stratum. Nineteen (19) percent say “most” do and 12
percent say “half”. Two percent are not certain.
Where small employers offer family coverage, the business pays 100 percent of the premium in over one quarter of
cases (27%) (Q#24) (Table 3). The business pays between 50 and 99 percent of the premium in 46 percent of them,
meaning that the business pays at least half for the employee’s family coverage in three-quarters of cases. Eight percent
of offering small employers claim that they pay “nothing” toward family plans.
appears quite large, much more than for either individual or family. The reason is not obvious, though one might speculate that the relative unfamiliarity of this insurance type might allow insurers’ greater pricing flexibility than otherwise
might be the case. Thirteen (13) percent of small employers offering plus-one coverage could not or would not estimate
the monthly amount they spend on it.
Participation in plus-one coverage is relatively infrequent even in those firms that offer it. Seventy-seven (77)
percent say that “some” use it (Q#34). Just 19 percent report that half or more of participating employees have plusone coverage.
The employer cost-share for plus-one coverage is somewhat more generous than for family coverage. That makes
sense given the relative costs. Still, 21 percent pay 100 percent of the cost and another 33 percent pay between 75 and
99 percent (Q#32) (Table 3). In all, nearly three-quarters (73%) pay at least half of their employee’s plus-one coverage.
Table 3
Percent of Employee Health Insurance Premiums Paid by Employers by Type of Policy
% Employer Paid
100 Percent
75 – 99 Percent
50 – 74 Percent
< 50 Percent
Nothing
Not Sure
Total
N
Individual
Type of Policy
Family
Plus-One
40%
23
27
6
2
2
27%
19
28
11
8
7
21%
33
19
8
12
5
100%
525
100%
523
100%
227
While employees contribute a substantial portion of the total premium through cost-sharing arrangements that range
from no cost-share to full payment (see Table 3), small employers pay the largest share of the premium cost for individual plans. They absorb 100 percent of the cost in 40 percent of cases. The median employer cost-share for an individual plan is between 85 and 90 percent. That amounts to an employer cost of about $490 per employee per month.
Two-thirds pay about $640 a month or less.
To be an affordable plan under ACA, the employee’s cost-share can amount to no more than 9.5 percent of wages;
the absolute amount the employee must pay is immaterial. Thus, an employee earning $40,000 a year can pay no more
than $3,800 ($317 per month) as their share of their health insurance cost. Employers subject to the employer-mandate
must offer affordable insurance or be subject to a penalty. The affordability question is inconsequential to other smallbusiness owners, unless employees decide to leave their employer’s insurance and switch to potentially subsidized insurance from the exchange. If the small employer’s insurance is affordable, the employee cannot switch (or not receive a
subsidy if he does); if it is not affordable, the employee can.
Table 4 illustrates ACA affordability as it impacts current small business cost-sharing. Note the two columns in
the left panel. The first contains a hypothetical employee’s annual earnings. The second shows the maximum monthly
amount the employee could pay for health insurance and still have the employer’s plan qualify as affordable under
ACA. The right panel in Table 4 shows the monthly premium small employers currently pay for an employee’s coverage
(employee and employer shares) by the percentage of the employer’s cost-share. The percentage in each cell represents the proportion of small businesses that have the two characteristics in their employee-only plan. For example,
11 percent of small employers offering individual coverage pay 100 percent of a plan costing between $400 and $599.
14 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Cost-Sharing in Context
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Table 4
ACA Affordable Coverage and Monthly Premium for Individual
Coverage by Percent of Employer Cost Share
$158
$238
$317
$396
$475
$554
$633
$713
>$400
$400-$599
$600-$799
$800-$999
$1,000+
Not Sure
N
8%
11%
5%
6%
7%
2%
131
5%
8
4
1
2
3
178
8%
2%
1%
5
1
0%
3
12
42 0
1* 0
4
0
0
165
31
8
1%
1%
0
0
0
0
10
N
170
169
72
30
33
49
523
Table 4 also permits rough estimation of the number of current small businesses with coverage that is not affordable for an employee earning $40,000. The table shows that an employee earning $40,000 can contribute no more than
$317 a month or his employer’s plan is not affordable (left panel). If the insurance plan therefore cost $500 a month and
the employer contributes 35%, the plan would not be affordable; if the employer contributes 40 percent, it would be.
If the plan were $900 a month and the employer contributes 60 percent, it would not be affordable. But a 65 percent
contribution would make it so. The italicized bold numbers in table’s right panel running from upper right to lower
left roughly estimate the percent of firms that do not offer affordable coverage for an employee earning $40,000. The
total of all affected cells is 11 percent, though crossing size classes and using mid-points to make estimates, reduces the
percentage somewhat. The reader can make similar estimates for other income amounts.
Small employers are less generous in their cost-sharing arrangements for family and plus-one plans, both because
they are more expensive than individual plans and because dependents do not work for their firms. Small employers
do pay 100 percent for family plans in 27 percent of cases and 100 percent for plus-one plans in 21 percent of cases.
However, the median contribution is also much lower than for individual plans, about 75 percent for the latter and
somewhat less for the former. Even then, family and plus-one plans are more expensive for small employers than individual plans. The median employer cost of a family plan per employee per month approximates $575 (two-thirds are
$725 or less) and the employer cost of a plus-one plan per employee per month approximates $540 (two-thirds are
about $730 or less). The differences are not extraordinary, however. The median difference in employer cost (after
employee cost-share) between individual and family coverage approximates $85 a month, and between individual and
plus-one coverage approximates $50 a month.
A modest relationship appears between the amount (in percent) of the employer’s cost-share and employee participation for both individual and family coverage. The same relationship does not appear in plus-one coverage, perhaps
due to the smaller number of cases, or to its infrequent applicability in real world situations. The most extreme instance
occurs in individual coverage where 58 percent experience all of their employees participating when the employer pays
100 percent of the premium (free insurance). But even when the employer pays 100 percent of the premium, many do
not take it, presumably because they have even more attractive alternatives. Once cost-sharing declines, so do participation rates. Since there are so few cases with cost-sharing below 50 percent, it is difficult to explore the relationship
more completely.
Employee Participation
When small employers offer health insurance, substantial percentages of their full-time employees participate. Eighty-five
(85) percent offering coverage report that half or more of their full-time employees are covered by their firm’s plan (Q#22).
Fifty-seven (57) percent note participation from at least three of four. Thirty (30) percent claim total (100%) participation.
Employee size of business is closely tied to participation. Full-time employees in the smallest, small businesses
are more likely to participate than those in the largest. For example, 39 percent of small employers with businesses
employing 2 – 9 people report full participation compared to just 9 percent of employers with 50 – 100 people working
www.nfib.com/ACAreport
Small Business’s Introduction to the Affordable Care Act, Part 1
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Not
Sure
15 |
Wage AffordableMonthly
/Salary/Mo.
Premium 100% 99-75%74-50% 49-1% Nil
for them. There are two reasons for this size distribution. The first is that it is simply easier to obtain 100 percent participation from a smaller number of employees than a larger number. Employees often have coverage alternatives, such as
a spouse’s policy, and with more employees, there is a greater likelihood one or more employees will choose an alternative. The second is that insurers of small groups require minimum participation rates in order to limit adverse selection.
If enough full-time employees do not participate, the business cannot obtain insurance. Thus, the smallest employers
may sweeten the pot for reticent employees, an issue not often faced by larger, small employers.
