Finding quality, affordable health insurance has never been easy. The Patient Protection and Affordable Care Act (PPACA or ACA for short), passed in 2010 and also known as “Obamacare,” was introduced in part to solve the health insurance conundrum for employers.
Has the law succeeded? Reports from the field, which includes the category of small-to-medium businesses that many commercial integrators fall within, suggest that the ACA in its early stages can best be described as “a mixed bag.”
“Some smaller employers may have gotten better deals under the ACA,” says Adam C. Solander, an associate at the law firm of Epstein Becker Green, Washington, D.C. “Most, though, have experienced cost increases, in some cases large ones.”
Premium Hikes Still Prevalent
Reports from the field lend credence to Solander’s analysis. Nine out of 10 employees responding to a recent survey by the International Foundation of Employee Benefit Plans (IFEBP) stated their health care costs had increased as a result of the ACA.
While the median reported increase was 4 percent, one in seven respondents said their rates went up by over 10 percent. Some small businesses claimed spikes ranging between 20 and 50 percent.
In 2014 the premium for employer-provided family coverage averaged $16,834, a rate 3 percent higher than the previous year, according to the “2014 Employer Health Benefits Survey” from the Kaiser Family Foundation. The average annual premiums for such coverage have risen 26 percent over the past five years.
While these increases are unwelcome, the Kaiser Foundation points out that they are smaller than the escalations for the previous five year period. Also, some higher premiums have not arrived absent advantages.
“Premium increases often result from the law’s requirements for coverage of better quality than what employers have offered in the past,” says Solander.
One ACA benefit seems certain: Small employers are no longer penalized by sky-rocketing premiums when one employee incurs an expensive treatment. That’s because the ACA eliminated what insurers call “experience rating,” or the assessment of premium levels by the medical history of participating employees.
“Some employers had found it challenging to provide coverage at a reasonable cost if they’d had adverse health experience among their employee population,” says Julie Stich, director of research at the IFEBP. “With premium reform, adverse experience can no longer be taken into consideration and can no longer jack up premiums.”
The disappearance of experience ratings has also resulted in an overall leveling effect.
“Before the ACA, employers with healthier employees would have seen premium discounts, while employers with less-healthy employees would have seen premium surcharges due to poor experience,” says Stich. “After the ACA, some employers that had previously received discounts may be seeing increases. Those who had previously seen surcharges may be seeing lower costs or cost increases that aren’t as high.”
Any assessment of the ACA has to consider whether premiums might be higher without the law. That is the conclusion of at least one expert on health care costs.
“There has been a 2 percentage point downward pressure on insurance premiums,” says Steven Eastaugh, a Washington, D.C.-based health economist and consultant. “This has been caused by a combination of consumer comparison shopping and competition among insurance companies.”
SHOP Around and Save
The ACA provides employers with several resources and advantages. One is the dedicated Internet-based insurance marketplace called the Small Business Health Options Program, or SHOP.
It’s available to employers with 50 or fewer full-time workers. The median number of full-time staff at integration firms was 21 when NSCA conducted its 2010 Compensation & Benefits Report.
“For smaller employers, SHOP is a great resource,” says Kaya Bromley, an Incline Village, Nev.-based attorney who counsels employers nationally on the ACA. “SHOP allows them to get the pricing that only larger employers enjoyed before.”
The SHOP exchanges were originally scheduled to open in late 2013 but were delayed until late 2014 while energies were devoted to fixing the public exchanges for individuals. In many states employers were required to fill out paper applications.
The inelegant process led to dismal results: California, for example, signed up 1.4 million people through its public exchange but only 11,500 employees and dependents through its SHOP exchange.