Small businesses still ailing in wake of Affordable Care Act

A year ago, financial advisers were cheering the launch of government health insurance exchanges, but today they're grappling with costly group insurance policies for their small business clients, who have been hurt by delays in the implementation of Obamacare. The health care law, formally known as the Patient Protection and Affordable Care Act of 2010, or simply the Affordable Care Act, led to the creation of federal and state exchanges where individuals and small businesses can buy health insurance policies. After getting off to a rocky start on Oct. 1, 2013, the marketplace for individual coverage has been producing results. A survey earlier this year of 742 adults by the Kaiser Family Foundation found that out of the 340 participants who bought insurance from one particular health care exchange, 57% had been uninsured just before they made their purchase. Advisers praised the fact that the availability of individual coverage — whether on a public exchange or privately through an insurance agent — allowed early retirees and entrepreneurial clients to walk away from the 9-to-5 grind and start their own businesses. But trouble has cropped up with group health insurance coverage for small business clients, and advisers say they're having a hard time finding affordable insurance.

HOW ONE FIRM WAS HIT

For Pam Poldiak, an adviser at Partners in Financial Planning, the problem hit home. Her firm obtained group insurance coverage nearly two years ago, when it came to light that an employee's health condition made obtaining her own coverage cost prohibitive. The firm renewed its group coverage last December before the ACA rules on coverage went into effect for 2014. But now, Partners in Financial Planning is facing a 130% premium increase in December plus the prospect of undoing its coverage plan and providing workers with a stipend to buy their own coverage. “The most we had to pay was $200 per employee, and now it's $580 for just one person on her own,” Ms. Poldiak explained. “It's a minefield for the small employer to figure out what to do and still comply with the regulations.” There are a number of reasons why the process for obtaining health insurance for small businesses has remained burdensome, despite the major strides made for individual health insurance coverage. For instance, the Small Business Health Options Program, which is better known as SHOP exchanges for small employers, has experienced delays in a number of states. In 2014, the exchanges were supposed to be open to employers with 50 or fewer full-time workers. In addition, those with fewer than 25 workers would qualify for tax credits if they bought insurance through a SHOP exchange. In May, the Department of Health and Human Services published a final rule that would bring the “employee choice” model, which permits workers to select any health plan at the actuarial value chosen by the employer, to fruition in the SHOPs. In order to ease the transition to the employee choice model at the state level, the federal agency permitted state insurance regulators to ask that the SHOP in their respective jurisdictions not enact employee choice in 2015. Indeed, in June, 18 states decided they would hold off on implementing employee choice via the SHOPs. Small businesses that use the exchanges in these states will only be able to offer workers one health plan through the SHOP exchanges next year. Employers have also faced delays in implementation. In February, the Obama administration said it would permit employers with 50 to 99 workers to hold off on providing health care until 2016, which is two years later than initially anticipated. During that period, those companies won't be subject to any federal penalties for failure to provide coverage.

PROCRASTINATION

Those delays have left even small business owners in the doldrums with respect to addressing health care. They are procrastinating. “Because of all the delays and having the deadlines forgiven, many people are staying with their old plans,” said Carolyn McClanahan, founder of Life Planning Partners. “Because they couldn't get the exchanges up and running, it didn't materialize.” As a result, those small employers are in stasis. “Nobody has changed what they're doing,” Ms. McClanahan added. “My small business owners who didn't offer health insurance are continuing not to offer it.” Uncertainty around the affordability of health insurance for small businesses, as well as the availability on the exchanges, has also led some small business owners to shy away from making new hires. “People aren't really apt to hire new employees unless there is a strong business case to do so,” said Don McAnelly, a principal at Rehmann Financial. “The continuing unknown is, "What's the final cost when I hire these employees? How is the dust going to settle?'” On the large employer side, more cost-conscious companies are looking at using consumer-directed health plans — those that use health savings accounts and high-deductible health care plans — for their coverage. A survey of 136 large U.S. employers by the National Business Group on Health found that these companies expected health care benefits costs to rise by 6.5% next year, but they said they would limit that increase to 5% by making updates to their plans.

WAYS TO CUT COSTS

How? By broadening consumer-directed health care plans and raising cost-sharing provisions. Fully 32% of those surveyed expected to offer CDHP plans as the only benefit plan option in 2015, compared with 22% in 2014. Mr. McAnelly expects more of his clients to consider such plans as an option, and he's nudging even his smaller clients to start analyzing their choices this fall. “People are seeing rates go up, they're looking to manage the costs and one way to do it is to look at high-deductible health care plans,” he said. “I'm encouraging clients to analyze their operations: If you're on the cusp of 50 workers, 100 workers, be aware. Prepare for it.”