CRYSTAL LAKE – In coming years, the business of providing health insurance as a workplace benefit could drastically change as provisions of the federal Affordable Care Act take effect.
Gary Reece does not know what changes due to the federal health care reform law will look like – other than they might not be as affordable as the name suggests.
Reece – president of his own small business, Heartland Cabinet Supply, and the Crystal Lake Chamber of Commerce – said insurance rates increased nearly 35 percent this year in both places after he expected about a 20 percent bump.
Whether that is a sign of times to come – as of 2014, the ACA requires every individual to have health insurance – remains to be seen, Reece said.
“Most people are up to their eyeballs just trying to manage this,” Reece said about keeping up with changing information about the act. “When the goal posts keep getting moved, it makes it really hard to plan.”
Changing insurance landscape
For decades, health insurance coverage in America typically has come from employers who provide it as part of an overall compensation package.
In 2011, the most recent year for which data were available, 54.7 percent of American workers had health insurance from an employer, according to a report issued in July by the Employment Benefit Research Institute. The study found that 22.4 percent of uninsured workers hadn’t been offered health benefits from their employers.
Proponents of the ACA have said it will help reduce the ranks of the uninsured. In October, public health insurance marketplaces, or exchanges, will open and individuals and businesses can buy health insurance from it if they choose.
The government has pushed back by a year the so-called “employer mandate,” which was to take effect in 2014 and would have required all businesses with more than 50 full-time equivalent workers to offer them health insurance or pay a penalty.
However, those whose business it is to advise businesses on the ACA say they are advising that the extra year is not a time to relax.
“The first thing I advise any business owner is: Don’t stick your head in the sand,” said Elizabeth Milito, senior executive counsel for the National Federation of Independent Business.
She noted that the rollout of the ACA appears to be fluid, with rules still being written, and potential future legislation and executive actions could alter the timetable for various provisions.
But she advised employers to be aware of what’s coming, and to prepare for each provision and for questions from their workers.
“There is a lot of misinformation out there,” Milito said.
Jim Erickson, president of Boltswitch Inc. in Crystal Lake, said that misinformation has made it nearly impossible to plan, as new changes or delays are added constantly.
Erickson said his company has always been cognizant of employing fewer than 50 people because it has made it easier to comply with other federal guidelines, such as the Family and Medical Leave Act.
He said he plans on maintaining the roughly 45 employees he has now, but would be interested to see what changes are made during the yearlong delay of the employer mandate.
“I don’t know what the impact is going to be other than our carriers told us rates would go up,” he said. “I’m still not convinced it won’t be repealed or set back.”
Milito said employers should educate themselves on the intricacies of the employer mandate. She noted that the rules for counting employees under the ACA are not the same as those in other federal or state labor laws.
Milito has heard from some business owners who have reduced their full-time headcount by shifting more workers to part time or redesignating them as “independent contractors.”
But Milito said the National Federation of Independent Business cautions against such tactics.
“Beware of workarounds,” she said. “They can be problematic. It’s not going to get you out of the requirements under the ACA, and it may get you into hot water with other government agencies.”
Mike Deagle – an insurance broker through his company Deagle Benefit Group Inc., of Batavia, and president of the Illinois State Association of Health Underwriters – said there are other impacts of the law of which employers should be aware.
He noted that the law will greatly reduce the number of health plans offered by insurers. And the law has mandated changes to how rates are determined.
Previously, rates could be determined by a number of factors, including medical history, gender, lifestyle and occupation, among others.
Now, Deagle said, insurance premiums can be rated based on only the age of the insured, family composition, the geographic region in which they live, and, for individual policies, whether the insured smokes.
He said that will result in otherwise healthy individuals of different ages being charged different rates for health insurance, even under the same plan.
Deagle said the changes undoubtedly will result in changes in how much employers must pay to insure their workers.
Some observers have wondered whether the law will cause some employers to steer staffs into the exchanges and drop health insurance as a benefit. Employers will be required to provide workers with a notice regarding the opening of the exchanges by Oct. 1, Milito said.
Kathi Etten, an agent at Market Financial Group in Crystal Lake, has been advising businesses on the changes and said most employers are not interested in dropping coverage for their employees.
She said the biggest change would come in the number of options employers may offer to meet the different thresholds in the act. For example, she said businesses with a wide range of salaries would need to have multiple options to meet the requirement that the cost to employees cannot be more than 9.5 percent of their W-2 wage.
“The rating methodology will work well for some groups and not as well for others,” Etten said. “I think the biggest issue for all small employers will be deductibles, but I haven’t heard many people talking about dropping coverage to pay a penalty.”
A recent survey by workplace issues consulting firm Challenger, Gray & Christmas supports Etten’s claim, finding that 82 percent of companies surveyed will continue to offer health care coverage next year. And none of the human resources executives surveyed said their companies will drop health coverage when the individual mandate takes effect Jan. 1.
While the changes remain unclear, Reece said one change he would not make is dropping coverage because it is one of the best ways to attract quality employees.
“Good employers offer insurance,” Reece said. “At least everyone knows they are in the same boat so they know they are not being singled out.”Health care changes bring challenges for public sector