New Labor rule will be a big health care boon for small businesses

Health care deeply divides Americans, but most agree that our health care system had difficulties before enactment of the Affordable Care Act (ACA). Still, after implementation of ObamaCare, many old problems remain while new ones were created. Given today’s contentious political environment, can anything be done to improve this state of affairs? The Labor Department’s newly published regulation on Association Health Plans (AHPs) delivers an emphatic yes, promising to make health coverage in the small business sector both less expensive and more widely available.

Small businesses inherently face unique challenges in purchasing health insurance. Their limited size translates into small risk pools. Business margins are often thin and backed by few or no reserves, making these entities extremely sensitive to price and cost increases.

The ACA created additional obstacles for small businesses. First, ObamaCare places more stringent regulatory health coverage requirements on smaller enterprises than on large companies, driving up the costs of insuring small business workers and placing small employers at a severe competitive disadvantage. Second, ObamaCare compounds these economic headwinds by requiring small businesses to purchase health insurance at expensive “community rated” prices.

Democrats in Congress knew when they passed health care reform that many small businesses could ill afford the added expense of their expansive health care experiment. That is why they exempted employers with fewer than 50 employees from the health coverage mandate that applies to larger employers.

Providing health benefits helps small businesses compete for workers in tight labor markets and avoid efficiency-killing turnover, but the impact of the ACA’s dictates on small business-provided health insurance was predictable. As expenses have increased, many small enterprises have found themselves unable to supply health insurance to their employees. The Employee Benefit Research Institute has reported that the percentage of small businesses offering health coverage to their employees has dropped dramatically since ObamaCare was enacted. According to the Department of Labor, up to 11 million Americans who work for small businesses and their family members now lack employer-sponsored insurance.

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