For small businesses with fewer than 50 employees, the Patient Protection and Affordable Care Act (ACA) will decrease the costs of offering coverage, in aggregate, according to an analysis from the Urban Institute Health Policy Center. The report, Implication of the Affordable Care Act for American Business, noted that these small businesses will be exempt from penalties and may be eligible for premium tax credits under the law.
The analysis, from the Urban Institute's Health Insurance Policy Simulation Model, found that if all provisions of the ACA were implemented in 2012, the number of Americans covered by employer-sponsored insurance would increase by 2.7 percent (from 151.5 million to 155.6 million) and costs-per-person for small businesses with fewer than 50 workers would decrease by 7.3 percent. Overall for small businesses with less than 100 employees, total health insurance spending would be reduced by 1.4 percent, the report found.
Midsized businesses would see increases. Only midsized businesses (those with 101 to 1,000 employees) would see a 4.6 percent increase in costs-per-insured-person. This increase reflects penalties on as many as 5 percent of mid-sized employers who are not currently providing health coverage. However, the Urban Institute noted that expanded enrollment is the primary factor contributing to an increase in overall spending of 9.5 percent.
Impact on large businesses. Since most large businesses (more than 1,000 employees) currently provide health insurance for their workers, the ACA would increase their costs by 4.3 percent, due mostly to somewhat higher employee enrollment rates because of an increase in the number of workers and dependents who will get coverage.
The Urban Institute did not take into account the ACA's cost containment provisions for Medicare, which aim to reduce federal spending on the program. "Private purchasers will benefit from Medicare cost containment if they similarly press insurers and providers for efficiency," the report concluded.