June 19, 2018
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The biggest change for small businesses under Obamacare you haven’t heard of

A patient waits in the hallway for a room to open up in the emergency room at Ben Taub General Hospital in Houston, Texas, in this July 27, 2009 file photo.
By Whit Richardson, Special to the BDN

Since the Affordable Care Act was made law in 2010, the impact it would have on businesses has been debated in Maine and throughout the country.

Today, a mere five weeks from the beginning of open enrollment on Oct. 1, the debate is still raging.

Much of the attention about the act’s impact on businesses has focused on the employer mandate, which will require employers with more than 50 full-time equivalent employees to offer health insurance or pay a penalty.

But with that provision delayed until 2015, large companies buying insurance will likely see “very few changes” come Jan. 1, 2014, according to Mitchell Stein, policy director for Consumers for Affordable Health Care in Augusta.

Instead, small businesses that choose to buy their insurance from the small-group market — which insured roughly 93,000 individuals in Maine in 2011 — are more likely to feel the law’s impact next year.

A little-discussed provision in the act will change what’s known as the “community rating.” This is how insurance carriers such as Anthem rate the risk among individuals and small groups and set the price of insurance.

“That’s a big change, and unless they’ve talked to their brokers, small businesses don’t know that’s coming,” said Ed Feibel, an employee benefits lawyer in Eaton Peabody’s Portland office.

Eric Jermyn, Anthem’s director of small-group sales, said that while most of the questions Anthem receives from business owners are about the much-discussed employer mandate penalties, the change in how insurers set rates has the most potential to affect the rates those business owners pay.

Currently, an insurance carrier offers customers buying in the small-group market composite rates. If a company with 15 employees buys health insurance, all employees of that company would have their rates determined by being put into one of four buckets — an individual employee, the employee and his or her spouse, the employee and children, and everyone else. Each bucket offers the same rate, and the insurance company doesn’t care if your spouse is 65 or 32, or if your 24-year-old son who’s a dependent on your plan is a smoker.

Having only four groups “smooths things out,” said Stein from Consumers for Affordable Health Care. “You have fewer highs and fewer lows because everyone is in those larger groups.”

Beginning Jan. 1, 2014, small group rates will vary from person to person based on four factors: age, location, tobacco use and family size. Some measures are similar to those included in a Republican-backed insurance overhaul passed by the Maine Legislature in 2011, called PL 90.

  • Age: Older adults in a group could pay up to three times the rate of young people in the group. This is an increase from the 2.5-to-1 ratio that Maine currently has, though PL 90 was already scheduled to increase the rate to 3-to-1 in January. What this change means is that older workers will pay a bit more, and younger people will pay a little less. The young carry less of the burden to subsidize the health care costs of the older members of the group.
  • Location: Maine will be split into four geographic regions, and a company’s rate will be determined by the headquarters’ zip code.
  • Tobacco use: Insurers can adjust rates based on whether employees, spouses and dependents smoke.
  • Family size: Instead of four buckets, there will be an individualized plan for each employee depending on factors like the age of his or her spouse and how many children are on the plan.

What does all this mean?

Stein said the changes will make health insurance rates more “transparent.”

Feibel at Eaton Peabody agreed, saying fewer buckets mean employers’ rates will more accurately reflect their employee demographics.

However, in a state such as Maine, which has the oldest population in the country, that’s not necessarily a good thing, according to Carrie Baker, an employee benefits broker at Norton Financial in Cumberland.

“I don’t think the small-business person that does continue to offer coverage fully understands the impact of what lies ahead,” Baker said at a forum on the Affordable Care Act held this week at the University of Southern Maine and co-sponsored by the Bangor Daily News. “Our state is getting older. … Some [small businesses] are going to win, but many, many, many are not going to win. They’re not going to have better rates.”

Some of Baker’s clients have received early renewal notices from their carriers indicating they’ll face steeper rate increases if they wait until after Jan. 1, 2014, to renew, she said.

The carrier for one eastern Maine manufacturer with fewer than 50 employees, but on the larger end of the small-business scale, told the business it could renew Dec. 1, 2013, and see a 2.5 percent increase or wait until June 1, 2014, the company’s annual renewal date, and face a rate increase between 35 and 43 percent.

A small, Cumberland County employer — “hip, young and upcoming,” Baker said — was told it could renew on Dec. 1 and face a 4 to 8 percent increase. If it waits just two months, it will face a rate increase of between 18 and 34 percent, according to Baker.

“The rates and tiers as we know them now won’t look the same, and I think the sooner [small-business owners] understand what they might be facing, the better,” Baker said. “I’m very concerned, and we’re just right in the throes of this.”

Baker said many of her clients will likely opt for early renewal to buy themselves time.

Anthem has been sending early renewal offers to customers, an option hundreds of small employers in Maine have expressed interest in, Jermyn said. He didn’t dispute that some of the numbers Baker shared could be accurate, but he pointed out that she’s likely focused on the clients on the extreme end of the spectrum.

“The changes to the way we community rate are definitely going to be very impactful to small groups, both positively and negatively,” Jermyn said. “Some groups will be negatively impacted; some groups will be positively impacted. It’s not a matter of everyone being negatively impacted. That isn’t the case.”

But Jermyn conceded Maine, because of its older population, could be be hurt more than other states.

“If in fact our workforce is older, then, yeah, it would stand to reason a larger percentage of our state will be negatively impacted by the ACA than a state with a younger workforce,” he said.

However, Stein said examples of employers facing double-digit increases sound “very much like scare tactics.”

“All I’ve heard are the stories. No one has said what the plan designs are before and after,” Stein said. “Is it apples to apples, or are the benefits changing? That’s always important. If the premiums are going up, are they gaining something because of it? Is that 35 percent increase because before they had a $10,000 or $15,000 deductible and so weren’t offering true health insurance to begin with? Unless we know the details, it’s problematic.”

Some small businesses will qualify for assistance from a Small Business Health Care Tax Credit if they have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less. Eligible small businesses also need to pay at least 50 percent of their full-time employees’ premium costs.

Rep. Linda Sanborn, D-Gorham, worries that such fear of the law will distract people from discussing the good that could come of it.

“What I don’t want to see is everyone expressing fear of the unknown rather than realizing that the Affordable Care Act can be beneficial for small businesses and their employees,” said Sanborn, the legislator who sponsored the bill this year to accept federal funding to expand MaineCare coverage, which was vetoed by Gov. Paul LePage.

But what if the estimates cited by Baker are the norm?

If that’s the case, something went wrong, Sanborn said.

“If that’s the reality, we’ll have to tweak as we go along,” she said. “What we know is it’s not going to be perfect.”

All big social programs the government has rolled out — Social Security, Medicaid, Medicare — have been tweaked along the way, she said. “They weren’t perfect to start with either.”

Whit Richardson is BDN business editor.

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