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Small Employers Grapple With Rising Health Insurance Premiums

Small Employers Grapple With Rising Health Insurance Premiums

By Ellen Jean Hirst, Chicago Tribune (TNS)

CHICAGO — YJT Solutions isn’t required to offer health insurance to its 35 employees, but the Chicago company does. In fact, it covers 100 percent of its workers’ individual costs.

But that rare act of generosity by the information technology services company was tested when the company saw a 27 percent increase in monthly premiums this year, and the company anticipated a similar jump for 2015 if it stayed with the same plan.

“People enrolled in a family plan were going to be paying almost $2,000 a month for their health care premium,” said manager Tiffany Fitting, noting that employees pay for dependents’ costs and the company pays individual premiums. “We knew that something had to change.”

Many small businesses that offer health benefits are feeling the same pressures. Rate increases for small companies are outpacing those of larger employers, with mandated benefits under the Affordable Care Act one factor in driving the jump, experts said.

As a result, more than one-third of small businesses said they’ll likely eliminate health benefits by 2018, according to Mercer data. Those that plan to stay the course say they are exploring new ways to offer that coverage.

Now in its second year, the federal Affordable Care Act requires companies with 100 or more full-time workers to offer affordable coverage or pay a fine. Beginning in 2016, companies with 50 to 99 workers will be subject to the act. Smaller firms will remain exempt.

Those that do offer coverage, like YJT Solutions, say the benefit plays an important role in attracting top talent.

Data from Mercer shows that insurance costs for small companies jumped 20 percent from 2010 to 2014, compared with 15 percent for companies with more than 500 employees.

“Small employers would be the ones on average to offer fairly bare-boned coverage, so they were the ones most likely to have to improve the value of the plan because of these various mandates,” said Beth Umland, Mercer’s director of research for health and benefits.

The federal health law only allows insurers to base premiums on three factors: geography, age and tobacco use.

Before the Affordable Care Act took effect, companies with consistently healthy employees would be rewarded by low year-to-year cost increases, said Jesse Greenberg, director of the Midwest and West for Small Business Majority. Now, “everyone is in one pool,” he said.

YJT’s Fitting said the prospect of $2,000 a month for family coverage was even spooking potential job candidates.

“We were getting feedback even from people who were considering joining the company that that’s not sustainable,” Fitting said, “We knew we still wanted to pay for the employees’ premium, but how to do that, how to make it cost-effective was the challenge.”

The company decided to ditch its old plan for a high-deductible plan with a health savings account.

“The goal was to get premiums more affordable,” Fitting said. “While it might not have been the most ideal move, it was the best available. It’s ACA-compliant and we know that if we get past that 50 (employee) mark, this is going to be a good option for us.”

The employee rate in 2015 will be about the same as in 2013, she said.

Fitting said shopping for coverage through the federal Small Business Health Options Program, or SHOP, an online exchange established as part of the Affordable Care Act, wouldn’t offer her anything more than her broker ultimately found.

The Rev. Tom Stack, with 12 full-time employees at the Belmont Assembly of God church in Chicago, said he also looked into SHOP because he wanted to get a tax credit available to businesses that enroll through the program.

But SHOP couldn’t compete with what he was able to find on his own, he said. Stack’s insurance rate through Blue Cross Blue Shield was recently cut by 11 percent.

“I think the big difference between the individual marketplace and SHOP is there’s quite a disparity as far as the amount of plans, the carriers that are offering plans and the types of plans,” Stack said.

As of June 1, SHOP’s 18 state-based marketplaces had enrolled about 76,000 people in plans, according to the Government Accountability Office. Data for SHOP, in which Illinois participates, have not been made available, but are expected to be similar, suggesting that the program failed to enroll the 2 million customers that had been estimated for 2014.

Blue Cross Blue Shield said it will offer a private exchange for small businesses this year called Blue Directions that will allow small business owners to offer up to six plans and contribute a set amount to employees’ plans, based on their ages.

Richard Allegretti, vice president of marketing strategy and business development at Health Care Service Corp., the parent of Blue Cross Blue Shield of Illinois, said his company research shows that about 80 percent of companies with two to nine employees do not offer coverage, along with 60 percent of companies with 10-50 employees.

“SHOP was appealing to the 20 and the 40,” Allegretti said. “We’re trying to appeal to the other ones too, to say: Think about the economics here and what you may want to do and knowing that you want to offer coverage. … Let’s see how we can do that.”

Because they are not mandated to offer coverage, some small firms are offering bonuses to employees to help them pay for their own policies bought on public health exchanges.

“I think employees may be just as well off using the individual exchanges,” said Chicago benefits attorney Amy Gordon, “but it’s really on a case-by-case basis.”