Eight percent of small employers report greater than 100 percent participation. That of course is not possible. The
reasons for the reporting errors and their implications cannot be identified with certainty. However, two possibilities
draw immediate attention. The first is that some respondents consider full-time employees to include covered family
members. Indeed, these businesses extend coverage to families in over 90 percent of cases compared to 65 percent
for the general offering population. A second possibility is that some respondents counted part-time employees rather
than just full-time employees because they offer insurance to both. But this combination occurred in just over 10
percent of cases. While an attractive explanation, the small number of potentially applicable cases could explain only a
small portion of the group. Even without a totally satisfactory explanation for the inconsistencies however, it appears
that these cases of greater than 100 percent participation consist of businesses with very high percentages of full-time
employees using their employer’s plan.
16 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Total Health Insurance Costs
Small-business owners have consistently reported over the years that they have no greater business problem than the
inexorable increases in health insurance premiums.19 They, therefore, looked forward to changes in the health care
system that, if not lowering costs, would at least minimize their persistent escalation. The Great Recession lowered the
rate of cost increase, but those rate increases remain above the rate of inflation, considerable, and unsustainable. Meanwhile, small business health insurance premiums (employer and employee shares) average $6,721 a month ($80,652 a
year) (Q#35).20 The median (50% more and 50% less) is about $3,500 ($42,000 annualized) every 30 days, and twothirds pay about $7,000 or less.
A strikingly large percentage of small employers cannot estimate either their total monthly health insurance costs
for all types offered or their monthly per employee cost by types offered. For example, 12 percent cannot provide an
estimate of total monthly premium costs (employee and employer share), including about one in six (18%) who have
firms employing 50 or more people. Similarly, 12 percent cannot estimate the average monthly premium for individual
policies and 15 percent cannot estimate them for family policies. A lack of such information among so many seems
incongruous with continuing complaints about ever-rising insurance costs.
There are several plausible explanations for the apparent inconsistency. The first is that the small employers who do
not have such cost information readily available are not those who are complaining; they are less concerned about cost than
are others. If that were true, those experiencing lower (less frequent) rates increases would be less likely to recognize the
increases they receive. That seems to be the case, at least for many. Small employers whose premiums did not change from
prior year are most likely not to know actual costs (15%) compared to those that had their premiums rise (11%) and those
who had theirs premiums decline (5%). A second plausible explanation is that these owners are unfamiliar with the unit
of account used in the question; they sign an annual contract (annual unit) and put payment on auto-pilot (monthly unit).
Roughly half who knew one (annual or monthly) did not know the other, suggesting the unit of account may have been a
problem for a non-trivial number. Third, unfamiliarity with monthly costs may occur because a reasonably large number
of respondents are paid managers that may be more or less conscious of a firm’s budgetary situation. Further investigation
proves that reason is probably not a factor, however, as both owners and managers respond similarly.
Changes from the Prior Year
If small employers offer employee health insurance this year, there is a strong likelihood that they offered it last year,
and vice-versa. Ninety-two (92) percent did not change their offer status in the last 12 months (Q#40). Seven percent
did change their offer status and 1 percent who now offer do not recall if they offered last year or not. The result is a
net decline of between 1 and 2 percent of the population
Examining the changes that did occur shows a continuing decline in the number of small businesses offering. Eight
percent offering health insurance last year do not offer this year. In contrast, 6 percent not offering last year do offer this
year (Table 5). Both add and drop estimates are static. They do not account for businesses entering and exiting. That
19
Holly Wade, Small Business Problems and Priorities, NFIB Research Foundation: Washington, DC., particularly Table 5.
20
The data is this were calculated omitting four outlying cases of $100,000 a month or more.
www.nfib.com/ACAreport
means both estimates are low. About 10 – 12 percent of firms open each year and 10 – 12 percent close.21 However,
neither additions nor drops can be estimated because we do not know whether, 1. those that entered offer insurance
as often as the small employer population (not likely because new and very young businesses, those three years and
younger, are less likely to offer than are more mature ventures) or 2. those that exited the market offered health insurance as often as the small employer population (not likely because financially healthier businesses are more likely to
offer than those less financially healthy).
Most offer status changes from the prior year, additions and drops, appear in firms with 2 – 9 employees. Changes
among businesses in the 20 or more employee groups appear unusual. The differences can be explained by the much
greater number of smaller, small firms compared to larger, small ones, and that the financial health of the former is often
more precarious than the financial health of the latter. The smallest firms also tend to be the youngest firms, though the
limited number of cases showed no association by business age.
Too few cases of change occurred to be able to examine the motives behind them. However, a change in profitability compared to the prior year appears tied to drops, though not necessarily to adds.
Table 5
Small Businesses Offering Employee Health Insurance
Currently by Those That Offering It the Year Before
Offer Currently
Offered Year Before
Do Offer
Do Not Offer
Total
Did Offer
Did Not Offer
Do Not Know
Total
N
93%
6
1
8%
92
—
47%
53
1
100%
664
100%
257
100%
921
Employee Participation
Those numbers are estimates based on calculations for 1999 – 2008, the latest data available. The 2008 – 2009 figures, showed a sharp decline in the
21
number of starts and a sharp increase in the number of closures. The assumption here is an approximate return to normalcy, though other data suggest
that the earlier balance between the two has not yet been achieved. U.S. Small Business Administration, Office of Advocacy, http://www.sba.gov/
sites/default/files/FAQ_Sept_2012.pdf, p.3, Accessed 9/13/13.
www.nfib.com/ACAreport
17 |
Change in Coverage Selected
The distribution of plan types (individual, family, plus-one) chosen by employees in offering small businesses did not
change from the prior year, either. Eighty-nine (89) percent report that their plan distribution remained essentially the
same (Q#36). Nine percent note a change with 1 percent not certain.
The shifts that did occur saw 46 percent choosing individual coverage more often, 41 percent choosing family plans
more often and 5 percent plus-one plans more often (N = 70) (Q#37). The remainder did not provide an assessment.
The most frequently cited primary reason (34%) for the shift is different employee choices (N = 70) (Q#38). A
change in employee costs follows (22%) with others mentioning more employee participation, less employee participation and the composition of the workforce among others. A follow-up question regarding the type of employee cost
change are too few cases to present numbers (N = 21) (Q#39).
These data indicate no profound shifts in the type of health insurance plans that small-business employees choose.
Some natural churn is to be expected and that appears to be what has happened over the last year or two. The outstanding
question is whether the ACA will stimulate any change.
Small Business’s Introduction to the Affordable Care Act, Part 1
Employee participation in offering firms changed infrequently. Ninety-five (95) percent of offering small employers
report the same portion of employees participating this year as the year before (Q#54). The remainder split with 3
percent indicating greater participation and 2 percent lesser. One would expect the number of participants to increase
in 2014 given the presence of the individual-mandate. Employees not previously covered, though eligible, are more
likely to accept coverage.
Change in Insurance Costs
The cost of health insurance continues to climb for small employers. Sixty-four (64) percent pay more per employee for
health insurance this year than they did last (Q#41). Six percent report a decline and 29 percent indicate no change.
The median price increase, incorporating in the calculation those with increased, stable, and lower prices, was about
6 percent, though the average increase was closer to 12 percent (from Q#51). The most frequent (44%) per employee
premium increase was between 10 – 19 percent. Another 29 percent report increases of 5 – 9 percent. Fourteen (14)
percent say theirs was 20 – 34 percent while 9 percent saw theirs rise less than 5 percent. Just 3 percent claim increases
of more than 35 percent. The limited number of price decreases (N = 39) shows a similar distribution (compared to
increases) around a 10 – 19 percent median.
