Small businesses in the U.S. have been bleeding from group health insurance costs for years and COVID-19 only worsened their anemic state. But an unnoticed yet profound employer benefit in the American Rescue Plan of 2021 may be the very hope they need to be revived.

The only thing steady about annual health insurance renewal costs is that they have steadily increased by 3-5% every year for decades. This means employers are spending on average 50% more than they did 10 years ago. Health insurance is already the second most expensive line item in most budgets—second only to employee wages. But the rate of premium renewal increase well outpaces even standard cost-of-living raises.

From losing the ability to recruit because health benefits haven’t been good enough, to losing tenured staff because those overpriced health benefits finally had to get cut. The “cost of doing business” has driven too many companies out of business. 

America is built on small businesses. The American Rescue Plan has done right by its name in creating the greatest help to small businesses that it’s seen in decades.

There are two primary components to the law changes. First to the individual. Second to the employer. Let’s begin with the personal impact. Because after all, business is done with people.

Beyond the items most focused on by the news—like the $1,400 checks and unemployment benefits—one of the most significant impacts are the dramatic discount increases made on individual health insurance plans. These discounts are officially called Advanced Premium Tax Credits, but are most regularly known as subsidies. The equation has changed for how these subsidies are determined. On average costs have been in half for most families. Example: Family of 4 making $120,000 will save $500 a month back into their pockets.

Not only are the discounts increasing, but even more people now qualify for those discounts. Before the change, there was a threshold where the discounts dropped off. This dropoff calculation was known as “the 400% FPL cliff.” FPL is the Federal Poverty Level, and it calculates the ratio of household income versus household size. The cliff was dramatic, costing thousands of dollars more with the slightest increase to the income. Even 399% to 400% was so devastating, people would refuse raises to protect themselves. 

For context, if we take a look at the national averages again, a 60 year-old couple making just $75,000 would not have qualified at all for subsidies prior to the American Rescue Plan. However, they will now see upwards of $15,000 in savings in just one year. That increases their cash flow by 20%. This is a life-changing impact.

These examples are real-life. And small businesses are made from people.

What if organizations could actually harness these personal impacts for their people? What if it was possible for employers to be smarter with their healthcare spend and actually start investing into their employees? 

Thankfully, it’s possible.

Yes, subsidies are for individual plans only. Yes, when an employer offers their employees a group plan, they don’t get any discounts on individual plans even if they tried. But it doesn’t mean employers can’t provide a way to actually use individual plans in a group chassis. In fact, innovative employers have done this for years.

In 2015, the IRS responded to a question from businesses asking if they could cancel their unsustainably expensive group health plans, but instead just provide taxable wage increases to employees and point them in the right direction. This would be similar in many ways to the change in retirement benefits, from pension plans over to 401(k).  Individual plans cover all preexisting conditions, more products are available every year, and most importantly, it unlocks those subsidies for deep discounts.

In Notice 2015-17, the IRS responded in the affirmative. And a whole new world of employee health benefits began. By leaving traditional group plans and moving to individual plans, it allows employees to pick personal plans that fit their own needs. Employers can also combine individual plans with group HRAs, HSA contributions, and ancillary plans. So they are not only cutting costs but improving coverage, too.

Indianapolis-based tech company, Remodel Health, is no stranger to leveraging law changes on healthcare. For six years, their Hoosier-grown software has empowered employers throughout the U.S. to leave traditional group benefits and offer a managed individual health benefit solution to their employees with the tools required from building and comparing budget strategies, all the way to employee shopping experience.

With the American Rescue Plan even increasing those subsidies and now making even more employees eligible, Remodel Health customers are already seeing additional millions of additional dollars being put back into their budgets. Not only have they been revived, but they now have enough to thrive like never before.

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