Posted: August 01, 2012
Obama’s health care act upheld
Employers urged to explore optionsDebra Melani
In June, as health-reform advocates were dancing in the streets and opponents were vowing a re-energized fight following the U.S. Supreme Court’s monumental upholding of the Affordable Care Act, Bill Lindsay was fielding an onslaught of calls from employers: What does this mean? What do I do? His answer: It’s time for everyone, political opinions aside, to stop the foot-dragging and get prepared if they want to survive the health-reform ride that lies ahead.
"A lot of them have been sort of hoping and wishing that this would go away," said Lindsay, president of Lockton Employee Benefits Group. People are now finding that playing the waiting game in hopes that the law would be thrown out did not make good business sense, said Lindsay, who specializes in health reform.
Even with a renewed oath of repeal from Republicans and an intense November election likely, history shows dismantling major legislation doesn’t happen quickly. "If businesses are waiting to see what happens, they could be waiting forever," said Dede de Percin, executive director of the Colorado Consumer Health Initiative. "As long as it’s the law of the land, this is what we need to be doing."
For employers, that means bracing for increased costs and new regulations at the insurance-renewal table again this fall, planning for industry transformations such as the health insurance exchange, and finding the educational resources needed to keep them apprised and afloat.
BRACING FOR COSTS
Some business owners might be blind-sided by a number of new rules affecting them when renewing policies this year, many of which increase costs (see changes sidebar). "Some of them are soft costs, because they are purely administrative. But some of them are actually going to result in hard costs," Lindsay said. Just one example: Beginning this renewal period, all employers will face a fee of $1 per covered life (including spouses and dependents), which increases to $2 per covered life the following year. Neither Bob Deibel, president of a 350-employee group of companies that includes OfficeScapes, nor Tony Gagliardi, state director for the National Federation of Independent Business, was aware of the fee.
"The complexity of the law is so great and so deep, it’s hard to find anyone, quite frankly, who really fully and completely understands top to bottom, A to Z," said Deibel, whose company recently went to a partially self-funded plan to help mitigate the changing pressures of the health industry. Gagliardi said his ignorance on the $1 fee exemplifies what employers will be facing: a number of surprise costs from the ACA. "There’s like 26 hidden taxes in there, and I’ve only gotten through the first two. That’s what happens when you have a plan written behind closed doors."
Most business owners won’t be surprised to hear that they should gird for a premium increase, although, for the first time in years, the Colorado Division of Insurance has predicted an average increase in the single, not double, digits, at about 8 percent. The Department of Health and Human Services recently attributed the new federal rate-review process in part to the lower premium hikes, saying President Obama’s law is working. Lindsay rejected the notion.
"That comment presumes that insurance companies are raising rates just whimsically," he said. In reality, rates are a reflection of past health-care costs and utilization, with the recent economic slump leading to the lower rates, Lindsay said. When times are tough, economists say, things like elective procedures and maternity rates fall, decreasing utilization. "And health care tends to be a lagging indicator," Lindsay said, explaining why, with signs of a recovering economy, the lower rates are hitting now.
But Commissioner Jim Riesberg, whose Colorado Division of Insurance began reviewing rate increases before the federal government did, doesn’t discount the idea that the process serves as a motivator. "I think in order to avoid that review, some companies probably had a little sharper pen," Riesberg said. When linking the review process to lower rates, HHS noted that states reported a 4.5 percent decrease in the number of proposed rate hikes in the last quarter of 2011.
While the increase bucks Colorado’s long double-digit trend, it’s not likely to send employers into celebration mode. "We know premium rates have been increasing faster than inflation and wages in most areas," Riesberg said.
Moreover, the increase is just an average, Gagliardi said. "I got an email yesterday from one of my members who was just hit with another 17 percent increase. The only way they can get the rate back down is to go to a higher deductible or less coverage," Gagliardi said. "The law does nothing to address the true costs of health care, and that’s what drives premiums."
Gagliardi predicts that increasing expenses and continued uncertainty will drive out more small business owners this year. "I hear from members all of the time. They are saying: I just don’t want to play in this arena anymore." Others might be forced to stop offering insurance to their employees, he said.
A Towers Watson survey of employers in 2007 found 73 percent said they were confident that they would be offering health insurance in 10 years. The number dropped to 38 percent in 2010. The ACA does not require businesses with fewer than 50 employees to offer insurance. But, by 2014, because the high court ruled to let the ACA’s individual mandate stand, their employees will suffer penalties at the tax table if they do not have coverage.
Yet it’s not all dark news. There are other options out there and on the horizon, and becoming educated about health reform means small businesses can find the life preservers being tossed their way.
PREPARING FOR CHANGE
"I still talk to so many business owners who don’t know they are eligible for a small business tax credit," de Percin said. Businesses with fewer than 25 employees that pay average annual wages below $50,000 might qualify for a tax credit of up to 35 percent to help pay for health insurance right now (up to 25 percent for nonprofits). "And that increases to 50 percent (35 percent for nonprofits) in 2014," de Percin said.
Couple tax credits with the impending Colorado Health Benefit Exchange, and offering insurance for small businesses could become easier down the road. "Business owners really want more affordable health plans," said Patty Fontneau, CEO of Colorado’s exchange. "In addition, they want more choice and they want to have the burden of administration taken from them." And that’s what the virtual exchange, which will offer an individual marketplace and a small-business marketplace known as SHOP (Small Employer Health Options Program), aims to provide, she said.
On track for an October 2013 launching, Colorado’s exchange is being created to meet the state’s specific needs by its own stakeholders, whose numbers have been steadily increasing at the planning tables, Fontneau said. States that banked on a different June Supreme Court ruling will not be so lucky, Lindsay said.