Small Employers' Health Plan Costs Are Up, Says the NFIB

Photograph by Ingram Publishing

Health-care costs for small businesses are rising. That’s no surprise, and it’s a trend that predates the Affordable Care Act. Now one of the law’s most ardent foes is launching a new survey to gauge small employers’ costs in the years ahead.

Nearly two-thirds of companies with fewer than 100 employees reported paying more for health plans this year than the previous year, while just 6 percent saw costs decline, according to a survey of 921 companies by the National Federation of Independent Business. The group led the legal challenge to President Obama’s health care law in the Supreme Court, which last year upheld most of the law as constitutional.

The NFIB plans to return to the same businesses over three years to gauge how they respond to the law as new provisions take effect. The report (pdf) the group published today is a mix of fresh data and familiar talking points. The finding that premiums keep rising is consistent with other research, though the pace of increases is moderating.

The NFIB ties premium hikes for small employers to Obamacare and says that’s hurting the economy. “The Affordable Care Act is affecting [the economy] because it’s raising insurance costs for smaller firms. They’re not in a position to invest, raise wages, do those kinds of things that one would hope would happen after a recession,” the NFIB researcher William Dennis told reporters on a conference call.

But that connection is tenuous, Dennis conceded. “How much is due just to rising costs normally and how much is due to the ACA, I couldn’t untangle that,” he said. Health costs were rising prior to the Affordable Care Act, and some of the law’s biggest provisions—such as the mandate that companies with more than 50 workers provide coverage—haven’t taken effect.

The group called this survey, which was conducted over the summer, a baseline to measure the effects of the law in the future. At the outset, though, it also revealed some of the confusion that persists about the health law.

One question the NFIB asked was whether employers had cut hours or employees in response to the health law. Thirteen percent of respondents said they planned to cut hours, but many of those had fewer than 50 employees, making them too small to trigger the health law’s requirement that they provide coverage to workers, according to Dennis. That means cutting hours or workers wouldn’t affect whether they provide health coverage—they’re already exempt. Many of those planning cuts “were much less profitable this year than they were the year before,” Dennis said. “If they cut or were cutting, it’s almost assuredly due to the profitability rather than the ACA for those people.”

In the report’s conclusion, Dennis notes a frequent criticism of the law. While it does a lot to expand access to health care, it does much less to control the cost: “On the whole, health cost increases remain at an unsustainable level and prospects for dampening them are bleak.” This survey in the years ahead should give us a better picture of what the ACA means for small business health costs.

    Before it's here, it's on the Bloomberg Terminal.