Bob Goldstein, a certified public accountant, knows his math — but he still couldn’t believe the numbers.
At his small accounting firm last year, health insurance for him, his wife and his handful of employees was costing $8,574 a month — or $102,888 for a full year of Highmark premiums.
That was before the Affordable Care Act took full effect. Now, premiums for his employees are costing $1,841 a month, or a bit more than $22,000 a year.
Annual savings? Nearly $81,000.
“Anybody who has less than 50 people would be crazy not to look at” individual insurance plans for employees purchased through, or alongside, the new health insurance marketplace, the Point Breeze CPA said.
Much has been made about how the Affordable Care Act will affect small businesses. A February report from the federal government said more would see premiums increase, rather than decrease, under the new pricing and ratings systems put in place by the ACA.
All new small-group policies are now treated like individual policies, and each employee — and covered family member — is rated and priced separately based on age, gender, place of residence and smoking habits. Those individual premiums are added up, and the small business pays the bill.
But not all small businesses choose to pay those bills. Small companies — those with less than 50 employees — are not, and will not, be mandated to provide insurance to employees under the Affordable Care Act. As most small businesses don't offer employer-sponsored insurance in the first place, fluctuation in premium price is a purely hypothetical concern for many.
But at least a third of small employers do offer health coverage — at least to full-time employees — and they have several options.
Those that switch to ACA-qualified plans may be eligible for employer health care tax credits, so long as the business pays at least 50 percent of its full-time employees’ premium costs.
Some may opt for “private exchanges,” giving employees a defined contribution each month and having them select from a menu of available insurance policies, arranged through insurers or benefits brokers. Some may even explore “self-insurance” — paying their own claims and bearing the risk of employees’ health costs — by adding stop-loss coverage to guard against unexpected claims.
And many small businesses — satisfied with their current employee health plans — have put off any paradigm-changing decisions by renewing their annual plans late in 2013, meaning they are keep their old coverage through most of 2014. In March, the federal government announced that individuals and small employers could keep renewing their old coverage through October 2017, so long as their health insurance carrier and their state insurance departments were also on board.
Pittsburgh insurer Highmark announced in April that its smallest clients would be able to keep their plans another year, affecting up to 200,000 policyholders; UPMC Health Plan has announced the same. Many small employers and individuals — up to 1.5 million people now have health insurance plans that aren’t compliant with minimum “Obamacare,” the federal government estimates — are expected to stay with those medically underwritten plans because they are cheaper.
Cheaper for some, but not all.
Mr. Goldstein had been paying his own personal premiums, rather than enroll in Medicare (at 66, he is eligible for it) so that he could include his wife in the company’s coverage. He has dropped himself from the company’s list of covered employees — he now has Medicare and related supplemental coverage — but is still able to provide coverage for his wife and employees via ACA-compliant individual plans.
Confused by the options? So was he, which is why he had a broker, Bob Cagna, walk him through it.
“He was getting whacked,” Mr. Cagna said. “There was some pretty heavy usage on his [small business] plan.”
One member of Mr. Goldstein’s group plan — his wife, Linda — had extremely high medical bills, thanks to years of dialysis, digestive illnesses and other chronic issues. Last year, she was hospitalized for months, spent time in a rehab facility, and racked up more than $1 million in medical expenses.
Health insurers could use that against the small group the next time around, by way of underwriting and predictive modeling. In other words, high medical bills in the past meant higher insurance premiums in the future.
But that’s not true of ACA-compliant individual plans — pre-existing conditions aren’t a consideration in setting rates. So the two employees, a husband and Mrs. Goldstein (four covered lives in all) were able to each get much cheaper individual plans through Highmark. It’s Highmark’s top ACA-compliant plan — “platinum,” which offers the lowest copays and deductibles of the ACA-compliant plans available through the exchanges.
And instead of paying $4,964 a month for coverage for himself and his wife, he is getting his own through Medicare, while her individual premium — a nonsmoker born in 1953 — is now $735 a month.
High users — those employees with chronic health issues — are the ones who drive up health care costs for employers large and small. It’s why many will explore the approach Mr. Goldstein took, through restrictive plan design or other, less passive approaches.
“Shifting even one high-cost member out of the company plan could save the employer hundreds of thousands of dollars a year — while increasing the cost of claims absorbed by the marketplace,” according to Kaiser Health News.
A 2010 paper from the University of Wisconsin suggests that if companies keep their healthy employees but move sicker ones to the public exchanges, “not only would this undermine the spirit of health care reform, but it would [also] jeopardize the sustainability of the insurance exchanges.”
But part the spirit of health care overhaul was to make health insurance more affordable for the chronically sick, and to offer small businesses more options when it comes to providing coverage. Beth Goldstein Goldman, Mr. Goldstein’s daughter and also an employee at the CPA firm, said that the Affordable Care Act, at least by these measurements, is working as advertised.
For people like her mother, who before the ACA would have had a difficult time finding affordable coverage, the new pricing system for individual policies is providing instant relief — and it can provide that same relief for the businesses who pay their premiums.
“If Bob didn’t have a successful practice, he’d be bankrupt” because of how expensive the premiums used to be, Mrs. Goldman said. “It’s easy to see how people [can] lose everything to pay their medical bills,” even those with insurance, she said.
Now, saving $80,000 a year will mean less time at the office and more time for recreation, she said.
“I do hope we get to Hawaii,” Mrs. Goldman joked.
It won’t work that way for every small business, of course. Mr. Goldstein’s dramatic savings stem from the fact that one member of his group was a dramatically high user — something that’s obviously not the case at all small companies.
Most of Mr. Cagna’s small-group clients, in fact, are just renewing their old, non-ACA-compliant plans. One client, a seven-person group, would have seen premiums go up by 55 percent by moving into a new Affordable Care Act plan. By staying with the old plan, the premiums will increase by only 10 percent.
“Just because it worked for Bob, it may not work for everybody else,” said Mr. Cagna, of USI Affinity in Bethel Park.
Still, it’s an option that small businesses should examine. With so many options out there — renewing an old plan, shopping through the Small Business Health Options Program marketplace, sending employees to the individual market — small business owners could be overwhelmed by the process.
“It’s a different time. I’ve been [doing] this for many years, and I’ve never seen anything like it,” Mr. Cagna said.
Bill Toland: firstname.lastname@example.org or 412-263-2625.