A lot of small businesses, especially in Delaware, are going through tough transitions when it comes to employee health benefits and renewing coverage for next year.
That includes Foulk Lawn & Equipment in Wilmington. General manager Phillip Socorso said the company couldn’t afford a 44.5 percent increase.
“I was mad as hell,” Socorso said. “It’s something we’ve always prided ourselves on, offering our guys good coverage.”
So why the jump?
Nick Moriello, with Health Insurance Associates in Newark, said a big reason is that as of 2015, Delaware will no longer allow health care underwriting for small group coverage. That’s where insurers offer cheaper plans to businesses with healthier employees.
The change is a provision of the Affordable Care Act that will kick in everywhere, including Pennsylvania. New Jersey already bans it.
“Delaware was a state that allowed health underwriting pre-ACA, and so businesses that had healthy employees got a better rate,” Moriello said. “Businesses with employees that had high claims exposure got a worse rate. In the new world, health is irrelevant.”
Instead, only age and smoking habits matter.
Grant Lahmann, eastern director for Small Business Majority, an advocacy organization, said the impact of the ACA changes on small businesses varies, but a lot of insurance options exist. Those with fewer than 25 workers and an average salary of under $50,000 may be eligible for tax credits for health insurance through the SHOP or Small Business Health Options Program.
Moreover, he said, a lot of businesses struggled with the past underwriting method for determining rates.
“Yes, if you [a business] were healthy, you could be rated on that health. We’ve seen stories in other states like in Colorado and Missouri where business owners were just being put out of business because of the exorbitant rates that the pre-existing condition fees and things of that nature were being tacked on to their group rates because of who they had as employees …So it kind of bites both ways.”
At least in Delaware, Moriello said, most of the small businesses he’s worked with are struggling with the higher rates resulting from the policy change this coming year. One third of his small business clients, or about 100, are dropping coverage, and he expects that number to go up.
In other instances, he said, businesses are continuing to offer coverage to stay competitive with larger businesses, but employees may have to share a bigger bulk of the expense, through a higher-deductible plan.
A much smaller contributor to overall rate increases this coming year has to do with the Affordable Care Act’s new requirement that all health plans cover certain essential benefits, such as pediatric dental and vision coverage, Moriello said. That was supposed to take effect last year, but the federal government gave states the option to postpone the requirement for one year.
As for Socorso, after 30 years, his eight employees will have to find health insurance elsewhere, though he is raising their wages. And that’s taxable for the employer and employee, unlike health benefits, he noted.
But the change, he said, isn’t all bad. All of his employees were able to find coverage through the individual health insurance marketplace, and many were surprised with the coverage they were able to find.
“That’s where it got interesting,” Socorso said. “If you’re young and you’re single, they were actually able to get pretty good plans for less money than I was able to offer them.
Insurance was a lot more expensive for his older employees, he said.
Unlike large businesses, those with fewer than 50 workers don’t face any penalties for not offering health coverage.
Individuals, however, may face a fine for not having insurance.