Question: I do have a question upon which you may be able to shed some light. It seems to me that (in 2014 and beyond) many small business owners will forego purchasing group health insurance (either in the Shop Exchange or directly from carriers) and send their employees to the individual exchange where some of them will qualify for subsidies. Does the ACA create any obstacles to impede employers from doing so?

Answer provided by David Fear Sr. of Shepler Fear Insurance Agency, Sacramento,. CA. Mr. Fear is a former President of the National Association of Health Underwriters and a recognized expert on the ACA.

Answer: [David Fear Sr.] I cannot see any obstacles from ACA to prevent that from happening. In fact, I do think that ACA encourages this for two reasons: The fact that the law specifically authorizes Exchanges the exclusive ability to administer the Individual Premium Subsidy and that there will be a Risk-Adjustment mechanism between exchanges and carriers outside of the exchange. The former is a HUGE promotion for participation in an exchange and the latter is way to keep the carriers honest so that their product pricing ends up being on par with the exchange. That being said, if I’m a small business employer and employ a number of people who are going to qualify for the premium subsidy, then why wouldn’t I encourage my people to enroll in the exchange since there is “free government money” there for them to pay for their coverage. So, yes, I think that ACA really does buy off the small employers by making the exchange the exclusive place to get the premium subsidy for employees who qualify. Just the opposite for large employers who are penalized for not providing coverage…

Follow-up Question: What are the incentives for purchasing group coverage in the Shop Exchange rather than turning employees loose on the individual exchange?

*Answer: *[David Fear Sr.] Well we know there are disincentives for large employers to not provide group coverage, but not so for the small employers. In fact, I think the small employer premium tax credit that went into effect last year will actually go away in 2014 because that is when the individual premium subsidy kicks in - so that kind of leads me to believe that this deal was set up as a transition into that. On the larger front it seems that if Congress can modify parts of PPACA before 2014 so as to allow for small employers to get the same subsidy outside of the exchange as will be provided within the exchange that many of these issues might be fixable. But if you read what the responsibilities of an exchange are, in a very broad sense they are now going to be the “local agency” that makes determination of eligibility for Medi-Cal, Healthy Families and Exchange Subsidy, not to mention whether or not a person is exempted from the individual and/or the employer mandate. They are going to have HUGE responsibilities and frankly that is why I’m against a Federal-Fallback exchange because I don’t trust the Feds to do this right at all.

[David Fear Sr.] I hope this answers your question. It’s just my opinion based on how I read the law as it now stands…