Follow The Republic:
The clock is ticking toward Oct. 1. That’s when consumers and small business owners eligible to buy health insurance on a federal exchange under the new Affordable Care Act will learn how much that costs.
Many would-be buyers in Columbus — from older workers who lost private insurance after being laid off to the working poor and small business owners with a handful of employees — are confused and worried about all the new rules.
“We have 18 employees, and we’ve provided a group health insurance plan as long as we’ve been in business. But I can’t tell you what we’re going to do in the future,” said Jesse Brand, a co-owner of the Brands Inc. lumber supply company on California Street. “If there’s a 50 (percent) or 60 percent increase in premiums, I don’t know what we’ll do.”
Don Faber, 59, also is in a quandary.
Faber, an engineering consultant who recently moved to Columbus from Milwaukee, was laid off by his longtime employer last year. Faber has started shopping around for new health insurance coverage for himself and his wife.
He is covered by his former employer under a special severance package through the end of October. But after that date he will either have to buy a private plan through an insurance broker or tap the federal exchange for an individual policy that will take effect Jan. 1 at a price likely to be more than $1,000 per month.
Individuals with low to moderate incomes can get federal subsidies to make insurance coverage on the exchange more affordable, but Faber (who has started his own consulting operation) probably will make too much money to qualify for such help.
‘Deal in reality’
Meanwhile, some small business owners — Brand included — are rushing to renew existing health insurance on the private market by Dec. 1 in a bid to keep their costs at a modest level for the next 12 months. Brand said that interim step will give his company another year to evaluate whether federal health reform offers any workable and affordable options.
“Make no mistake, I want to do the benevolent thing,” Brand said. “I want to continue offering a health care program, but there’s significant uncertainty about what we’ll be able to afford. We have to deal in reality.”
Businesses with fewer than 50 employees can buy coverage on the exchange, but the Affordable Care Act also says they don’t have to offer health insurance to employees at all. Companies with 50 or more full-time workers must provide insurance options.
Still, small family-oriented employers like Brand Inc., which have always offered coverage, face a dilemma.
Brand said his company pays roughly $85,000 a year for its share of employees’ insurance. Brand Inc. absorbs 80 percent of the premiums while the typical employee picks up 20 percent, he said.
If he ends up dropping health coverage for employees completely, individuals will have to seek coverage on their own — most likely by buying coverage on the federal exchange.
Individuals who don’t have insurance coverage will be taxed for going bare, with the penalty taken out of their federal income taxes. At first, anyone without insurance will have to pay a tax equal to
1 percent of income or $95, whichever is greater. In 2015, that rises to 2 percent of income or $325, whichever is greater. And it tops out at
2.5 percent of income or $695, whichever is greater, in 2016 and beyond.
Faber, stressing that he is in good health, said he will review rates on the federal exchange once they’re published, but he also will consider private insurance through a nationwide engineers professional association and on the private brokerage market.
“As a baby boomer, you have to make some decisions,” he added. “How much money am I willing to spend to stay alive? You never really know what you are facing.”
Faber said one blessing is that since he is 59 years old he needs only to figure out insurance coverage for six more years until Medicare kicks in and his personal coverage plans become more obvious.
“It also helps that I’ve got pretty good savings,” he said. “I’m not destitute.”
Insurance consultant Mark Sherman of LHD Benefit Advisors in Indianapolis said he thinks most small business owners who have traditionally provided insurance will decide to keep some level of company-provided plan in the end.
He said many businesses see insurance coverage as a benefit that helps them attract top talent, and the importance of that factor will grow as the U.S. economy improves and more companies start to hire again.
What is happening for many companies, though, is cost-shifting to employees. Higher deductibles, bigger co-pays for doctor visits and wellness incentives to coax people to stop smoking, exercise and lose weight are much more common — and those trends will continue, Sherman said.
Sherman said small businesses face the toughest choices under the Affordable Care Act. He said a
seat-of-the-pants estimate is that it costs $10,000 a year per employee to provide health insurance, and some small businesses may feel forced to drop coverage rather than absorb that expense.
“At the level of a big business like Cummins, a large claim from one employee doesn’t cause them to blink an eye because it’s spread over such a huge workforce. But smaller companies could go under from a single million-dollar claim,” the benefits consultant said.
Another issue is how full-time employees are counted under the Affordable Care Act’s rules. Unlike in federal labor law, the health act defines a full-time employee as anyone who averaged 30 hours per week during the prior calendar year. That can be a tricky calculation for firms that run offices or factories where hours fluctuate based on seasonal demand for products or services.
Sherman said the 30-hour rule could persuade some consumer-driven businesses, such as restaurants or hotels, to drop insurance coverage for workers rather than trying to limit everyone to under 30 hours weekly.
Big employers — defined by the Affordable Care Act as those with 50 or more employees working at least 30 hours a week — have been given a reprieve until 2015 before penalties kick in if they don’t provide health insurance coverage.
Despite that delay, insurance experts like Sherman and Mayfield say they don’t expect any major employers to drop coverage in the short run. But some big companies are reducing insurance coverage where they can legally.
The health law requires big firms to cover employees and dependent children, but they don’t have to cover spouses or domestic partners. On the national level, UPS (the delivery company) has told its staff that some 15,000 working spouses eligible for private insurance at their own workplaces no longer will be welcome on the UPS plan starting next year.
Other major employers are trimming retirees’ health coverage, a trend that has been gathering momentum for several years.
A benefits survey conducted this summer by human resources consultants Towers Watson & Co. found that
44 percent of companies plan to stop health plans for former workers over the next two years.
Older retirees, the corporate argument goes, have Medicare and Medicaid as their safety net beginning at age 65.
Will young, healthy apply?
Another nagging issue that could hamper the Affordable Care Act’s early results is what young people will do, insurance brokers say.
Some analysts are suggesting that the cost of federal health exchange policies may be so high that it chases away young, healthy consumers from buying policies.
Some of the 20-something crowd will “go bare,” basically thumbing their noses at the Affordable Care Act, said Larry Mayfield, a broker with Zeller Insurance in Columbus. “I call them the young and the invincible,” he said.
They figure they’ll remain healthy, have almost no medical bills, and they may be willing to pay a federal penalty rather than buy insurance they assume they won’t use, Mayfield said.
Think your friends should see this? Share it with them!
Note: All comments left on our sites are first reviewed by an automated comment moderation system. Your comment may take up to 5 minutes to appear. If for any reason your comment can not be approved you will receive an email from this system with a detailed explanation.
All content copyright ©2013 The Republic, a division of Home News Enterprises unless otherwise noted.