Small businesses' dilemma: Keep costly health care coverage or lose talented workers
Regina Weinhardt briefly considered dropping health coverage for the employees of her family-owned plumbing business when she learned recently that her premiums were expected to jump 80 percent.
She decided against it, because the Delaware County company she runs, Joseph Rosati Plumbing Inc., takes pride in its long history of providing medical coverage for its workers. Weinhardt also feared her best plumbers would leave for competitors that still fund health insurance.
But Weinhardt, president of the company in East Lansdowne that her father founded in 1962, said she can imagine a day in the near future when price hikes will force her to cancel the benefit.
“It's very difficult. You struggle to pay your bills each month,” she said. “I just think everything is so expensive and so difficult for small businesses.”
Many small companies are feeling the same pressure. And an increasing number of them are seriously considering dropping coverage, experts say.
“It's one of the biggest things going on in the industry, and we believe it will only accelerate,” said Mike Stahl, senior vice president of marketing for HealthMarkets Inc., a Texas-based insurance broker that operates in all 50 states and online.
Small companies with 50 or fewer employees can end the benefit without penalty, because they're not subject to the Affordable Care Act's mandate that they offer coverage to all full-time workers. And those companies, including Rosati Plumbing, are dealing with big price increases because they must switch to new health plans that meet robust benefit coverage requirements of the health overhaul.
Companies with more than 100 workers will be fined $2,000 per worker starting Jan. 1 if they do not offer affordable coverage. Employers with 50 to 99 workers will be subject to the penalty in 2016.
Ending coverage is looking more feasible to small companies because public exchanges set up under the Affordable Care Act, such as HealthCare.gov, give workers a huge choice of health plans and the possibility of tax credits to offset premium costs, Stahl said.
A single person with income between $11,670 and $46,680 may qualify for credits. A family of four with income between $23,850 and $95,400 may receive subsidies.
“Everyone agrees it's going to happen. The only debate is over how fast,” he said. “No one thinks that five, seven years from now, we're going to have a substantial market in small group plans.”
J.T. Shilling, who runs the Pittsburgh office for benefits consulting company Mercer, agrees that many more small firms are seriously considering dropping employee coverage.
A national survey by his firm last year found a growing number of smaller companies expected to stop offering coverage within the next five years. The results of this year's survey won't be available for several weeks, but Shilling said he expects the trend to continue.
“The smaller the employer, the more likely they are to get out of benefits,” he said.
Preliminary results of this year's survey of 2,500 companies, which Mercer released Wednesday, showed the opposite for mid-sized and large companies that are subject to the law's mandate. Sixteen percent of firms with 50-199 employees said they expect to drop coverage, down from 23 percent last year. The decline among companies with 200-499 workers was even bigger: 6 percent said they are considering ending health benefits, down from 12 percent last year. And only 4 percent of companies with 500 or more employees are thinking about dropping their health plan, down from 6 percent last year.
A similar trend was seen in another national survey released Wednesday. The Employee Benefits Research Institute and the Society for Human Resource Management found that just 1 percent of employers said they have decided to stop offering health coverage for 2015. There was relatively little difference between larger employers and ones with fewer than 50 workers, the survey of 3,000 companies found.
Shilling said many large companies have done the calculation and found they could save money if they stopped paying for employee health benefits and paid the penalty instead. But many had chosen to continue coverage because there's much more to the decision than figuring out whether insurance or a penalty is cheaper, he said.
“It might be cheaper to stop offering benefits altogether. But what does that do if your competitor down the street continues to offer benefits and recruits your best people?” Shilling said. “It's still important, and employers know that in order to compete for talent, you need to offer a benefit package that appeals to employees you're trying to recruit and retain.”
At Rosati Plumbing, Weinhardt said she was able to minimize the rate increase to 23 percent by switching insurers and more than doubling deductibles.
She offered her 26 workers a plan for next year that has a $5,000 deductible for a single person and will cost Rosati Plumbing $300 a month per person. The company pays 100 percent of the premium price for the high-deductible plans. Family coverage carries a $10,000 deductible and costs the company about $910 a month, she said.
Workers can choose plans with lower deductibles and richer benefits, but they have to pay the difference in monthly cost, Weinhardt said.
“You're being charged these outrageous numbers for doing what you feel is right,” she said, frustrated by her struggle to continue the company's more than five-decade tradition of paying the full cost of health coverage.
“Maybe it is cheaper for them to do it all on their own. I don't know.”
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.