Obamacare Case Study: This Manufacturer Cries Foul
Oren Elliott Products / Edgerton, Ohio
Owner: Steven Elliott
2012 revenue: Approximately $5 million
Benefits costs in 2012: $220,000 in insurance premiums
Estimated costs in 2014: Zero
In continuous operation under different names since 1925, this small manufacturer makes parts, such as capacitors and shaft couplings, that other manufacturers put into their equipment. Employing 43 people from their mid-20s to their mid-60s, OEP is one of the bigger companies in this northwest Ohio town, which owner Steven Elliott describes as "small, rural, and somewhat economically depressed."
OEP began offering health insurance 25 years ago. The company's plan--which Elliott says is more robust and requires a lower employee contribution (about 25 percent) than many nearby employers'--covers about 32 employees plus their family members, including several children with serious medical conditions. Health premiums are one of the company's biggest expenses, says Elliott: "They went up 12 percent last year, and they've continued to rise since they enacted the ACA." In 2012, the company paid about $220,000 for employee coverage through BlueCross BlueShield.
"Our insurance broker projects premiums will go up even more steeply, about 15 percent, in 2014," says Elliott. That's because new guidelines will force insurers to cover preexisting conditions and forbid them from considering medical history when calculating premiums. If that prediction pans out, OEP will drop its health plan as soon as Ohio sets up a state exchange on which people can buy their own insurance.
But Elliott's headaches do not end there. He also complains that the new health care law confers an advantage on small garage-shop competitors. Such businesses employ fewer people and pay them less, which means they will be entitled to federal subsidies that are not available to OEP. "In the past, we were able to attract better machinists than smaller shops in the area, because we offered insurance and they didn't," he says. "If they can afford to offer plans now because a portion of their premiums are subsidized by the ACA, it's not really a differentiator anymore."
To attract and retain talent, Elliott instead will use the money saved from not paying insurance premiums to increase the salaries of key employees. "It's going to be a trial to see who jumps ship," he says. "We've worked and reinvested in the company for decades, trying to grow the business and employ as many people as we could--not out of altruism, but to increase billable man-hours on the $4 million of equipment that we've invested in. Now we're forced to remain under 50 employees or pay a penalty for not offering insurance. We'll have to change our entire philosophy."