Saul Arteaga, director of SWITS, a Wisconsin-based translation services company with offices in Rockford, said he offers bonuses ranging from $350 to $1,000 per month based on an employee’s age, because premiums are determined based on age under the new health law.

“Technically the payment is a bonus added to the first month,” Arteaga said. “We just want to make sure we’re being fair to everybody and allocating resources wisely.”

Don Bora, principal of technology at Chicago-based Web and mobile app development firm Eight Bit Studios, said offering bonuses to go toward health plans works well for his company’s culture.

“One of the things we do to attract people is we allow them to figure out their own work-life balance,” Bora said. “Sometimes they’ll work 20 hours, sometimes 40. We’re very conscious of making that work for people and consider it part of our retention model.”

Others have decided they’ll try their hand at insuring their own claims.

The Affordable Care Act doesn’t govern self-insurance premiums, said Russ Carpel, owner of Barrington-based Level Funded Health, so as small businesses have watched premiums jump, they’re considering what has historically only been thought of as a feasible option for employers with 100 or more employees.

“What they think is they have two options: to take those increases on the chin, suck it up … (or) to let their employees go out on the exchange, which they don’t want to do because it puts them at a competitive disadvantage,” said Carpel, who helps businesses find self-insurance options. “What they don’t understand is they have a third option.”

Experts suggested employers consider all options — dropping coverage, changing coverage through a broker or SHOP, or choosing to self-insure — before making a decision.

“As a small business, we have to invest in our professionals by offering health insurance,” Arteaga said. “But we also make sure we shop for the best deals.”

AFP Photo/Karen Bleier

Uninsured Rates Fell Under Obamacare, But Who’s Reaping The Benefit?

Uninsured Rates Fell Under Obamacare, But Who’s Reaping The Benefit?

By Chad Terhune, Los Angeles Times (TNS)

LOS ANGELES — Hospitals and health insurers have reaped a financial windfall from the 2014 rollout of the federal health law, even beyond what was expected.

Now, employers and consumers are seeking a share of the Obamacare dividend.

For years, insurance companies and hospitals told Americans that one reason their insurance bills were so high was because they were paying the hidden cost of medical care for the uninsured.

The Affordable Care Act sought to remedy much of that by unleashing the biggest expansion of insurance coverage in half a century. Ten million Americans became newly insured, and federal officials estimate that $5.7 billion in uncompensated care was wiped out this year as hospitals received more paying patients.

Now it’s time to share the bounty from Obamacare, said Bill Kramer, director of national health policy at the Pacific Business Group on Health, which represents big employers like Wells Fargo and Chevron.

“Consumers and businesses have been absorbing this cost shift for decades,” he said. “Employers need to step up and put pressure on hospitals and health plans. Show us the money.”

In a similar vein, consumer groups are questioning why these savings aren’t showing up in health insurers’ latest rates. By some estimates, the cost shifting in recent years typically has raised the average family premium by $1,000 or more annually.

But there have been benefits for employers and consumers — even though they may not be readily apparent, industry officials say. They point to historically low increases in overall medical spending and affordable premiums in government-run exchanges.

“The dividend is being shared,” said Charles Kahn, chief executive of the Federation of American Hospitals, an industry trade group in Washington. “There are a lot of factors indicating the costs to many are coming down or moderating. But all the problems that brought about cost shifting aren’t being washed away.”

Providers say government reimbursements for patients on Medicare and in particular Medicaid don’t always cover their costs. The health law also imposes funding cuts to hospitals.

Health insurers insist they always bargain for the best deal from medical providers, and they say other factors are pushing up costs at the same time. They fault pharmaceutical companies for charging exorbitant amounts for some specialty drugs and worry that a wave of hospital consolidation will drive up prices even further.

“While this cost shifting is decreasing, theoretically that should drive down health care costs,” said Dr. J. Mario Molina, chief executive of Molina Healthcare Inc., a health insurer based in Long Beach. “People are going to scratch their head and say, ‘What happened?'”

Molina’s short answer: “It’s the drugs. A huge pipeline of new pharmaceuticals is going to push us back into double-digit health care inflation.”

That hasn’t happened yet, and hospital chains and insurers have posted strong results, to the delight of Wall Street.

Profits at HCA Holdings Inc., the largest publicly traded hospital chain, jumped 18 percent to $1.7 billion for the first nine months of 2014 compared with the same period a year earlier. The Nashville company’s shares have soared 53 percent this year.

Likewise, health insurance stocks have rallied as the federal government guaranteed millions of new customers and spent billions of taxpayer dollars subsidizing their premiums. Insurers are handling much of the Medicaid expansion under state contracts.