The percentage of the small businesses experiencing premium increases does not appear to vary by firm size, but
the size of increases do. For example, 36 percent of those under 20 employees saw premium rate increases of less than
10 percent last year (when they experienced increases) compared to 45 percent among firms over 20 employees. Even
within the small business population, smaller firms seem to more commonly experience higher rate increases. Younger
firms (6 years or fewer) experienced relatively fewer increases compared to older firms (42% - 63%). No reason for this
difference appears in the data presented here. However, one could speculate that most young firms have not had insurance very long and therefore have not had time to establish a track record on which to readjust rates. The frequency
of firms seeing increases also varies by geographic area, the most frequent rate increases came in the east central area
(within the states cornered by Delaware, Kentucky, Tennessee, and North Carolina) (80%, N = 89) and the Pacific
(80%, N = 62) and the least frequent in the Great Lakes area (Ohio to Wisconsin) (51%, N = 111).
Small employers responded to the higher costs in various ways, frequently shielding employees from the brunt of
them. The most frequent was to take a lower profit (66%) (Q#45) (Table 6). The next most frequent was to increase
productivity (48%) (Q#49). Cutting back, delaying, or postponing business investment was the third most frequent
action taken (40%) (Q#46). Only then did employees and customers start to bear the additional costs. Employees in
40 percent of firms with higher health insurance costs bore no part of the increase and another 37 percent made their
contribution in a single way. Thirty-seven (37) percent of small employers froze or reduced wages to help compensate for the premium increases (Q#47). Thirty (30) percent increased the employee’s cost-share (Q#44) and 12
percent reduced non-health employee benefits (Q#48). Seventeen (17) percent reduced employment or reduced hours
(Q#43). Customers were the ones who least often bore the costs. Just 30 percent raised selling prices (Q#42). Finally,
17 percent report taking the tax credit to help offset cost increases (Q#50). That figure is likely much too high. Several
small-business owners with firms over the eligibility size limit, for example, say that they took the credit. They may have
told their tax preparer about the credit, but their tax preparer later determined them ineligible.
18 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Table 6
Actions Taken to Defray Costs of Health Insurance Premium Increases
by Percent Taking Them and Average Premium Increase
Cost Defraying Action
% Took
Average Premium Increase
<10%
10 – 19%
20+%
Raised Prices
Cut Employees/Reduced Hours
Increased Employee Cost-Share
Took Lower Profit
Delay, Postpone, Reduced
Business Investment
Freeze or Reduce Wages
Reduce Non-Health
Employee Benefits
Become More Productive/
More Efficient
Took Health Insurance Tax Credit 30%
17
30
66
25%
10
24
67
29%
16
36
68
38%
35
25
56
40
37
28
31
48
41
50
40
12
6
10
36
48
17
38
18
55
13
44
24
Average Number of Actions Taken
N
2.7
n.a.
2.2
178
2.9
178
www.nfib.com/ACAreport
3.1
77
Those reporting lower premium increases took fewer actions to defray costs than did those reporting higher premium
increases. The average was 2.7 actions (Table 5). Small employers experiencing price increases of less than 10 percent
took 2.2 actions compared to 3.1 among those whose increases averaged 20 percent or more. The individual actions
taken also became more frequent as price increases rose. For example, 25 percent raised selling prices when their health
insurance costs rose less than 10 percent. But 29 percent did when their costs rose between 10 and 19 percent and 38
percent did when cost increases rose to 20 percent or more. The same pattern holds for four other defraying actions.
However, owners facing 10 – 19 percent increases more frequency engaged in four actions – took a lower profit, became
more productive, increased the employee cost-share, and froze or reduced employee wages – than those facing 20+
percent increases. The reason for this anomaly in the overall pattern is not clear. However, it is likely associated with
the size or amount of an action taken.
The critical point in this discussion of premium increases is that small employers must defray them in some manner.
The good news is 48 percent were able to off-set at least some of them by becoming more efficient, more productive.
The bad news is that everything else harms small-business owners directly or indirectly, from not being able to invest (a
loss in productivity growth) to adverse consequences for employees and consumers.
Change in Insurance Benefits
Though three-quarters (75%) of offering small employers did not change health insurance benefits from last year to this,
those who did were much more likely to reduce them than to increase them (Q#52). Nineteen (19) percent cut benefits while 4 percent expanded them. Owners of the smallest firms were the most likely to expand benefits (5%); owners
of the largest were least likely (0%).
Premium increases are strongly associated with benefit cuts. For example, if premiums rose 20 percent or more,
benefits were cut in 32 percent of cases. If premiums were unchanged, they were cut in just 14 percent of cases. Similarly, profitability is associated with lower benefits. Owners of firms more profitable this year than last cut benefits in
16 percent of cases compared to 24 percent among those who were less profitable.
Deductibles on the whole are higher this year than last. While two of three (66%) maintained them at the prior
year’s level, 28 percent increased them (Q#53). There are limits to use of this strategy to reduce costs, however. The
small group market (exclusively) will have a requirement beginning in 2014 that deductibles must be limited to $2,000
for individual (employee-only) policies and $4,000 for family policies. Just 4 percent lowered deductibles in their plans
this year. Owners of the smallest, small firms were only ones who did (5%).
19 |
The number of small businesses offering employee health insurance fell from last year to this, another in a long series of
declines. The size of the decline is modest. However, small employers expect that trend to change this year. More plan
to introduce the benefit than to drop it. The intended changes are relatively small on net, but more substantial when
examining adds and drops separately.
Forty-eight (48) percent of small employers plan to offer employee health insurance next year, 27 percent “definitely” and 21 percent “probably” (Q#73) (Table 7). The identical percentage plans not to offer next year, 16 percent
“probably” not and 32 percent “definitely” not. While most expect no change from their current offer-status, a few
plan shifts. Three percent who do not now offer “definitely” plan to offer next year and another 10 percent who do not
now offer say that they probably will. In contrast, 2 percent of small employers currently offering intend to drop their
current coverage. However, just 5 percent of those currently offering say that they will “probably” drop theirs. If small
employers follow those plans, the net proportion of them offering would rise, breaking a decade-old trend.22
The number of cases involving owners planning to switch their offer status is too small (N = 65) for an analysis.
However, it appears that switches are planned overwhelmingly for the smallest businesses, 2 – 9 employees, particularly
among those planning to add insurance in the coming year. Owners of firms employing more than 20 people seem more
inclined to drop. Drops also appear centered on firms 20 years or more old. Thus, the total net change in employees
covered will largely result from the follow-through of those who say they will “probably” take an action, and their size.
Reasons for the changes were not included in the survey.
Small Business’s Introduction to the Affordable Care Act, Part 1
Plans to Offer Next Year
Kaiser Family Foundation, op. cit.
