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Flexibility for small businesses: Adjustment to ACA lifts limits on deductibles

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Small businesses potentially regained some flexibility to buy health insurance plans when Congress and President Barack Obama last week tweaked a provision of the Affordable Care Act.

The legislative fix – which drew little attention because it sailed through Congress tucked into a larger Medicare bill – lifted the limits on deductibles for health insurance plans covering small employers with fewer than 50 workers. Under the ACA, those deductible could not exceed $2,000 for an individual or $4,000 for a family.

Now those deductible caps are gone, but it's not clear how soon small employers will see the impact since health insurers are currently selling plans that conform to the ACA deductible limits. Generally, the higher the deductible the lower the premium, so lifting the cap could make small employer health plans more affordable.

Vaughan M. Reale, executive vice president of employee benefits at CBIZ, said the changes to the ACA "that seem to allow small employers the flexibility to purchase plans with deductibles that are higher than the $2,000 single and $4,000 family limit should be welcome news to many small employers trying to maintain affordable premiums."

David Oscar, an insurance broker for the Altigro Financial Group, said he is waiting to see how New Jersey insurance carriers respond. It could take insurers several months to price and issue new plans with higher deductibles.

Oscar said prior to the ACA limits, small businesses could purchase health insurance plans with individual deductibles of $2,500 and family deductibles of $5,000. He said lifting the deductible caps could clear the way for higher deductible plans with lower premiums.

"Higher deductibles will ultimately lower the premiums," Oscar said. "However, there are many factors that have increased premiums – it wasn't only the deductible."

The ACA's most dramatic change is its new method for pricing small employer plans, he said. Instead of quoting blended rates, the insurers now provide different rates for each employee, based on their age. That can mean lower premiums for young workers and higher premiums for older workers that has nothing to do with the deductible.

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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