Small Employers Grapple With Rising Health Insurance Premiums

By Ellen Jean Hirst
Chicago Tribune.


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.”

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