22
www.nfib.com/ACAreport
Table 7
Plans to Offer Employee Health Insurance Next Year by
Current Offers of Employee Health Insurance
Offered Last Year
Plans to Offer Next Year
Yes
No
Total
Definitely Yes
Probably Yes
Probably No
Definitely No
Not Certain
Total
N
55%
3%
27%
35
10
21
5
26
16
2
57
32
444
100%
664
100%
257
100%
921
Small Business’s Introduction to the Affordable Care Act, Part 1
Obamacare Strategies
The survey asked those with at least some familiarity with ACA about their strategies for dealing with the Act. The most
obvious for small employers anywhere near the 50 employee threshold of the employer-mandate is to make their businesses smaller by dividing them, selling off parts, cutting employment, or some other means of downsizing, either to
creep (remain) under the mandate threshold or to reduce the number of employees for whom they would be required
to offer insurance. Contraction is anathema as a general rule to most small-business owners. They want to grow, even
if relatively few actually do after the first years in business.23 This survey shows that 37 percent would like to grow “a
lot” and another 40 percent would like to grow “a little” (Q#D2). Only 12 percent want to remain at their current size
while just 8 percent want to contract to a greater or lesser degree.
To date, small-business owners have not pursued contractions in a significant manner, if at all. Thirteen (13) percent
indicate that they used the size reduction strategy within the last 12 months (Q#78). However, it seems clear that
many of those reductions are not tied to the ACA, though the survey specifically mentioned it. Other factors often
appear more important or are the actual reason.
The most obvious reason that ACA would cause small employers to reduce business size is the 50 employee
threshold of the employer-mandate. If cutbacks caused by ACA were to occur, one would expect that the two larger
firm size categories would be the most likely to contract. Still, the percentages that report contracting in the last year
do not vary across the four employee size strata. It is not clear why those with fewer than 20 employees would reduce
their size on account of the Affordable Care Act. The aggregation rules, addressed earlier, might also affect owners in
the smaller sized groups, but the larger size groups are typically more likely to be impacted by them. A second issue is
that half (53%) who responded positively to the size reduction question do not offer health insurance. That can be a
reason to contract for those near or above the 50 employee threshold for the employer-mandate. They do not currently
offer health insurance and do not want to do so. Yet, insurance offers and not should have no effect on owners of
smaller, small firms. Finally, 8 percent who express a desire to grow also report contracting their business compared
to 48 percent who express a desire to contract actually doing so. This association simply indicates that small-business
owners contract when they want/need to, and vice versa. Unfortunately, the relationship can be interpreted in multiple
ways for present purposes and therefore is not helpful.
The decision to contract is strongly associated with lower profitability compared to the prior year. Twenty-seven
(27) percent who say that they are “much less” profitable this year than last contracted as did 19 percent who indicate that they are “somewhat less” profitable this year than last. However, just 7 percent of those whose profits rose or
were stable report cut-backs. Cuts actually attributable to ACA are therefore probably closer to 6 or 7 percent than to
13 percent, still a sizeable number, though not as large as many reports. But in sum, the data provide a series of mixed
messages. Some reports of contraction associated with ACA are doubtful while others are consistent. The proportion of
each is the important question and cannot be determined.
John C. Haltiwanger, Ron S. Jarmin, and Javier Miranda, Who Creates Jobs? Small vs. Large vs. Young. NBER Working Paper 16300, National
20 |
23
Bureau of Economic Research: Cambridge, MA, August, 2010
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A factor associated with cuts in business size is familiarity with ACA. The more they know about the new law,
other factors equal, the more likely they are to contract in size. For example, 22 percent who claim to be “very”
familiar with ACA took contracting actions in the last year compared to 11 percent for both those “somewhat”
familiar and “not too” familiar with the law. The rationale for the relationship is the more you know about the law,
the more likely you to see ways it might adversely affect you.
A second and related strategy to contraction is to cut hours for some people in order to have more part-time
employees and fewer full-time employees. The effect is to have fewer employees to cover with health insurance,
either due to the employer mandate or due to non-mandated coverage that small employers prefer to maintain.
Thirteen (13) percent report plans to cut employee hours (Q#79). But again, the association with the ACA seems
tenuous. One would expect larger, small employers to be more likely to have such plans. Yet, no relationship appears
between employee size-of-business and plans to reduce employee hours. Instead, planned changes in employee hours
are related to business profitability and the offer of health insurance. Just 5 percent who are much more profitable than in the prior year plan cuts in hours compared to 33 percent who are much less profitable than last year’s
comparable time frame. The association of fewer hours with the offer of health insurance also appears, though not
in the expected direction. Small employers offering health insurance report planned hour reductions in 12 percent
of cases; those who do not offer plan hour reductions in 16 percent of them. Non-offering firms are typically less
profitable than offering firms. Plans to reduce employee hours therefore seem strongly tied to profitability rather
than ACA.
Small employers who plan to reduce their size and who plan to cut employee hours are typically not the same
respondents. They are different in two of three cases. The differing responses indicate that respondents see the
questions as measuring different things, and they therefore react differently. Contraction of the business normally
should be considered the more extreme reaction.
Both contraction and planned reduction in employee hours appear highly related to recent change in business
profitability. That is to be expected. But it does not mean that either or both have no current tie to ACA, let alone
one that will arise in the future. Many continue to experience premium increases and expect premiums to continue
rising. That affects profitability. The result is an indirect tie between ACA and actions taken probably. More importantly, there is no need to make such commitments so far in advance. The employer mandate, initially scheduled
for January 1, 2014, has been delayed a year. Most respondents were therefore looking at a year and one-half before
necessary actions go into effect and others were looking at six months.
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21 |
Small-business owners are reasonably confident that they will be in compliance with the ACA when it becomes
effective. Unfortunately, “effective” is a bit of a moving target. Still, 38 percent are “very” confident they will be in
compliance with the law and 31 percent are “somewhat” confident (Q#80). That leaves 18 percent who are either
“not too” or “not at all” confident. Another 13 percent did not answer.
A small employer’s confidence is related to three factors. The most important is familiarity with ACA. The
more familiar the owner is with the law, the more likely he or she feels confident about being compliant. The second
factor is current possession of employee health insurance. Small employers who offer are also more likely to be confident. This seems odd at first blush, since the only requirement of all small employers is to notify their employees
of opportunities in the exchange. However, currently offering small employers already have a relationship with the
insurance industry and the industry is major source of information about ACA. This relationship likely translates
into greater confidence about compliance with the Act, particularly when the small business size does not approach
the employer mandate threshold.
The third factor is unexpected. It finds that small-business owners are more confident if they were interviewed
for this survey prior to the July 2, 2013, suspension of the employer-mandate, other factors equal. That means the
July 2 announcement either had an adverse effect on small business confidence or some other intervening factor is
involved. The latter does not appear likely. Since familiarity and offers of insurance, the two most likely influences
on response date, were controlled, it is reasonable to conclude that July 2 announcement diminished, rather than
enhanced small business confidence in their compliance with the Act. This relationship raises obvious questions
about the impact of other delays and administrative changes to ACA.
Owners of firms in the 50 employees plus group are different than the rest of the population. None of the three
factors previously mentioned, including familiarity with ACA, are associated with their level of confidence. That
indicates small employers directly subject to the employer-mandate did not lose confidence when the employermandate was postponed; it did not increase their confidence, either. Rather, the loss of confidence fell principally on
those with fewer than 50 employees.
