What the NFIB Report Really Tells Us
The NFIB has put out a very interesting survey of small businesses, defined as those with fewer than 50 employees, and PPACA. They surveyed 750 businesses:
- 42% or 314 offer health insurance to their employees.
- 78% purchased through brokers/agents.
- 30% could qualify for full or partial small business tax credits.
Unfortunately the really interesting and valuable parts of the study are getting no attention but the headline grabbing sound bites that fit the anti PPACA meme are getting reverberated across the right wing echo chamber online.
Let’s do a quick summary. One year after enactment of PPACA, 42 percent of small businesses (<50 lives) offer employee health insurance.
This group fall into 3 distinct sub categories of size and often life cycle of a business:
- <1o employee – 35 % provide health insurance
- 10-19 employees- 56 % provide it
- 20-49 – 80 % provide it
Approximately 10-12% of the firms surveyed have started are new in last 3 years and according to Denny Dennis at NFIB the annual “failure rate of businesses is in the same 10% range so this is a very dynamic and fluid part of the economy.
The main headline out there today is that because of PPACA 11.7% of these businesses report that their insurer has terminated the specific health insurance plan they had, or have said they will in the near future.
When I spoke with Mr. Dennis, an expert on small business trends, about this he agreed that plan terminations for this size employer are common but that this seems higher than in the past. He also commented that this rate of loss was consistent with what CBO had predicted might happen as the transition to PPACA occurred prior to 2014 and the Exchanges coming into existence.
The second breathlessly reported stat is that 20% of businesses expect to have to make plan changes this year to keep costs under control with the implication that this is due to PPACA. Of course this is total baloney as nearly every firm in the nation reviews their benefits every year due to ongoing healthcare cost increases.
I was actually surprised this figure was not higher but smaller firms in standardized plans may not have the full array of options available to them that larger companies do.
66% of insured firms (314) used an HSA/HRA and another 11% a sec. 125 tax favored account which means many of them are already pushing the envelope on plan funding.
The final talking point that is revving up PPACA haters is that 57% (180) of the 314 employers with plans responded that they would “likely” terminate their plans if employees had other options like the Exchanges but this depended on whether all or a large number left the corporate plan for one in the Exchange.
The real message that has gotten no attention is that 57% of firms responded positively to this question which describes what can be done under the law once Exchanges are in place, ie defined contribution plans they contribute to:
“Suppose you had a new option to purchase health insurance. Under the new option, employees would purchase health insurance in the open market and the business would send a tax-excluded contribution to the insurer to help employees pay their premiums. The business could send as much or as little as it liked. If this proposal were to become law, how likely would you be to consider substituting it for current your health insurance plan (OR as appropriate) paying a portion of your employees’ health insurance premium? “
So 57% of all 750 firms – or 454 – responded that they would likely participate in a defined contribution plan for their employees.
This actually represents an increase of nearly 50% over the 42% providing plans today that could provide some form of employer funding to their employees.
So pre PPACA 42% are providing coverage and post PPACA 63% would likely provide a defined contribution style plan to their employees.
This looks to me like the law may actually work as intended to close the coverage gap for the <50 market and especially under 20 employee market.
Click the graphic above to download the study for yourself.