Managed Healthcare
The Affordable Care Act provides that large employers need to provide a specific percentage of their full-time employees and their families with minimum essential healthcare insurance. A large employer is an organization that employs at least 50 full-time employees for six months or more of the previous year. The insurance must have the capacity to cater for at least 60% of covered services (Abraham et al., 2016). Employers can have employees contribute to their insurance. However, such contributions should not be more than 9.86% of their household income. The large employers who fail to comply with the requirement must pay a no-coverage penalty to the Internal Revenue Service (IRS). The condition is placed to ensure that large employers comply with the expectations of the ACA and ensure that their employees are fully covered. On the other hand, small employers are not mandated by the ACA to provide health insurance for their employees. However, where they do, they may qualify for the Small Business Health Care Tax Credit.
Given the requirements of self-insured health insurance plans, there are certain conditions where a small employer would become self-insured. One of them is where the organization is performing well financially. Under such situations, it might not have enough flexibility and capital to provide its employees with the necessary coverage they need. As a result, it would be essential for such employees to consider securing self-insurance (Abraham et al., 2016). Another instance is where the company is operating in a risky industry or period. Therefore, its management might not be fully aware that it can be capable of footing for the health insurance premiums of its employees throughout the year. The consequence of the situation is that small businesses might opt to avoid providing insurance coverage for their employees. Instead, it would consider the concept of self-insurance as most appropriate in regard to its operations.
Reference
Abraham, J. M., Feldman, R., & Graven, P. (2016). Employers’ changing economic incentives to offer health insurance under the Affordable Care Act. American Journal of Health Economics, 2(3), 273-299.