[FirdausByte] Health Care Reform's Effect on Employers

By Ron J Collins

I came across this paper written in July of 2010, and it still applies (at least until January 20th of next year). It outlines what is scheduled to occur in 2014 with small employer premiums under PPACA. First of all, a small employer is defined as any company with fewer than 50 employees. Large employers (50+) will have to pay penalties if they do not offer group health coverage. As far as I know, there is no penalty for small employers not offering it. There are some factors in California that may mitigate big premium hikes. Actually, we have had small group reform here for the past 19 years. It began in 1993 with a requirement that all employers with 5 or more employees be issued guaranteed coverage. In 1994 the minimum was lowered to 4 employees, and by 1996 it was lowered to 2 or more. The impact of this has been to stabilize the market over the long term. Group rates are already higher than individual rates because every employee that is eligible cannot be declined and all group plans must offer maternity coverage. Since the mandated addition of 100% free preventative care to all plans as a result of PPACA, premiums have not gone up as much as I thought they would, and in some cases have gone down. Keeping people healthy by early detection of problems should have a beneficial long-term impact.
What probably will have a negative impact on rates is the shrinking of the rate categories based on age. For example, rates are now broken up into 5 or 6 age groups, under 30, 30-39, etc. In 2014 there can be no more than a 3:1 difference between what is charged a 64 year old and an 18 year old. So if the premium for an 18 year is $150, the rate for the 64 year old could be no more than $450. The paper also talks about the removal of gender-based ratings, but California hasn't had them since the early nineties.
Will premiums go up? Of course they will, but I think California is better positioned than some other states. I have read comments by some that say "why should I pay for the people that don't want coverage and won't buy it?" My answer is that we all are already paying for the uninsured that either can't or won't get coverage, because they still use the health care system. And they use it for free. The rest of us pay for them in the form of higher health care costs and higher insurance premiums. From my point of view, and that of many on both sides of the issue, the biggest problem with the individual mandate provision that is before the Supreme Court (aside from the question of its constitutionality) is that it is not stiff enough. It is actually cheaper to go without insurance and pay the penalty than to buy coverage. But that was the result of political compromise. Too bad, because the one common element of every stable health care system worldwide is covering nearly everyone.
Of course all of this may be moot if Mitt wins. If he does, we may see some big changes to the Act. That might not be such a bad thing, but it should be noted that the health insuranceindustry has already priced many of the anticipated changes into their products, and some have said that it would actually cost them more to make changes once again so soon. We'll just have to wait and see what happens. Hope this is helpful.

Ron Collins, in Redwood City, has been serving the insurance needs of the San Francisco Bay Area since 1981. His independent insurance agency, Collins Insurance, remains focused on providing the most knowledgeable, accurate and timely information to clients about small group employee benefits, family health insurance and supplemental Medicare coverage. With over 30 years of experience in the industry, Ron Collins is dedicated to finding the best combination of benefits that works for his client's situation.

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