The past week hasn't been a great one for proponents of Obamacare.
The Department of Health and Human Services reported that in 2017, benchmark premiums in federal and state-run health care exchanges will increase by an average of 25 percent. That's a big jump compared with the modest increases in 2015 (2 percent) and 2016 (7 percent). What's more, the report confirms that as a result of major insurers pulling out of many state exchanges, customers will have on average just 30 insurance plan options to choose from next year, down from the current average of 47. One in five consumers buying coverage through the federal health insurance portal HealthCare.gov will find only one insurer offering a plan in their state.
While the numbers don't look good--and will intensify the pressure on the next president to fix or even repeal the health care law--they don't tell the whole story about the Affordable Care Act's impact on business owners and entrepreneurs. Here's how to parse the news.
In looking at the premium increases in the public exchanges, it's important to note that we're talking about averages. That means some markets will have much higher increases (145 percent in Phoenix, for example), while others where state regulators have aggressively bargained down insurers' proposed rates will be flat or even have decreases (-4 percent in Indianapolis).
If you're an entrepreneur buying your own coverage, these premium changes could affect you, although qualifying for subsidies may offset increases. However, the majority of Americans get health coverage through an employer plan, not through the insurance marketplaces. "In general, the increases [in group premiums] will not be as volatile as what you are seeing in the insurance marketplaces," says Paul Ashley, an adviser with FirstPerson Benefits in Indianapolis.
Employers likely to see the biggest changes are those located in states like New York, California, and Colorado that have decided to include midsize companies of 51 to 100 employees (in addition to those with 50 or fewer employees) in their small group category for health insurance. In these places, midsize companies must have health plans that provide a list of essential benefits, with rates based on community underwriting, where everyone's premiums are based on a wider state pool that includes sicker and older people as well as young, healthy ones.
This means that younger, healthier companies, who in the past would have benefited from "experience" rating--with rates based on employees' actual health and use of medical services--could face much higher premiums than in the past. Through early renewals of last year's plans, many companies avoided buying the more expensive plans in 2016, but will have to switch over for 2017.
Employers who fit this profile are increasingly looking for better ways to manage their health care costs, brokers say. Many are opting for self-insurance or so-called level funding, a kind of partial self-insurance where employers set aside a chunk of money to pay for expected health costs and, unlike with conventional insurance, get to keep anything that's left over.
What almost no one is doing, though, is dropping coverage altogether. Most companies that offered coverage prior to the ACA have stayed the course. "We've seen 90 percent of our groups keep their same pre-Obamacare plans," says Mark Bailey, of the Bailey Group, an employer benefits firm in St. Augustine, Florida. And the ranks of the insured are increasing, led by younger workers, who went without coverage in the past, signing up to avoid paying an individual-mandate penalty.
Another reason employees are taking plans offered through employers is that generally the coverage is better, and there are more choices. Even when they may qualify for insurance purchased through the health care exchanges, workers have been disappointed in what was available--namely, just one or two carriers in many areas, and plans with "narrow" provider networks, which severely restrict which doctors they can see.
The employer market is a different story. While big insurers like Aetna, UnitedHealthcare, and Humana have pulled out from the public exchanges, they are mostly continuing to offer employer health plans in the private market. This lets employers offer a much wider array of benefits--from more carriers--than workers are likely to find going it on their own in the public market.
Lack of choices--plus a badly botched technical rollout--have all but doomed the well-intentioned SHOP exchanges, the small-business version of the state and federal health care exchanges for individuals. The SHOPs were designed to ensure that businesses with 50 or fewer workers could find affordable health plans for workers if they wanted to offer that benefit. (By law, businesses of that size are not required to underwrite any employee health care costs.)
By offering potential tax credits to small companies that did the right thing, the Obama administration hoped to get thousands of small firms to sign up. The Congressional Budget Office estimated 1 million people would enroll for coverage through the SHOP program in 2015; by year's end, though, only about 85,000 people, from 11,000 small businesses, had done so, according to federal data released in May. Status: Without a major effort to promote them to more small businesses, SHOPs could be down for the count.
What you hear less about in the headlines--but lots more in HR offices--is the paperwork, possibly the biggest Obamacare pain point for many small companies. "The 1094 and 1095 reporting was just a cluster this year because payroll providers and other third parties had a really hard time populating and compiling the forms," says Katy Stowers, an attorney with FirstPerson in Indianapolis, referring to burdensome new paperwork that confirms an employer's offer of health coverage, which must be sent to employees and the IRS.
It's only going to get worse. This year was basically just a test of employers' ability to get the forms done in time. In 2017, "they actually have to be accurate," says Stowers.
Many employers--especially small ones not required to offer coverage under the law--were also surprised and confused by so-called marketplace notices, which are sent by the Department of Health and Human Services whenever a worker gets a subsidy for coverage through a public exchange. The purpose of the notification is to confirm that the workers didn't have the option to get covered through work. Companies with 50 or fewer employees can safely say "no." Larger employers could be a subject to a penalty of up to $2,260 per full-time employee.
"It's a conundrum," says Bailey. "If an employer receives a notice that an employee received a subsidy through the marketplace, even though they were offered insurance by the employer, do they file an appeal and risk taking the subsidy away from the employee? How is that communicated to the employee?"
Overlooked good news
If you've been worried about the rollout of the so-called Cadillac tax levied on employers who offer some workers health benefits that are too generous, don't be. Originally slated to take effect in 2018, this provision of the ACA would have imposed a 40 percent excise tax on employers' plans above a certain cap--in 2018, it would have been $10,200 for an individual and $27,500 for a family. The argument was that these "rich" benefits packages encouraged excess use of health care services, driving up overall costs. Implementation of the tax has now been put off till 2020, and many pundits expect it will be repealed outright or replaced with a better version.