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Affordable Care Act provision encourages subsidized employee coverage

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Adam Woods doesn't provide his five employees with health coverage now, and he's taking a wait-and-see approach before making decisions about what to do under the Affordable Care Act. He's hardly alone.
Adam Woods doesn't provide his five employees with health coverage now, and he's taking a wait-and-see approach before making decisions about what to do under the Affordable Care Act. He's hardly alone. - ()

A provision in the Affordable Care Act will offer substantial tax credits to small-business owners who offer subsidized coverage to their employees. But as with all other things related to the ACA, business owners are taking a wait-and-see approach.

And consultants are encouraging them to stay put until the largest questions surrounding the ACA are resolved.

Take Adam Woods. He thinks he'd qualify for a 50 percent tax credit if he provides insurance to his five Camden Printworks employees — meaning if he spends $1,200 a month on employee health coverage, he'll get a $7,200 tax credit for the year.

But he's not jumping into the online insurance marketplace yet.

"I know other people in business," said Woods, who doesn't currently offer insurance to his workers. "Hopefully, one of them will pull the trigger on it before me, and I'll ask how it went."

That's a typical case. Consultants say the small-business exchange, called SHOP, will start slowly as executives get a sense of how the exchanges will work.

Part of the problem is that small employers are far less likely to offer health insurance than large employers. According to a report by the Kaiser Family Foundation, in 2011, 46.7 percent of New Jersey firms with fewer than 50 employees offered health insurance, compared with 96.5 percent of firms with 50 or more.

The reason, those employers say, is the high costs, a nut the ACA is attempting to crack. Insurers will offer four levels of coverage, both on and off the marketplace, and premiums will vary by the age of the workers in the employer group.

The jury's still out on whether it will work.

"The advice I'm giving my clients is: 'Let's see what the rates look like and how it's going to work on SHOP,' " said Brad Greenbaum, a partner in Altigro Financial Group, of Fairfield.

The SHOP tax credits give employers of fewer than 50 an incentive to offer coverage, but it may be a better deal for lower-wage employees to buy their own government-subsidized policies on the marketplace. Those subsidies phase out at four times the poverty level — about $46,000 a year for an individual.

Larry Altman, vice president of health care reform at Horizon Blue Cross Blue Shield of New Jersey, also thinks the individual exchange will carry more weight than SHOP.

The tax credits for the smallest employers are an incentive, but those credits, "are very restrictive as to which employers can access them," Altman said.

For instance, in a high-wage state like New Jersey, many employers aren't eligible for SHOP incentives, since their average wages exceed $50,000.

Greenbaum said most of his clients have fewer than 50 employees, and are renewing their plans under the state's small-group market.

For the past two decades, that small-group market is where insurers have sold state-regulated coverage to employer groups with two to 50 employees.

If SHOP turns out to be a better deal than the existing small-group market, employers can drop their current health plan and switch to SHOP.

That may be what John O'Connor does.

O'Conner, who owns Shade Tree Garage, in Morristown, said he plans to continue offering coverage to his seven employees. He expects he'd qualify for a tax credit via SHOP, but is waiting to see how things shake out.

If he can keep the coverage he's providing and get a credit, "I'm going to do that in a heartbeat," O'Connor said.

Health insurance, he said, is critical to his workers. "It's a tool that I use to keep and retain good staff," he said. "The last guy I lost left to get a better benefits package."

That worker, O'Connor said, "took a pay cut and went on the night shift" for his new employer in order to get that richer benefits package.

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