Patient Protection and Affordable Care Act’s Effects on Small Business Health Insurance

The Patient Protection and Affordable Care Act, also known as PPACA, is a federal statute that was signed into law in March of 2010 by President Obama.  This forms the bulk of the recent health care reform legislation in the United States, along with the HCERA (Health Care and Education Reconciliation Act of 2010).  PPACA has been fairly controversial though it is still upheld on nearly all levels at this time.

The effects for small businesses and their healthcare plans are minimal under the bill, however it does affect individuals who are not covered by an employer-sponsored healthcare plan. These individuals will be required to purchase healthcare or face penalties, as discussed in more detail below.

There are a number of provisions that are meant to take place between 2010 and 2020, some of them already obviously having happened.  The most important parts of the PPACA are:

  • Insurers will be required to offer premiums while disregarding most pre-existing conditions (excepting tobacco use).
  • Companies with 50 or more employees will have to offer health insurance or pay a fee to the government, assuming that the government will have to subsidize their healthcare.
  • Co-pays, co-insurance, and deductibles will be eliminated in some cases when programs are deemed to be essential care.
  • Low-income families and individuals will have increased aid from the government to help with insurance coverage.
  • Medicare is expanded.
  • An “individual mandate” will take place requiring that anyone who isn’t covered by an employer plan, Medicaid, Medicare, or another public insurance program, will be required to purchase a private insurance policy or pay a penalty.  Exceptions will be given to those with financial hardship or who are members of certain religious groups that are specifically exempted by the IRS.

The PPACA is expected to be funded by a variety of taxes and programs.  Some taxes include a Medicare tax, taxes on pharmaceuticals, high-end medical equipment, and indoor tanning services.

Possibly some of the greatest benefits include: insurance coverage provided to perhaps 32 million Americans who are currently not covered; pre-existing conditions and the ability to rescind existing coverage when someone gets sick will be effectively eliminated; and dependent children will be able to stay on their parents’ plans until age 26.

Effects on Small Business Owners

While business with fewer than 50 employees will not be required to offer healthcare to their employees, the small business owners and the employees themselves will be affected by the bill as individual citizens.

The bill intends to develop insurance exchanges whereby healthcare plans will be offered to individuals who previously were denied access, or at least access to such plans at affordable prices. The form and substance of this proposal is still unknown. Healthcare, rather than being a “nice to have” for many small business owners will now become a mandatory expense under PPACA. However, the exchanges are intended to reduce the cost of purchasing such plans.

However, there are some concerns about the effect that this could have on currently insured individuals.  There is a lot of speculation that the costs of healthcare will rise for many Americans, and that the tax increase will not justify the cost savings for those who are able to acquire new healthcare because of the PPACA.  Insurers worry that premiums will increase.


Both those for and against the act have valid points.  Though access will be increased for all, there are always costs.  There is speculation that insurance companies will raise rates while they still can and do everything they can to take advantage before the laws which take effect in 2014 kick in.  In defense of the insurers though, being forced to cover conditions which they would not have previously covered does incur extra expense and therefore may justify increased premiums.

It will be interesting to see how the laws continue to change over the next several years, and how these continue to affect healthcare in the future.  As the PPACA provisions come into play, it will be easier to gauge the actual benefits and downsides to the act, and to make revisions when necessary.  Though there are many pieces of the Act that are controversial, most change is unappreciated at first, so it’s hard to say what the long term effect will be at this point.  Changes in administration may create changes in the law on varying levels as well, and only the future can say how the Act will play out on each individual.

Written by the team at Insurance Swami who encourage all small business owners to carefully monitor the developments of health insurance legislation over the coming years.

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