Insurance giant Anthem Inc. signed up nearly 800,000 people on Obamacare exchanges across the country. Its shares rose 33 percent year to date — three times the increase in the broader Standard & Poor’s 500 stock index.

The biggest changes have occurred in the 27 states that have expanded Medicaid, the government health insurance program for the poor. HCA reported a 55 percent decline in uninsured patients and 30 percent growth in Medicaid business in five states where it operates and where the program was expanded.

Megan Neuburger, a Fitch Ratings analyst who tracks the for-profit hospital industry, said the turnabout has been dramatic.

“I think the Affordable Care Act has been more positive for the hospital industry than analysts had expected or even the industry expected it to be,” she said.

Uncompensated care totaled about $50 billion for hospitals last year, studies show. The Obama administration said the federal government has typically covered about 60 percent of those medical bills.

But the health law anticipated the decrease in bad debt and reduces future government payments to hospitals. The American Hospital Association estimates that hospitals have already experienced $122 billion in funding cuts since 2010.

U.S. workers aren’t likely to feel much sympathy. Medical costs are taking a bigger bite out of their paychecks while wages are largely stagnant.

Family premiums for an employer health plan rose 73 percent in the last decade, and workers’ share of the bill jumped 93 percent, according to a new report from the Commonwealth Fund.

On average this year, employers and workers combined spent $16,834 annually for a family health plan.

Dena Mendelsohn, a health policy analyst at Consumers Union in San Francisco, challenged 6 percent rate increases by Anthem and Blue Shield of California this year in a report to state regulators. She cited, among other issues, their failure to account for the drop in uncompensated care.

“We were puzzled because they didn’t factor it in,” she said. “The amount of cost shifting should go down.”

Insurers say it takes time for these changes to filter through and the effect remains unclear. The rate hikes for more than 1 million individual policyholders take effect next month.

The prospect of financial relief for consumers may vary across the country depending on whether a state expands Medicaid as well as the balance of power between hospitals and health plans locally.

The sterling reputation of some hospitals makes it difficult for insurers to bargain effectively or follow through on the threat to drop them from an insurance network, said Paul Ginsburg, a professor at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

Without outside pressure, he said, the first inclination of many hospitals may be to spend any extra money themselves.

“There are clearly some hospitals that have enormous leverage with insurers,” Ginsburg said. “Hospital administrators and their boards see opportunities to fund all these things they haven’t been able to do until now.”

AFP Photo/Karen Bleier

More Californians Support Affordable Care Act, Poll Finds

More Californians Support Affordable Care Act, Poll Finds

By Tracy Seipel, San Jose Mercury News

The nation’s new health care law is surging in popularity in the Golden State, according to the Field Poll, which finds more Californians today — of all political stripes — support the Affordable Care Act than at any time since it was signed into law four years ago.

And by a 2-to-1 margin, they praise the successful way it’s been rolled out in the state, compared to the federal government’s glitch-ridden system.

Still more now say they’re satisfied with the way the health care system is working in the state, compared to a year ago.

But for all their applause, many Californians aren’t happy with the cost of their health care and say they are having a tough time paying their premiums.

Those are among the highlights of the survey released Tuesday that tracked California voters’ overall opinion of the federal health care law.

The poll of 1,535 likely voters from June 26 to July 19 showed that 56 percent of registered voters say they support the law, while 35 percent are opposed.

That 21-point margin in support is up six points from last year, and Mark DiCamillo, director of the Field Poll, believes the results have national implications.

“If it’s going to be an effective law, you would probably see it in California — and we are seeing it,” DiCamillo said.

The poll found 60 percent of voters believe California’s smoother roll-out and implementation, through the Covered California health exchange, is a big part of its success, while 30 percent disagreed.

“By a 2-to-1 margin, the voters gave us five gold stars,” said Dr. Judy Belk, president and CEO of The California Wellness Foundation, which funded the poll. “We nailed it big-time.”

But what intrigues DiCamillo is the story behind the upward swing of support for the health care law statewide now that voters have had a chance to see the impact of the law. Last year’s survey results were based on voters’ predictions.

“The biggest increase in support or the largest reduction in opposition are coming from those groups that were previously opposed or evenly divided in prior years,” DiCamillo said. Like other Americans, Californians’ views of the law, known as Obamacare, are still highly partisan. While 79 percent of the state’s Democrats support the law, up by 2 percentage points from last year, only 22 percent of Republicans back it. However, GOP support is up 5 percentage points from last year. Fifty-six percent of voters with no party preference, also up 2 percentage points, favor the law.