Small Business’s Introduction to the Affordable Care Act, Part 1
Confidence in Compliance
The continued escalation in health insurance premiums documented in this and similar reports frame small business’s
entry into the Affordable Care Act era. But, as small business enters, all is not well. The rising cost of health insurance
has been the principal interest of small employers in the health care debates over the past quarter century; it remains so
today. Congress chose to make insurance coverage the centerpiece of the ACA; cost was largely ignored. In fact, in its
zeal to expand and improve (?) coverage, Congress purposefully took steps to exacerbate the cost pressures that smallbusiness owners face. Required new benefits, new taxes rolled into premiums that affect small businesses and individuals, and elimination of low cost plans are exhibits one, two, and three. But the principal accelerator is the addition of
vast new demand for health care, the proponents’ principal argument for ACA, with negligible increase in the supply of
health care providers or facilities. Champions of the ACA claim that they did help cost pressures on small businesses
through such fiats as caps on insurer administrative expenses and provision of a temporary tax credit for the purchase of
health insurance. Yet, one hundred dollar rebate checks that a few receive from insurers do not remotely compensate
for the thousands most will be required to pay in higher premiums; the tax credit impacts few and is temporary. Most
cost suppression claims are merely talking points. The potential bright spot for small business in the Act is the SHOP
exchanges and the potential to offer increased competition for health insurance. The practical problem is that the
increased competition comes on top of a much higher fixed cost base, implying that SHOP can help, but not compensate, let alone depress cost increases. A down-the-road measure that should also slow price escalation is caps on the tax
exclusion for health insurance Cadillac plans. But on the whole, health cost increases remain at an unsustainable level
and prospects for dampening them are bleak.
The Affordable Care Act impacts all employing small-businesses. However, the impact is concentrated. Small
employers offering health insurance are impacted more heavily than those who do not. Those employing an aggregated
50 full-time employees or more may be more impacted than those who employ fewer, though that is not a certainty.
Impacts for the most part are indirect; they are opaque, and small employers primarily see them in the insurance
packages they buy and the prices they pay for them, though that may change. Indirect impacts hide the causes of change
from small-business owners; they see them appear, but cannot determine who or what is responsible. That is likely to
evolve when employees feel the impact of the individual-mandate and start altering their demands for health insurance.
Many small employers, offering and not, will likely have to adjust to altered employee circumstances. That could mean
more small employers adding insurance as a benefit, or it could mean more small employers dropping it; that could mean
more small employers offering reimbursement to employees purchasing insurance on the exchanges, initiating an era of
defined contribution health insurance, or it could mean small business withdrawal; that could mean a change in the mix
of employees taking individual, family and plus-one coverage, or it could mean dropping one type or another; that could
mean an increase in the proportion of employees taking offered health insurance, or it could mean employees fleeing to
the exchanges. And, as premiums on the whole rise, it could mean increasing switches to self-insurance; it could mean
frequent escapes to the SHOP exchanges; it could mean more freezes, reductions, or depressed increases in employee
wages and benefits, greater employee cost-shares, higher selling prices, and/or lower business investment and a poorer
competitive position. The employer-mandate, including its calculation, is the principal exception to the opaque effects;
it is clearly direct.
Speculation about the impacts of ACA remains rampant. Fact, though also assuredly spin, should soon start substituting. The data reported in these pages establish a base from which to measure future changes in many of the interest
areas identified above. The numbers presented in this report break relatively little new ground per se, though employee
demand on small employers for insurance, ordering the means of defraying health insurance cost increases, the numbers
adding and dropping insurance, the primary source of information about ACA, quantification of the potential aggregation problem, and the impact of July 2’s delay announcement are examples to the contrary. Small business is now in a
temporary lull with respect to ACA. Many of the indirect impacts have been readied and even have begun to be implemented with the direct impacts on the horizon. The more interesting data comes in the next edition of this report when
small employer response to the direct and indirect changes caused by the ACA can start to be measured.
22 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Conclusion
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Nfib Health – Longitudinal Survey 2013
INTRODUCTION: Hello, my name is ____ from Mason-Dixon Research and we are
conducting a nationwide poll of small business owners and managers on issues related
to the implementation of the new healthcare reform law. You should have recently
received a letter about this survey. It is being conducted for a national non-profit organization and is NOT a sales or membership recruiting call. Do you have a few minutes to
participate? (If not, see if you can schedule call back time).
Note – The following tables present weighted Totals.
1. Owner-manager
2. Owner, but not a manager
3. Manager, but not an owner
Total
N
2.
3. 4. 68%
7
25
1. None
2. 1 – 9 employees
3. 10 – 19 employees
4. 20 – 49 employees
5. 50 or more employees
6. (Not Sure)
100%
921
Are you involved in making this business’s decisions about employee wages
and benefits?
1. Yes
2. No
100%
—
Total
N
100%
921
Total
N
5. Total
N
74%
15
9
3
100%
921
Total
N
6. 7%
71
12
7
2
3
100%
921
Approximately how many of those
full-time employees are seasonal and
will leave at the end of summer?
1. None
2. 1 – 9 employees
3. 10 or more employees
4. (Not Sure)
Not including yourself, approximately
how many Total employees does your
business have?
1. 2 – 9 employees
2. 10 – 19 employees
3. 20 – 49 employees
4. 50 – 100 employees
Not including yourself, approximately
how many full-time employees
working 30 hours or more a week, do
you currently have working for you?
82%
8
1
10
100%
921
Not including yourself, approximately
how many part-time employees
working less than 30 hours a week do
you currently have working for you?
1. None
2. 1 – 9 employees
3. 10 or more employees
4. (Not Sure)
Total
N
www.nfib.com/ACAreport
33%
53
3
11
100%
921
Small Business’s Introduction to the Affordable Care Act, Part 1
Which best describes your position in
this business? Are you an: ?
23 |
1.
7. Approximately how many of those parttime employees are seasonal and leave
at the end of summer?
1. None
2. 1 – 9 employees
3. 10 or more employees
4. (Not Sure)
Total
N
8. 65%
19
1
16
Total
N
11. 86%
8
1
—
1
3
2
Total
N
Approximately what percentage of your
full-time, non-seasonal employees earn
more than $23 an hour OR more than
$46,000 a year in salary?
1. None
2. 1 – 9 percent
3. 10 – 24 percent
4. 25 – 49 percent
5. 50 – 89 percent
6. 90 – 100 percent
7. (Not Sure)
Total
N
47%
33
5
4
6
4
3
Total
N
13.
100%
921
46%
54
—
100%
921
4%
96
—
100%
257
Does your business offer any employee
reimbursement or financial support to
help pay for a health insurance plan that
employees purchase on their own?
1. Yes
2. No
3. (Not Sure) Total
N
www.nfib.com/ACAreport
100%
921
In the last 6 months, have more than 5
percent of your employees, or representatives of more than 5 percent of your
employees, asked that the business offer
an employee health insurance plan?
1. Yes
2. No
3. (Not Sure)
24 |
Small Business’s Introduction to the Affordable Care Act, Part 1
9. 100%
921
35%
19
30
15
2
Does your business currently offer health
insurance coverage to employees?
1. Yes
2. No
3. (Refused) 12. Total
N
Do you personally have health insurance,
and if so do you get it from your business’s health plan, a spouse’s health plan,
or an individual health plan?
1. Have business plan
2. Have spouse’s plan
3. Have individual plan
4. Do not have health insurance
5. (Not Sure/Refused) 100%
691
Approximately what percentage of your
full-time, non-seasonal employees currently earn less than $8 an hour OR less
than $16,000 a year in salary?
