Small-business owners who have increased deductibles or out-of-pocket costs for their employees so they could keep providing health insurance are facing a new challenge.
The federal health care law places new limits on the costs employers pass on to workers. Meeting those new limits could raise expenses for small businesses and price more of them out of the market.
While the Affordable Care Act was intended to provide virtually all Americans with access to comprehensive coverage, some fear that this change could leave workers now insured by their employers left buying a plan on their own or doing without.
Workers in Idaho already face worse odds of gaining health insurance by securing a job than employees in the country as a whole. Census data show that about 51 percent of Idahoans of all ages obtain insurance coverage through employment-based health plans, compared with 55 percent nationally.
Health care is the second- or third-highest expense for many companies, and the money spent on it can make the difference between a company ending the quarter in the black or the red.
“No other cost is going up like health care,” says Glen Evelyn, Florida-area president of Gallagher Benefits Services. “It is truly about sustainability: How am I going to sustain myself as a company?”
Small employers who have wanted to stay in the health-insurance game have routinely looked to higher deductibles and out-of-pocket costs to control their side of the cost equation, he says.
But come 2014, the Affordable Care Act prohibits small employers from shifting costs to their employees through deductibles of more than $2,000 for an individual plan and $4,000 for a family plan. The law also sets maximum out-of-pocket costs. In 2014, those limits are expected to be roughly $6,250 for an individual plan and $12,500 for a family plan.
The new rules could reverse the trend toward passing costs to employees. Or it could encourage more small employers to drop coverage altogether.
From 2006 to 2012, the percentage of small firms with deductibles of at least $1,000 climbed from 16 percent to 49 percent, according to a recent employer survey by the Kaiser Family Foundation, a health policy analysis group in Washington.
At the same time, small businesses have been bailing out of the insurance market in growing numbers.
The percentage of workers from small firms — fewer than 50 employees — with employer-sponsored health insurance dropped from 62 percent in 2001 to 54 percent in 2012, the survey found.
Under the health care law, employers with fewer than 50 workers can drop health insurance with no penalty. Bigger employers must pay a fine of about $2,000 per employee.
Employees who lose coverage at work may receive subsidies from the federal government to buy it. They also will have access to new state-by-state insurance exchanges, one-stop shops to compare insurance rates. The exchanges also set minimum benefits for plans to ensure that they are not too flimsy.
Idaho lawmakers and Gov. Butch Otter have not moved to establish an exchange. If they do not establish one, the federal government will operate one for Idaho.
Families living between 100 percent and 400 percent of the poverty line will be eligible for subsidies through the exchange. That’s expected to include a family of four with an income of about $90,000.
Small employers whose average worker earns an income of less than $50,000 can earn tax credits to help the company afford insurance, but those tax credits are not as generous as the subsidies offered to individuals and families buying insurance on their own.
For small employers who want to continue to offer insurance, many will have to upgrade their plans.
Blue Cross of Idaho, which insures 2,981 small-employer groups covering 23,372 employees, says about 25 percent of its plans for those groups have deductibles or out-of-pocket limits that are higher than the maximum.
But several other aspects of the law that affect prices and benefits will likely affect those groups as much as the deductibles and out-of-pocket limits, a spokesman for Blue Cross of Idaho says.
Some employers may get a pass to offer a plan with a deductible higher than $2,000.
Under the health care law, the Department of Health and Human Services can issue exemptions to the deductible limit. The law outlines a tiered system of plans in which employees are expected to kick in a certain percentage of costs. If dropping the deductible below $2,000 would make it so that employees are not paying their share of the costs, HHS can permit a higher deductible for the plan.
The agency has not written the rules governing those exemptions. For now, a spokeswoman says the HHS can’t say how many small firms could be let off the hook.
Darrald Bean, a longtime Boise-based insurance agent and recent media chair of the board of the Idaho Association of Health Underwriters, says he deals with very few groups whose plans carry deductibles exceeding $2,500.
For the most part, he says, the higher deductibles are paired with health savings account plans for which employers generally chip in money.
Those tax-favored plans, created in 2003, are gaining popularity nationwide as employers try to reduce benefits costs and encourage workers to be more aware of their health care spending.
Audrey Dutton: 377-6408