How the American Health Care Act could impact small businesses

Practice Management

Republicans released their ACA replacement — the American Health Care Act.

The legislation would reverse course for several aspects of the ACA, including eliminating the individual mandate, ending Medicaid expansion in 2020 and restructuring tax credits to include a credit that would help Americans purchase health insurance.


How could the healthcare changes affect small businesses? Here are three key aspects for small business leaders:


• The AHCA eliminates the cap on the exemption tax for employer-sponsored insurance, so small businesses will no longer have a penalty if they don't offer health insurance coverage to employees.
• The Cadillac Tax will be delayed on costly health plans from implementation in 2020 to 2025.
• The ACA's provisions on pre-existing conditions would remain intact and adults would be allowed to stay on their parents' insurance up to age 26.


John Arensmeyer, CEO of the Small Business Majority, responded.


"Repealing various aspects of the Affordable Care Act and scaling back provisions like tax credits and Medicaid expansion will do little more than create instability in the insurance market," he said. "This instability will ultimately hurt small business owners by making insurance less affordable, which will make it more difficult for America's small business community to access healthcare."


He advocated for keeping the ACA intact and finding ways to improve it.


"Small employers don't want or need another healthcare overhaul; they need quality, affordable insurance for themselves and their employees so that they can focus on running their businesses," he said.


However, not all aspects of an ACA repeal are negative for all small businesses.


An article published in Forbes examines how the ACA repeal could affect small businesses, noting that the health insurance market became more standardized under the ACA. The risk was pooled together as more businesses sought coverage to avoid penalties; as a result, businesses with employees who had fewer healthcare needs saw costs go up. With a repeal, small businesses with healthy employees could see costs go down.


The article also notes that in December, Congress passed the 21st Century Cures Act which allows small businesses with 50-plus employees to pay for their employees' insurance costs with Health Reimbursement Arrangements. In some situations, HRAs can be a less expensive way for companies to pay for healthcare and it's a tax-favored account. ACA repeal could make HRAs more attractive to small businesses.


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