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Obamacare dramatically increases costs for some small businesses

Pam Krause, Treasurer, and Kurt Krause, Vice-President of Sales, in the warehouse at Fluidraulics, Inc., in Cranberry Friday, March 7, 2014. Heidi Murrin Tribune-Review

Tuesday, March 11, 2014, 11:15 p.m.
 

Safety Sling Co. has provided insurance coverage for its workers for at least 12 years, but because of the Affordable Care Act it was forced to cancel medical benefits March 1.

The North Side company's insurance premium would have tripled to about $75,000 a year for a policy that met the more robust requirements of the law, President Tom Talkowski said.

Safety Sling, which makes rigging for cranes, isn't mandated by the health care law to provide medical coverage for its employees because it has fewer than 50 workers. They could shop for coverage in the online marketplace set up under the law.

The law was intended to provide coverage for the millions of uninsured nationwide. But it has had the unintended consequence of pushing up premiums for some small companies, such as Safety Sling, prompting them to drop coverage they aren't required to provide.

The Obama administration and supporters of the law said people who are forced to shop on the exchange could find better coverage for less. But Talkowski said his individual policy carries a higher premium and requires much larger out-of-pocket spending.

“It's the worst plan I've ever had,” Talkowski said. “I'm faced with a higher deductible. ... This is the first time I've ever had to take a policy with 30 percent co-insurance. I've never had that before.”

2-year reprieve granted

The issue for these small businesses is similar to the one that caught millions of individuals by surprise last year. Insurers canceled their policies because they didn't meet the minimum requirements of the health care law. President Obama eventually granted a temporary waiver that allowed insurance companies to keep the substandard policies in place if state regulators approved.

While companies with fewer than 50 workers aren't required to offer coverage to employees — only large firms are subject to the law's employer mandate — many provided health coverage as a benefit to reward loyalty, prevent turnover and aid recruitment.

The Obama administration moved last week to tamp down the new uproar from his signature health law. The Department of Health and Human Services said that employers like Safety Sling, those with 50 or fewer employees, could keep their old plans for two more years.

An estimated 66 percent of small-group health plans wouldn't comply with the health law's coverage rules that went into effect this year, the Obama administration wrote in the Federal Register in 2010.

With about 31 million people having small group coverage, that could mean up to 20 million employees of small businesses having to switch plans, according to the National Center for Public Policy Research, a conservative think tank in Washington.

It remained unclear whether insurers and state insurance regulators would go along with the last-minute change, or if the delay could even help Safety Sling and other companies that have already acted.

“What about me? Mine's already been canceled,” Talkowski said. “Where am I in this?”

Steps to getting delay

Obama administration officials said the waivers are intended to ease the transition to the health law's mandates. The law requires insurers to provide greater health benefits, caps out-of-pocket costs and prevents carriers from excluding people with pre-existing medical conditions. The reforms were intended to protect people from financial hardship if they fall ill, but the changes also drive up costs.

Before Obama's delay can be implemented, state insurance regulators must allow canceled policies to be renewed and insurers have to agree to reissue the plans.

About half the states allowed insurance companies to extend canceled policies for individuals, which Obama announced last fall in response to public outrage. The latest delay allows canceled individual policies to be sold until October 2016.

The Pennsylvania Insurance Department is reviewing the rule changes and cannot comment, spokeswoman Melissa Fox said.

The two biggest health insurers in Western Pennsylvania, Highmark Inc. and UPMC Health Plan, were noncommittal.

“We will work with (the administration) and each of our state's insurance departments on this latest development,” Highmark spokesman Doug Braunsdorf said.

UPMC Health Plan spokeswoman Gina Pferdehirt said the insurer is waiting for guidance from the Insurance Department but would “work collaboratively with them to maintain insurance coverage for groups and individuals.”

Hoping for status quo

Small-business advocacy group National Federation of Independent Business called Obama's latest delay “bittersweet.”

“On the one hand it may mean that they can keep their coverage for another two or three years and avoid a massive rate increase,” Director of Public Policy Amanda Austin said in a statement. “On the other hand, the delay is temporary and doesn't address the underlying problems associated with Obamacare.”

But employers who haven't been canceled yet are eagerly awaiting word whether they can keep what they have.

Fluidraulics Inc., a Cranberry distributor of components for industrial automation systems, is expecting to switch to a more-expensive plan that's compliant with the health law on April 1, Treasurer Pam Krause said.

The company has been paying $3,676 a month to cover six employees for the past year. Its new plan costs $6,233 a month, a 69 percent increase, she said.

The additional cost will be absorbed, she said, because management believes providing health insurance is a key employee benefit. But Fluid­raulics prefers its current plan.

“Obviously the premium was so much less and it was a better plan,” she said. “That would have to be a management decision, but I'm sure that would be a pretty good possibility.”

Neal Hurley, principal of Hurley Insurance Brokers Inc. in Oakland, estimated that 90 percent of his small-business clients have or will need to switch plans.

While a few companies have seen costs go down, he said, “Generally speaking, we're seeing prices that are significantly higher.”

Alicia Linsenbigler, director of SMC Insurance Agency, a brokerage owned by Churchill-based SMC Business Councils, said the majority of the 700 companies that buy insurance through SMC are “seeing some pretty high increases ... upwards of 200 percent.”“It's been a tough go for some of these employer groups,” she said. “Some have decided to drop group coverage and look at individual options.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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