1. None
2. 1 – 9 percent
3. 10 – 24 percent
4. 25 – 49 percent
5. 50 – 89 percent
6. 90 – 100 percent
7. (Not Sure)
10. 14%
86
—
100%
257
Is that financial support based
primarily on:
18. What is the second type?
1. HMO
2. High-deductible PPO
3. PPO
4. Point of Service (POS)
5. (Not Sure)
1. A flat amount per employee
—%
2. A percent of the employee’s
health insurance premium
—
3. A percent of the employee’s
salary or wages
—
4. The employee’s length of service
—
5. Something else (specify) ________ —
6. (Not Sure)
—
Total
N
19.
Total
N
Total
N
16.
Total
N
17.
86%
11
—
3
100%
664
Under which one of the following
types of health plans are most of
your employees covered?
1. HMO
2. High-deductible PPO
3. PPO
4. Point of Service (POS)
5. (Not Sure)
Total N
26%
25
32
5
12
100%
664
Does your business also offer another
type of health plan?
1. Yes
2. No
3. (Not Sure)
Total
N
Which best describes the health plan that
covers most of your employees? Is it a:
1. A Fully Insured Plan [traditional] in
which you contract with a health
plan that assumes financial
responsibility for the costs of
enrollees’ medical claims, OR 86%
2. A Self-Funded Plan in which you
assume direct financial responsibility
for the costs of enrollees’ medical
claims, but have “stop-loss” coverage
from an insurer to protect you
against very large claims.
4
3. (Self-Funded with no stop-loss)
1
4. (Not Sure)
9
Is health insurance offered only to fulltime employees or to both full-time and
part-time employees?
1. Full-time only
2. Both full-time and part-time
3. (Part-time only)
4. (Not Sure)
15%
85
1
100%
121
20.
100%
664
Is it highly likely, somewhat likely, not
too likely or not at all likely that you will
switch to a self-funded employee health
insurance the next time your policy
comes up for renewal, or haven’t you
thought about renewal yet?
1. Highly likely
2. Somewhat likely
3. Not too likely
4. Not at all likely
5. Haven’t thought about renewal yet
6. (Not Sure)
Total
N
100%
664
4%
4
18
51
23
—
100%
567
25 |
15.
100%
31
19%
24
23
15
18
Small Business’s Introduction to the Affordable Care Act, Part 1
14.
www.nfib.com/ACAreport
21. What is the approximate dollar amount
at which your group’s specific or individual “stop-loss” reinsurance coverage
kicks-in?
1. <$10,000
2. $10,000 - $14,999
3. $15,000 - $19,999
4. $20,000 - $24,999
5. $25,000 - $29,999
6. $30,000 - $39,999
7. $40,000 - $49,999
8. $50,000 - $59,999
9. $60,000 or more
10. (Not Sure/Refused)
Total
N 22. 100%
54
Total
N
Total
N
25.
5%
8
28
15
3
31
8
1
100%
664
27%
2
16
28
7
4
8
7
100%
523
Including both employer and employee
contributions, what is the average total
monthly cost per employee policy?
1. <$500
2. $500-$599
3. $600-$699
4. $700-$799
5. $800-$899
6. $900-$999
7. $1,000-$1,099
8. $1,100-$1,199
9. $1,200-$1,299
10. $1,300-$1,399
11. $1,400-$1,499
12. $1,500-$1,749
13. $1,750-$1,999
14. $2,000+
15. (Not Sure)
There are typically three types of health coverage policies: FAMILY, INDIVIDUAL and PLUS
ONE. Does your business offer:
Total
N
17%
9
9
7
9
6
5
3
5
1
4
3
2
5
16
100%
523
Family coverage?
26.
1. Yes
2. No
3. (Not Sure)
Total
N
65%
35
1
100%
664
Do all, most, half, some or none of the
employees participating in your health
plan have family coverage?
1. All
2. Most
3. Half
4. Some
5. None (omitted; see text)
6. (Not Sure)
Total
N
26 |
23.
Approximately, what percentage of the
premium does your business pay for an
FAMILY health insurance policy?
1. All of it – 100%
2. 90 – 99 percent
3. 75 – 89 percent
4. 50 – 74 percent
5. 25 – 49 percent 6. 1 – 24 Percent
7. Nothing
8. (Not Sure)
36%
9
—
2
4
2
—
1
7
39
How many of your full-time, non-seasonal
employees participate in your health plan?
1. <25 percent
2. 25 – 49 percent
3. 50 - 74 percent
4. 75 – 89 percent
5. 90 – 99 percent
6. 100%
7. (>100%)(see text)
8. (Not Sure)
Small Business’s Introduction to the Affordable Care Act, Part 1
24.
www.nfib.com/ACAreport
14%
19
12
53
2
100%
523
1. Yes
2. No
3. (Not Sure)
Total
N
28. 71%
29
—
Total
N
100%
664
40%
5
19
27
4
2
2
2
Total
N
Total
N
31.
100%
525
Total
N
4%
6
14
11
15
8
8
5
8
10
11
32.
30%
24
12
33
1
100%
525
Does your business offer a so-called
“plus one” health insurance option, that
is, an option that covers the employee
and one other person?
1. Yes
2. No 3. (Not Sure)
Including employer and employee contributions for INDIVIDUAL health care
coverage, what is the average total
monthly cost per policy?
1. Less than $200 2. $200-$299
3. $300-$399
4. $400-$499
5. $500-$599
6. $600-$699
7. $700-$799
8. $800-$899
9. $900-$999
10. $1,000+
11. (Not Sure)
Do all, most, half, some or none of the
employees participating in your health
plan have individual coverage?
1. All
2. Most
3. Half
4. Some
5. None (omitted; see text)
6. (Not Sure)
Approximately, what percentage of the
premium does your business pay for an
INDIVIDUAL health insurance policy?
1. All of it – 100%
2. 90 – 99 percent
3. 75 – 89 percent
4. 50 – 74 percent
5. 25 – 49 percent 6. 1 – 24 percent
7. Nothing
8. (Not Sure)
29. 30.
27%
73
—
100%
664
Approximately, what percentage of the
premium does your business pay for a
“plus one” health insurance policy?
1. 100%
2. 90 – 99%
3. 74 – 89 %
4. 50 – 74 %
5. 25 – 49 %
6. 1 – 24 %
7. Nothing
8. (Not Sure)
Total
N
100%
525
21%
14
19
27
4
2
2
2
100%
227
Small Business’s Introduction to the Affordable Care Act, Part 1
Does your business offer an INDIVIDUAL
health insurance option?
27 |
27.
www.nfib.com/ACAreport
33.
Including employer and employee
contributions for “plus one” health
care coverage, what is the average
Total monthly cost per policy?
1. Less than $300
2. $300-$399
3. $400-$499
4. $500-$599
5. $600-$699
6. $700-$799
7. $800-$899
8. $900-$999
9. $1,000-$1,099
10. $1,100-$1,199
11. $1,100-$1,299
12. $1,300-$1,399
13. $1,400-$1,499
14. $1,500+
15. (Not Sure)
Total
N
35.
1. < $1,000
2. $1,000 - $1,999
3. $2,000 - $2,999
4. $3,000 - $3,999
5. $4,000 - $4,999
6. $5,000 - $7,499
7. $7,500 - $9,999
8. $10,000 - $12,499
9. $12,500 - $14,999
10. $15,000 - $17,499
11. $17,500 - $19,999
12. $20,000 - $24,999
13. $25,000 - $49,999
14. $50,000 or more
15. (Not Sure)
7%
4
5
12
8
9
5
7
11
2
7
1
2
6
13
Total
N
100%
227
36.
34.
Do all, most, half, some or none of the
employees participating in your health
plan have plus one coverage?