While it’s no surprise that in California the health care law’s strongest backers are residents in the nine-county San Francisco Bay Area (67 percent) and Los Angeles County (62 percent), both well-known liberal bastions, some favorable views appear to be surfacing in more conservative areas of the state.

The poll shows support in the Inland Empire is now 48 percent, up 9 percentage points, while the Central Valley support is now 50 percent, up by 8 percentage points.

Another key change: The state’s ethnic voter population continues to be overwhelmingly supportive of the law, but now a plurality of the state’s white non-Latino voters are too (50 percent to 44 percent).

But the poll also found frustration among voters over the continued escalation of insurance rate increases. Statewide, 47 percent of those surveyed said their health care costs have gone up over the past year.

Meanwhile, 46 percent of voters say they have a tough time paying their health care premiums, including 17 percent who say it’s very difficult.

“You can see the problem area for voters, at least in terms of the affordable part of the Affordable Care Act,” said DiCamillo, who noted that premiums increased most for voters earning between $40,000 to $100,000 or more.

Still, the proportion reporting that their health care costs are very difficult to afford declined four points from 21 percent who said this last year.

A November ballot measure, called Proposition 45, would require health insurance companies to get state approval before raising rates, as they must do in 35 other states.

The poll was done in seven languages and dialects and has a margin of error of plus or minus 2.6 percentage points.

A second part of the poll that examines other aspects of the health care law, and subsequent proposals surrounding the law in California, will be released Wednesday.

AFP Photo/Karen Bleier

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Report: ‘Claims That Premiums Will Skyrocket Are Unwarranted’

Report: ‘Claims That Premiums Will Skyrocket Are Unwarranted’

Although Republicans and even some insurers anticipate rising health care premiums in the coming year, an Urban Institute and Robert Wood Johnson Foundation joint report released Tuesday could ease those fears.

The report analyzed 2014 premiums for policies on the Affordable Care Act exchanges in Washington, D.C. and seven states: New York, Maryland, Alabama, Michigan, Minnesota, Colorado, and Oregon. The study’s most notable finding is a correlation, arguably a direct one, between a state’s local health care market and insurance premium rates for the people of that state. A more diverse local health care market often times involves “nongroup” market insurers: Blue Cross plans and startup insurers, among others. The significance of these nongroup markets is found in their influence on the entire health care marketplace. As the report notes, “subsidies in the individual nongroup market are tied to the second lowest cost silver plan,” which then means that “individuals buying a more expensive silver plan or a gold or platinum plan would have to pay additional amounts.” This provides insurers — particularly those outside the nongroup market — greater incentive to “price aggressively to gain market share.” As a result, competing premium rates assigned to an assortment of health plans comprise the marketplace.

If “2014 premiums were moderate and below original expectations” as a result of diverse health care exchanges — established through the ACA — then 2015 rates should be similar, considering that most of the current insurers included in the exchanges plan on staying, and other new insurers will join in the coming year.

“How these scenarios will play out is hard to know, but claims that premiums will skyrocket are unwarranted based on 2014 experience and the evolving conditions for 2015 suggest otherwise as well,” the study says.

Another factor that supports the study’s findings is the inevitable increase in enrollments in the year to come. Competition among insurers participating in the market will be further fueled by greater numbers of Americans obtaining coverage through the exchanges. This also explains why “urban areas” as defined in the report, which boast higher numbers of enrolled Americans, tend to have a more diverse exchange, resulting in lower premiums.

Premiums in urban areas also tend to remain lower than those found in “rural areas,” which often face “difficulty in negotiating with the limited supply of physicians and hospitals” nearby.

Ultimately, diversity plays at least some sort of a role in determining whether or not rates will increase or decrease over time. Even the report concedes that “there may be real reasons to believe that premiums will increase substantially” — but only before adding that such an event would occur “particularly in less competitive states.” As Obamacare experiences increased participation from new and old health insurers and increased enrollments, “there are even stronger reasons to believe that premium increases will be moderate.”

For now, the rates of premiums for insurance plans nationwide make it almost impossible to deny that President Barack Obama’s health care reform has had a substantially positive effect on the cost of health insurance. The news reflects a similarly positive report from the nonpartisan Congressional Budget Committee that had originally projected Obamacare would cost $41 billion in 2014 alone; the report says that Obamacare coverage provisions are expected to cost $5 billion less in 2014 and $164 billion less in the next 10 years, in no small part due to reduced premium rates.

In spite of new data, hysteria over impending increased premium rates will certainly continue. But those who point to the Affordable Care Act as the source of the problem ignore the law’s capacity to shape the health insurance marketplace and foster competition beneficial to Americans.

AFP Photo/Joe Raedle