03 December 2013 11:12 [Source: ICB]
As the US begins to implement its first mandatory health insurance program, chemical industry distributors and other small businesses worry that the federal plan will drive their costs sharply higher.
President Barack Obama’s signature policy, the Patient Protection and Affordable Care Act (ACA), also known as ObamaCare, began to take effect on October 1 as government-sponsored online insurance purchasing exchanges opened for business. The law will not take full effect until next year.
Under ACA, there are two main mandates. Every US citizen not already covered by employer-provided health coverage must purchase an insurance policy through the exchanges.
Those who fail to buy coverage will be fined $95 or 1% of their income beginning in 2014. Those fines escalate sharply in each successive year.
The second mandate requires that any company with 50 or more employees must provide health insurance. Any firm meeting that workforce threshold that fails to provide coverage must pay an annual fine of $2,000 per worker.
Small businesses, those firms with 49 or fewer workers, are not covered by the Affordable Care Act - but they may well feel the impact of the new law.
About half of NACD member companies fall into the small business category, according to NACD treasurer Doug Brown.
“So from the point of view of having to conform with new standards, the ACA won’t affect companies of that size,” says Brown.
His own firm, Brown Chemical Co., Inc. in New Jersey, is typical of the NACD average, with annual sales in the $20m-25m range, two locations and fewer than 50 employees.
“Small businesses like ours are not going to have to provide something that you haven’t provided before,” adds Brown. “The issue is, what will happen to the cost of health care programs that we already have now?”
Brown says that some insurance providers are already beginning to leave the small business marketplace altogether because they fear they will not be able to compete with larger carriers.
“We are concerned that under ACA we eventually will see fewer and fewer insurance providers willing to offer coverage,” Brown says. “So instead of a company like ours being able to shop for policies among five or six providers, we may soon be down to just two insurers.”
“As always, if there is not enough supply, the price of something is going to go up,” he points out, “and we’re afraid that things are going to get expensive.”
Brown says his firm’s healthcare program saw a price increase of around 13% for this year, and he is expecting another hike for coverage in 2014.
“Our costs now for our per-employee family plan is almost $16,000/year,” he says. “Those are pretty big numbers for a small company like us.”
Even NACD itself is facing mounting health insurance costs, according to NACD interim president Kurt McMillan.
“We budgeted for a 6% increase in our health insurance costs for next year,” he said, “but we’re hearing from our provider that the increase might be 17% or higher. We don’t have any hard numbers yet, but we’re hearing that the increase could be as much as 20% or even 30%.”
“From a small business perspective, it is hard to maintain these programs because they are getting to be very cost prohibitive,” Brown said. “Looking at the prospect of that number, that cost, escalating and then having to decide whether to reduce benefits or have employees pay more, is not a happy place to be.”
He worries that companies large and small may be tempted to abandon employer-provided health insurance altogether.
“The fine for not providing health coverage is $2,000,” Brown notes. “If a company is paying $6,000 per employee for health insurance, there’s a $4,000 incentive there.”
“We pride ourselves on wanting to be paternalistic, taking care of our employees,” he says. “It is not a matter of access, it’s a matter of cost.”
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