Total
N
6%
9
4
77
Total
N
4
100%
227
37.
100%
668
9%
89
1
100%
668
Which type of policy option has increased
its share of employee participation?
1. Individual policies
2. Family policies
3. Plus one policies
4. (Not Sure)
Total
N
www.nfib.com/ACAreport
12%
13
15
11
5
10
5
4
1
3
2
2
3
1
13
Has the percentage of employees choosing
individual, family, or “plus one” options
changed over the last year or two, or has
the mix held reasonably steady?
1. Changed
2. Steady 3. (Not Sure)
28 |
Small Business’s Introduction to the Affordable Care Act, Part 1
1. All
2. Most
3. Half
4. Some
5. None (omitted; see text)
6. (Not Sure)
What is your business’s total monthly
health care insurance premium cost, for
all types of health insurance offered?
46%
41
5
8
100%
70
What is the primary reason for this
change?
1. Change in employee costs
2. Changing composition of
the workforce
3. More employees participating
4. Fewer employees participating
5. Employees just making
different choices
6. (Not Sure)
Total
N
39.
40.
Did you do any of the following in
order to pay for the increase?
(ROTATE Q42 – Q50)
42.
Raise prices?
22%
6
12
10
1. Yes
2. No
3. (Not Sure)
34
16
Total
N
100%
70
43.
1. Cost-share
2. Plan price
3. Both
4. (Don’t Know)
—%
—
—
—
Total
N
100%
21
Total
N
44.
Total
N
45.
1. Yes
2. No
3. (Not Sure)
Total
N
Total
N
Is the PER EMPLOYEE cost of your current health plan more, less or about the
same as last year’s plan? (Plan cost, not
employer’s or employee’s share.)
1. More
2. Less 3. Same
4. (Not Sure) Total
N
64%
6
29
—
46.
30%
68
2
100%
407
Take a lower profit or suffer a loss?
1. Yes
2. No
3. (Not Sure)
100%
921
100%
407
66%
31
4
100%
407
Delay, postpone or reduce business
investment?
1. Yes
2. No
3. (Not Sure)
Total
N
100%
628
40%
58
2
100%
407
29 |
41.
47%
53
1
17%
81
3
Increased employee cost-share?
1. Yes
2. No
3. (Not Sure)
Did you offer employee health insurance
to any of your employees LAST year at
this time?
100%
407
Cut employees or reduce their hours?
1. Yes
2. No
3. (Not Sure)
Was the change in employee cost primarily due to a change in the employee/
employer cost share or a change in the
Total price of the plan, or both?
30%
67
3
Small Business’s Introduction to the Affordable Care Act, Part 1
38.
www.nfib.com/ACAreport
47.
Freeze or reduce wages?
1. Yes
2. No
3. (Not Sure)
Total
N
48.
37%
61
2
Total
N
100%
407
Total
N
12%
85
4
53. 100%
407
48%
48
5
Total
N
54.
Total
N
50.
28%
4
66
1
100%
582
Did more, less, or about the same
number of eligible full-time employees
choose to participate in this year’s health
insurance plan as participated last year?
Total
N
17%
73
10
100%
407
Please estimate the PER EMPLOYEE
percent change in cost of this year’s plan
compared to last year’s plan. Was it: ?
1. Less than 5%
2. 5 – 9%
3. 10 – 19%
4. 20 – 34%
5. 35 – 49%
6. 50% or more
7. (Not Sure)
Total
N
1. More
2. Less
3. Same
4. (Not Sure)
8%
9
45
14
3
2
3
Total
N
2%
3
95
—
100%
582
Please tell how important each of the following was in your decision to offer employee health insurance in the last year?
(ROTATE Q55 - Q58)
55.
Profitability now allows me to offer.
100%
407
30 |
Small Business’s Introduction to the Affordable Care Act, Part 1
100%
582
Take the health insurance tax credit?
1. Yes
2. No
3. (Not Sure)
51.
100%
407
5%
9
75
1
Are the deductibles in this year’s plan
higher, lower, or about the same as they
were in last year’s plan?
1. Higher
2. Lower
3. Same
4. (Not Sure)
Became more productive, more efficient?
1. Yes
2. No
3. (Not Sure)
Are the benefits in this year’s plan more,
less, or about the same, as they were in
last year’s plan?
1. More
2. Less
3. Same
4. (Not Sure)
Reduce non-health employee
benefits?
1. Yes
2. No
3. (Not Sure)
49.
52. www.nfib.com/ACAreport
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
27
58.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N 100%
27
61.
62.
59.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
27
63.
Needed to find a more affordable plan
for you and family to participate in.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
27
Which of the following did you do in order to pay for the new employee benefit?
(ROTATE Q59 – Q66)
—%
—
—
Total
N
100%
27
Delay, postpone, or reduce business
investment?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Freeze or reduce wages?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Reduce non-health employee benefits?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Raise prices?
65.
60.
1. Yes
2. No
3. (Not Sure)
Need to offer it to compete for employees.
64.
Take a lower profit or suffer a loss?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Become more productive, more efficient?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Cut employees or reduce their hours?
66.
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N 100%
27
Take the tax credit to add employee
health insurance?
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
www.nfib.com/ACAreport
Small Business’s Introduction to the Affordable Care Act, Part 1
57.
The new health care will soon require me
to add it.
31 |
56.
67
68.
70.
1. Yes
2. No
3. (Not Sure)
—%
—
—
Total
N
100%
27
Please tell me how important each of the
following reasons were that led you to
drop employee health insurance in the
last year? (ROTATE Q70-Q74)
71.
72.
The number of participants in my plan fell.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
21
73.
Business profitability took a turn for
the worse.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
21
My employees could do better on
their own.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
21
Do you expect to offer employee health
insurance to any of your employees at
this time NEXT year?
It became too expensive.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
1. Definitely Yes
2. Probably Yes
3. Probably No
4. Definitely No
5. (Refused/Not Sure)
Total
N
100%
21
Total
N
My employees preferred cash rather
than insurance.
1. Very Important
2. Somewhat Important
3. Not Important
4. (Not Sure)
—%
—
—
—
Total
N
100%
21
74.
www.nfib.com/ACAreport
27%
21
16
32
4
100%
921
A new health care and financing law,
sometimes known as the Affordable Care
Act, health care reform, or Obamacare,
is being implemented. How familiar are
you with this law? Are you: ?
1. Very familiar
2. Somewhat familiar
3. Not too familiar
4. Not at all familiar
5. (Not Sure)
Total
N
32 |
Small Business’s Introduction to the Affordable Care Act, Part 1
69.
Did you do anything else to pay for the
new employee benefit?
17%
49
21
13
—
100%
921
From what one source have you obtained
the most useful information about your
business’s responsibilities and opportunities under the new health care law? Has
it been:? (ROTATE 1 – 6.)
Some businesses are using various strategies to manage compliance with the new
health care law. Please tell me if have
used either of the following strategies in
the last year.
1. Health insurance industry or insurer 2. Health care industry or provider 3. Business advisor, like an accountant
or lawyer
4. Government 5. Trade associations or business groups
6. General news media
7. (Other)
8. (Have not received any useful
information)
9. (Not Sure)
78.
Divided or sold-off parts of the business,
cut employment, or in some other manner tried make your business smaller?
10
4
12
42
5
1. Yes
2. No
3. (Not Sure)
Total
N
1
3
79.
Total
N
76.
