Small businesses must select new carriers by Dec.1 to qualify for ACA

Some will find rates increased

By Kathy Canavan

Health insurance rates for many small businesses in Delaware are doubling this month — even though Qualified Health Plan rates for 2015 announced Oct. 31 rose less than three percent.

The reason: Most businesses didn’t pay the new Affordable Care Act rates last year.

Because Delaware allowed small businesses the option of renewing their health plans at 2013 rates last year, most never faced ACA rates that were hiked 20 to 100 percent to pay for new mandated coverages, such as maternity, pediatric vision care and pediatric dental care. This year they face those hikes and the modest hikes for 2015.

“On the one hand, it was good for people last year when they got to avoid this painful transition last year, but it was only delaying when they were going to have to deal with it, said Nicholas A. Morriello of Health Insurance Associates in Newark. “Most businesses are still paying a 2013 rate, so they’re not looking at this 2014-2015 increase; they’re looking at much bigger increases. They’re saying, ‘I didn’t get a 2.9 percent increase. I got an 89 percent increase.’ For some businesses, it’s double. Businesses with an old average employee are getting socked the most.”

Because businesses with fewer than 51 employees are not required by law to offer health insurance under the ACA, many businesses may offer employees raises or retirement plans instead or they may just cut coverage.

The employer-sponsored health insurance model in effect since the 1940s may change, brokers and businesspeople said. The 1942 Stabilization Act, designed to limit wage hikes and inflation during World War Two, made it difficult for employers to recruit workers when many men were serving overseas, so employers began to offer health benefits. The insurance didn’t count as income, so workers didn’t pay income taxes or payroll taxes on the benefits.

Michelle Amadio, director of Delaware’s health insurance marketplace

“I think you’re going to see some people who were giving insurance to employees but they’re going to have to stop because they just can’t afford it,” said Judy Diogo, president of the Central Delaware Chamber of Commerce. “Their employees are going to have to go onto the open market.”

“I do believe you will see large businesses, where there are penalties for not offering insurance, continuing to offer insurance,” Moriello said, “but I do see small businesses who currently offer insurance disbanding their coverage as early as December of this year. The program goal was to insure people who were uninsured, not to transfer people who were covered under a business to being covered under the federal insurance.”

“How is the federal government going to be able to maintain the number of people who are going to enroll if employees have to go to the open market,” Diogo said. “How are those numbers going to work? What we are going to see happen is people losing their health care insurance at work and going onto the federal plan and being subsidized. Where’s the money going to come from that’s going to subsidize them?”

Even well-meaning employers who offer employees salary bumps instead of insurance will see unintended consequences for themselves and their employees, Moriello said.

Employees may not qualify for insurance subsidies when they go into the insurance marketplace with high salaries, raises are taxable for the employees, raises increase the employer’s payroll so they pay more for worker’s comp insurance higher employer matches for Social Security and Medicare taxes.

Nicholas A. Morriello of Health Insurance Associates in Newark

Since the mid-90s, Barbara Hearne and Ziggy Mielnikiewicz have offered health insurance to their 12 employees at Ziggy’s Inc., a wood floor installation and refinishing company in Newark. Hearne spent the equivalent of six 40-hour weeks last year trying to determine which plans would work best for all their 12 employees, whose ages run from 20s to 60s.

“What I’m trying to do is to figure out what’s best for the employees,” Hearne said. She has considered giving employees a raise or bump up their retirement accounts instead of offering insurance, but she’s concerned what will happen if some employees must go out on the open market for insurance. “One who turns 60 next year is really going to get reamed, but some will do better on the open market.”

And, if too many employees opt out of the insurance plan, Ziggy’s won’t have the 70 percent required in order to participate in the Affordable Care Act’s Small Business Health Insurance Options Plan. Participation in a SHOP plan is required for a business to take a federal tax credit for offering coverage. The tax credit would partially balance the huge premium increases they can expect.

Small business owners are scrambling to find suitable plans because employees must choose coverage by Dec. 1 in order to be covered under the ACA by Jan. 1.

The ACA offers advantages for some insured – especially those with pre-existing conditions who had trouble getting policies before the law was enacted.

“For the first time, people with health problems can buy insurance, and that’s good,” Moriello said. For groups that had health-related surcharges in the past, when they moved into the ACA plan, it might have represented a reduction in costs for them. But, for the healthy groups, their health advantage has gone away and the ACA added benefits. The combination of those two things has led to a fairly significant increase for them.”

Michelle Amadio, director of Delaware’s health insurance marketplace and executive director of the state’s Health Care Commission, said the current situation is definitely a Catch 22, and her group is cognizant of the problems and working to drive premium costs and deductibles down. She said increasing access to care through the insurance marketplace and the state’s expanded Medicaid program is a first step. With the help of federal funds, the state has developed a four-year Health Care Innovation Plan. She said the aims are to improve health, strengthen the quality of care and drive down costs.

Delaware’s current per-capita cost of care is 25 percent higher than the national average, she said, and 22 percent of the state budget is devoted to health care, although health outcomes remain at or below average by many measures.

“The cost of care is the major driver of the insurance premiums, and Delaware has a very high cost of care,” Amadio said. “I know it’s not helpful for people who are trying to buy plans right now for 2015 and I certainly appreciate their situations, but we’re looking systemically at a whole broad spectrum of ways we can bring down costs – certainly paying better attention to reduce re-hospitalizations, medical home piloting, care coordination for high-risk populations, coordinating with specialists, reducing the utilizations of high-cost hospitals and emergency room.”

Amadio said Delaware expects to create $282 million in cost-of-care savings through 2018 and reinvest most of the savings in the delivery system in those early years.

She urged small businesses to use insurance brokers’ services to compare rates and find the best solution for their businesses. There is no charge for their services and they cannot charge more for the same coverage than the prices listed on federal websites. 

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