The Hidden Costs of ACA Plans You Didn’t Expect
For small businesses that don't qualify for traditional group plans, there are better options that those on the ACA marketplace.
As a small business owner, providing health insurance is one of the most important benefits you can offer your employees. However, not all health insurance plans are created equal. While the Affordable Care Act (ACA) has made coverage more accessible, its plans come with several limitations that may not meet the needs of small businesses. Particularly for businesses operating across state lines or those with employees who travel, ACA plans often fail to provide the necessary flexibility and cost-effectiveness.
Let’s explore the main disadvantages of ACA plans for small business owners and why private health insurance might be the better solution.
1. Restricted Network Coverage
One of the primary challenges with ACA plans is their limited provider networks. Many ACA plans, particularly those categorized under Health Maintenance Organizations (HMOs) and Exclusive Provider Organizations (EPOs), restrict employees to a specific group of healthcare providers within a local network. This means employees must receive care from these approved providers in their area to avoid costly out-of-network fees..
“One of the primary challenges with ACA plans is their limited provider networks.”
For small businesses that employ remote workers or have employees who travel or relocate frequently, this limitation can lead to disruptions in care. An employee who works in one state but moves or travels to another may struggle to find in-network providers, leaving them to pay out-of-pocket for out-of-network care or, worse, forgo necessary treatment.
Private health insurance plans, on the other hand, often feature expansive networks that span multiple states, allowing employees to seek care regardless of location. This nationwide coverage ensures that employees can access in-network healthcare providers no matter where their job or life takes them.
2. Higher Costs Due to ACA Regulations
Although ACA plans have made healthcare accessible to more individuals, they come with a range of regulatory requirements that can increase costs for small businesses. One such requirement is the "community rating" rule, which obliges insurers to charge similar premiums to all policyholders, regardless of individual health status.
This pricing structure can be disadvantageous for businesses with younger, healthier employees, as they may end up paying higher premiums to help subsidize coverage for higher-risk individuals. Additionally, small businesses with 50 or more full-time employees are subject to the ACA’s Employer Mandate, which requires them to provide ACA-compliant health insurance or face financial penalties. This can add significant financial strain, especially for growing businesses.
Private health insurance plans tend to be more flexible when it comes to pricing, as they can often be tailored to the specific health needs and demographics of your workforce. For many businesses, this can lead to lower premiums and overall healthcare costs, offering more value than ACA plans.
“By opting for a private plan, small business owners can craft a more tailored health insurance package that fits both the company’s budget and the needs of their workforce.”
3. Lack of Flexibility and Customization
ACA plans are built to provide essential health benefits, ensuring that certain coverage elements are standardized. However, this can limit flexibility for businesses that have unique healthcare needs or employees with specialized requirements. For example, businesses with employees in multiple states may require broader coverage that isn’t confined to local networks, or they may want to offer access to specialized care or treatment not included in basic ACA plans.
The rigid nature of ACA plans leaves little room for customization, making it difficult to meet these specific needs. In contrast, private health insurance plans typically offer more flexibility in terms of coverage options. Businesses can design plans that cater to their unique circumstances, whether that means adding coverage for out-of-state providers, offering specialized care, or including additional benefits that ACA plans may not cover.
By opting for a private plan, small business owners can craft a more tailored health insurance package that fits both the company’s budget and the needs of their workforce.
4. Limited Portability
Another disadvantage of ACA plans is their limited portability. Since ACA plans are tied to the state in which they are purchased, an employee moving to another state may lose coverage and have to enroll in a new plan. This can cause gaps in coverage, force employees to switch doctors, or require them to navigate a confusing re-enrollment process, especially if their move occurs outside of the ACA’s open enrollment period.
Private health insurance plans often come with nationwide coverage, ensuring employees are protected regardless of where they live or work. This portability is particularly beneficial for companies with employees who relocate or travel often, as it guarantees continuity of care and avoids the disruptions associated with changing health plans.
Conclusion
ACA plans can be a viable option for many individuals, but when it comes to meeting the needs of small businesses, especially those with a workforce spread across different states or constantly on the move, these plans often fall short. The restricted networks, higher costs due to community rating rules, lack of customization, and limited portability make ACA plans less appealing for businesses seeking comprehensive, flexible coverage.
Private health insurance plans, by contrast, offer more flexibility, broader coverage networks, and cost-saving potential, making them a more practical solution for small businesses. By choosing a private plan, business owners can ensure that their employees are covered wherever they are, with healthcare options that suit their unique needs and circumstances.