Total
N
16%
38
23
22
2
Total
N
80.
100%
848
If you added all of the full-time employees in this business and all of the fulltime employees in any other businesses
that you own at least a half interest in,
would the total number of full-time employees reach 50 or more? (Asked only of
those with fewer than 50 employees.)
1. Yes
2. No
3. (Not Sure)
Total
N
81.
Total
N
100%
692
13%
87
1
100%
848
How confident are you that you will be in
compliance with the new health law on
January 1, 2014, are you? (Revised after
July 2 to read: How confident are you
that you will be in compliance with the
new health law when it goes into effect?)
1. Very Confident
2. Somewhat confident
3. Not too confident
4. Not at all confident
5. (Not Sure)
4%
76
20
100%
848
Cut hours for some employees,
to have more part-time and fewer
full-time employees?
1. Yes
2. No
3. (Not Sure)
How satisfied are you overall with the
clarity and usefulness of the information
received? Are you:?
1. Very satisfied
2. Somewhat satisfied
3. Not too satisfied
4. Not at all satisfied
5. (Not Sure)
77.
100%
848
13%
85
2
38%
31
7
11
13
100%
921
Is there a health care exchange, sometimes called a health insurance marketplace, currently operating in your state?
1. Yes, there is
2. No, there isn’t
3. (Don’t Know)
Total
N
www.nfib.com/ACAreport
19%
28
53
100%
921
Small Business’s Introduction to the Affordable Care Act, Part 1
15%
8
33 |
75.
Demographics
The following questions are for classification
purposes only
D1.
Proprietorship Partnership
S-Corporation
C-corporation
LLC
Not Sure
Total
N
<1 – 3 years
4 – 6 years
7 – 9 years
10 – 14 years
15 – 19 years
20 – 29 years
30—39 years
40+ years
(Not Sure)
Total
N
D5.
100%
921
Total
N
*%
10
34
2
33
19
1
100%
921
5%
16
38
27
13
2
100%
921
What is the five digit zip code of your
primary business location? (Grouped
into regions.)
1.
2.
3.
4.
5.
6.
7.
8.
What is your highest level of formal
education?
1. Did not complete high school
2. High school diploma/GED
3. Some college or an
associate’s degree
4. Vocational or technical school
degree or certificate
5. College diploma
6. Advanced or professional degree
7. (Refuse)
Much more profitable
Somewhat more profitable
About as profitable
Somewhat less profitable
Much less profitable
(Not Sure/Refused)
Total
N
D6.
37%
40
12
3
4
3
Compared to last year at this time, is this
business currently:
1.
2.
3.
4.
5.
6.
Northeast
Mid-east
Southeast
Mid-west
North Central
South Central
Mountain
Pacific
Total
N
21%
13
10
14
12
11
7
12
100%
921
D7. Sex
100%
921
34 |
Small Business’s Introduction to the Affordable Care Act, Part 1
8%
6
4
13
9
25
22
8
6
Grow a lot
Grow a little
Stay the same
Downsize a little
Downsize a lot
(Not Sure/Refused)
Total
N How long have you owned or managed
this business?
1.
2.
3.
4.
5.
6.
7.
8.
9.
D3.
18%
2
34
29
11
6
100%
921
Over the next three to five years, do you
want this business to:
1.
2.
3.
4.
5.
6.
Is your legal form of business a:
1.
2.
3.
4.
5.
6.
D2.
D4.
www.nfib.com/ACAreport
1. Male
2. Female
63%
37
Total
N
100%
921
D8. How would you describe your primary
business activity?
1. Agriculture
2%
2. Construction
8
3. Manufacturing
9
4. Wholesale trade
5
5. Retail trade
25
6. Transportation and Warehousing
4
7. Information
1
8. Finance and Insurance
6
9. Real Estate and Rental/Leasing
6
10. Professional, Scientific,
and Technical Services
15
11. Administrative and Support,
Waste Management,
or Remediation Services
*
12. Education Services
1
13. Health Care and Social Assistance
5
14. Arts, Entertainment, and Recreation 1
15. Accommodations and Food
3
16. Repair and Maintenance Services
or Personal Care Services
4
17. Other
7
Small Business’s Introduction to the Affordable Care Act, Part 1
100%
921
35 |
Total
N
www.nfib.com/ACAreport
The NFIB Research Foundation engaged Mason-Dixon Polling & Research in early 2013 to help it begin a projected
three-year longitudinal survey of small business and the introduction of the Affordable Care Act. The purpose of this
research is to follow small businesses as the new law takes effect and measure the changes that they experience over
time. It likewise is intended to trace health insurance cost changes and small employer response to them. What the
survey will not do is attempt to measure opinion about the Affordable Care Act. The answers to those questions appear
reasonably well-established and well-known, and therefore require little additional attention here.
The Foundation’s research strategy for the project is to draw a nationally representative stratified random sample
of small employers and then follow small-employer respondents to the first year’s survey for an additional two years. A
stratified random sample is necessary to conduct the project due to the distribution of the small employer population.
Ninety (90) percent of all small employers have fewer than 20 employees and 60 percent have fewer than five. Although
the Affordable Care Act affects all small employers, its major direct impacts will fall on larger, small firms, principally
those approaching the 50 employee employer-mandate threshold and larger. It is, therefore important that the survey
contain enough cases to be able to say something about the larger, small business segment of the population. A sufficient number of cases from this group require over-sampling them. Hence, the Foundation targeted a sample size of 225
cases from each of four employee-sized strata: 2 – 9 employees, 10 – 19 employees, 20 – 49 employees and 50 – 100
employees. The choice to cap the definition of a small business at 100 employees rather than at some other point is arbitrary, but probably not controversial. It is an intuitively satisfying dividing line; virtually all small businesses above that
line already offer health insurance; adding another stratum of say between 100 – 250 employees appears to offer little
additional informational value; owners of increasingly large firms are increasingly difficult to interview; etc. In the end,
Mason-Dixon interviewed 921 small employers, numerically distributed across the four strata from smallest to largest
as follows: 231 cases, 224 cases, 238 cases, and 228 cases. The survey incidence was 59 percent. Use of a random stratified sample means population totals can only be reached by weighting cases, smaller, small firms (under-sampled) being
given greater weight per case and vice versa. Thus, population totals, totals for a 2 – 100 employee firm size population,
or totals for a 20 – 100 employee firm size population are presented using weighted numbers.
The survey’s sampling frame is the Dun & Bradstreet file, an imperfect frame, but the best currently available from
a non-governmental source. Mason-Dixon mailed the potential members of the sample an introductory letter outlining
the project, asking for cooperation, and announcing gift-card incentives for randomly drawn participants. Telephone calls
followed the introductory letters and respondents were given a choice of answering by telephone or by e-mail. Seventythree (73) percent chose the telephone option. Interviewing began in mid-June and continued through late July.
The Obama Administration announced on July 2 that the employer-mandate, a major provision of the Act, would
be suspended for one year. Interviewing was put on hold until July 8 in response. The Foundation reexamined the interview schedule during the interim to determine if changes were necessary in light of the announcement. One modest
change was required. Mason-Dixon interviewed 27 percent of responses prior to July 3 and the remainder after.
36 |
Small Business’s Introduction to the Affordable Care Act, Part 1
Methodology
www.nfib.com/ACAreport
1201 “F” Street, NW
Suite 200
Washington, DC 20004
www.nfib.com
www.nfib.com/ACAreport