Sickening Expense

GLOVERSVILLE – It’s a familiar feeling every year when employees get their benefits packet. It’s not a question of whether their health coverage premium costs will go up – it’s how much.

While the average standard of living in the U.S. increased by 14 percent between 2000 and 2009, the cost of health-insurance premiums increased 92 percent.

“That’s outrageous. So what are we not doing?” asks Scott Sylvester, a certified professional insurance agent and account executive with Mang Insurance Agency.

Whether they supported or opposed the Affordable Care Act, also called “Obamacare,” many are hoping it will help stem rising health care costs.

“Hopefully it’s going to provide a more competitive landscape. That would be my biggest hope because the pricing has just been so out of whack,” Sylvester said.

The law was enacted in March 2010 and upheld by the Supreme Court in June 2012. Portions of the law are already in place, but other elements are still subject to change.

For example, Sylvester said courts have ruled on the law’s contraceptive coverage mandate with mixed results on whether employers must comply.

For many business owners and organizations with group health plans, the compliance process has been confusing and overwhelming.

Edwin A. Luczynski, an accountant who owns his own business with a few employees, said he’s hopeful the law will have a positive outcome.

However, in the meantime, it has posed a challenge for him and many other small-business owners.

“It’s so confusing and frustrating across both state and federal levels now. It seems like they try to set things up to cause you to fail so they can charge you more fees. But working through that, I think they have the best interest of everyone at heart,” Luczynski said.

To Luczynski, it was clear something needed to change in the health-insurance market.

“It seemed to me the road we were on was quickly making the product too expensive for many people to carry, and then eventually, more and more people would be without it and be put on the social rolls. I think the overall theory of reform is good,” Luczynski said. “I think it is something everybody has a right to, not just wealthy people. I think Scott alluded to it in his talk: a lot of people who have it now take it for granted and have no idea what it costs.”

Having several questions about the law, Luczynski attended a recent informational seminar with Sylvester hosted by the Fulton Montgomery Regional Chamber of Commerce.

Titled “Remedy for Health Care Reform Doubts,” Luczynski said it was helpful in answering his questions.

The seminar covered updates to the law, which is still evolving, as well as what employers should be thinking about now and into the future to stay in compliance.

Under the federal healthcare reform legislation, states had the option to set up their own health-insurance exchanges, which are meant to streamline the purchase of health insurance.

New York state also is offering tax credits to small businesses that make employee coverage more affordable. In 2014, the tax credits will cover 50 percent of premiums, according to the state’s website

Sylvester said other states’ exchanges – a total of 17 states declared state-based exchanges – have already released competitive rates.

The state Department of Health indicated Friday rates and plans for the exchange will be released by the end of the month. Open enrollment is expected to start Oct. 1 and be fully operational.

Sylvester said employers should be prepared to discuss the exchange with their employees. The law says employers must do so by Oct. 1 with information about potential eligibility for subsidies under the exchange and the risk of losing employer contribution if an employee buys coverage through the exchange.

Individuals and small employers can purchase health coverage through the exchange. The Small Business Health Option Program applies to companies with up to 100 employees, but states are allowed to define small employers as having up to 50 employees before 2016.

In 2017, states can allow employers of any size to purchase coverage through the exchange.

Individuals can get tax credits, too, if certain criteria is met.

Large employers are subject to a “pay to play” rule with the exchange and there can penalties if the employers fail to offer minimum essential coverage to full-time employees – the law defines full time as 30 hours a week – or afford unaffordable coverage.

“I think the exchange is going to help people who don’t have coverage at all or help people who have employer-based plans that are too expensive. It will help them the most. A lot of us [who] are in the direct market are going to continue to get our coverage through the direct market, whether it’s through the chamber, a broker or a direct carrier,” Sylvester said.

Effective Jan. 1, 2014, individuals must enroll in health coverage or pay a penalty. The penalty amount depends on the person’s income and changes from 2014 to 2016: $95 or 1 percent in 2014; $325 or 2 percent in 2015; $695 or 2.5 percent in 2016.

Sylvester told the story of an unnamed company that employed about 50 people. Its health-insurance costs totaled $1.9 million, and he was working on saving them money with a self-insured plan. Scott said the new plan was able to save the company $250,000 to $300,000.

However, the company calculated its cost in fines if it were to not offer health insurance: $400,000. That means if the company didn’t offer health insurance it could save $1.2 million.

“What becomes the issue with an employer like that is, are we pulling benefits in a situation where they’ve always been there? Are we going to start losing or not attracting the employees we’ve had or always wanted? I think that’s the issue,” Scott said.

Another element of the law requires a single individual at a company with 50 or more employees pay no more than 9 and a 1/2 percent of their earnings toward their premium. That’s a substantial decrease from what many are paying now.

“If they are paying more than that 9 and a 1/2 percent, and [the employer’s] plan is considered unaffordable, that employer can be fined $3,000 [per individual applicable],” Scott said. “That’s pretty big. Someone making $400 a week, they can’t pay more than about $36.”

He said he knew of one company that had 30 of its roughly 50 employees paying 20 to 30 percent of their earnings on their premiums.

“That’s pretty massive. That’s a huge change in structure and design that’s going to take place,” Scott said.

The Department of the Treasury announced July 2 employers would have until 2015 before penalties start kicking in, but that doesn’t affect other provisions of the health care reform.

The additional year will give employers time to make changes without the fear of fines.

The law requires employers report certain information about health coverage to the government and individuals, and this provision in part triggered the delay of enforcement, the Obama administration has said.

According to the group Small Business Majority, the Obama Administration’s delay of requiring employers with more than 50 employees offer health insurance to their employees will not affect many businesses.

According to the group, 96 percent of businesses nationwide have fewer than 50 employees.

“For these employers nothing changes because they were already exempt from the employer responsibility requirements. For larger businesses with more than 50 employees, 96 percent already offer insurance and we believe will continue to for business reasons. Only the 4 percent of larger employers that do not offer health insurance will be impacted by the delay in the penalty,” according to a statement from Terry Gardiner, Vice President, Policy & Strategy of Small Business Majority. “The one-year delay in reporting requirements will allow larger businesses time to adjust and provide additional input to the Treasury on how the proposed requirements will work best. The most important provisions for small business owners in the law are still moving full steam ahead, including health insurance exchanges.”

The state exchanges scheduled to come online Jan. 1 will help small businesses pool their buying power to help drive down coverage costs, Gardiner said in the statement. Small employers that do offer coverage will be eligible for a tax credit of up to 50 percent of their premiums, according to the Small Business Majority.