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    The Affordable Care Act Five Years On: How it affects Small Business

    By Mark Taylor | Small Business

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    Five years after the Affordable Care Act was passed, health insurance experts continue to debate its merits and dispute its value and impact on small businesses.

    Nancy Clark, owner and president of the North Conway, N.H.-based marketing and advertising firm, Drive Brand Studios, is a supporter of the law who believes health insurance is a right, not a privilege.

    Before the Affordable Care Act, each November she would annually enroll her staff of nine in the only health plan available because of her rural location. Since the ACA, however, she’s been able to choose from five insurance carriers online through her state’s Small business Health Options Program (SHOP).

    “It was fantastic to go from one to five carriers and next year we’ll be able to offer two plan options through the carrier we select,” she said. “I’m still paying half the cost of the plans, but I can offer more now. Choice was one of the basic tenets of the ACA.”

    She said her costs have stayed within her budget and not escalated significantly.

    “That’s more than I could say for the previous 16 years before the ACA. Every year I was faced with double digit increases,” she recalled, noting that one year premiums rose 28%. “I haven’t had anything but marginal increases in last two years. The new law is working for us.”

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    [Nancy Clark, Drive brand Studios]

    Clark views insurance not just as an employer responsibility, but a recruitment and retention tool to attract and keep good employees.

    “The more you can help them stay healthy and prevent problems in the long run, the happier and more productive they will be,” she said.  “There have been a lot of naysayers. This law is far from perfect. But it’s a step in the right direction. At least now we have options.”  

    Clark is one of hundreds of thousands of small business owners grappling with the complexities of the landmark ACA, also known as Obamacare. Congress have voted to repeal the law more than 40 times. But the Supreme Court has rejected repeated legal challenges.

    Insurance Industry Issues

    Insurers have complained the law requires them to insure everyone, which meant accepting unknown risks they claim have proven costly and accelerated a trend of insurance company consolidations.

    Gary Claxton, a vice president of the Kaiser Family Foundation, said the ACA effect on small businesses has been minimal to date, mostly because most small firms that had been providing health insurance under grandfathered plans have continued to renew those policies.

    “We haven’t seen much change yet,” said Claxton, who tracks healthcare market changes. “We’ll start to see greater activity in 2016 and 2017 and the grandfathering exemptions expire and they begin purchasing new policies.”

    Matt Glaros, chief strategy officer for Schererville, Ind.-based insurance brokerage Meyers Glaros Group, said employers have fewer options under the Affordable Care Act than they did one year ago. But Glaros said the upside is his firm hasn’t seen many small businesses dropping health insurance coverage as was predicted.

    “It’s getting more confusing,” he said. “In many cases employers are looking at higher prices and costs than they ever saw before. While more employees are insured, many are underinsured and can’t afford to use their insurance because their deductibles are so high. Most small businesses that are not renewing under grandfathered plans have seen rate increases.”

    Glaros advised small businesses in the short run to keep their grandfathered health plans or seek out community-rated plans if they’re priced well.

    He said this year if companies employ more than 50, they must meet minimum essential health coverage as required under the ACA or pay fines to the federal government. But he pointed out that requirement doesn’t apply if firms employ fewer than 50.  

    David Chase, California director of the small business advocacy organization, the Small Business Majority, said companies employing 100 or more have had to provide insurance or pay penalties. But Chase, whose organization represents 40,000 small business owners nationally, said firms employing 50 or under face another change under the ACA.

    Loophole Closed

    “In the past, many small businesses unable to offer employer insurance would set up reimbursement arrangements by subsidizing employees to buy their own insurance on the individual marketplace,” he explained.                                      

    But an Internal Revenue Service regulation that took effect in July 2015 effectively ends that practice, penalizing employers by imposing fines of $100 per day per employee.                                   

    “Employers need to know that practice is no longer allowed and that they should steer away from it or risk those fines,” he said.

    He said that premiums have increased in the small business insurance market, but noted that they have generally been low, single digit hikes, not the double digit increases many employers faced year after year before the ACA.

    He said there has also been a slight uptick of the number of employees covered under employer- sponsored plans.

    Chase said the political rhetoric denouncing the law has impeded understanding and acceptance of its small business provisions.

    “You still find small business owners struggling to understand the ACA because there has been so much demagoguing,” he said. “We don’t need lawmakers taking potshots at it, but understanding it and figuring out how to comply.”

    Jack Mozloom, national media director for the Washington, D.C.-based advocacy organization, the National Federation of Independent Business (NFIB), said the law has failed to live up to its promises of lowering healthcare costs. Mozloom, whose organization represents 350,000 small business owners, said five years after its passage, “The ACA has delivered all the bad things folks predicted and few of the good things, at least in terms of the small bus universe.”

    Mozloom said a recent NFIB survey found that 62% of its small business owner members reported premiums rising again, with many claiming 10% increases, and only 8% saying premiums had dropped.

    He said surveyed NFIB members also believed their plan choices were limited, not expanded, under the law.

    Disincentives

    “The law has generally been a disappointment for small business owners.  And it’s creating a natural disincentive for some employers to expand to employ more than 50 employees so as to avoid the insurance mandates, which is not ideal for our economy.”

    Jim Pyles, a healthcare attorney and partner with the Washington, D.C.-based law firm Powers, Pyles, Sutter & Vervile, said an integral goal of the ACA was to have insurance plans compete for business and open access to a broad pool of customers so their costs would not rise too much. “It’s worked somewhat well, particularly in states with multiple health plans in states with healthcare exchanges,” Pyles said. “It has not worked as well in states with little competition. In those states plan costs have tended to rise more quickly.”

    Pyles said that insurers have reported enrolling more people, but those new customers were sicker and required more services, leading to higher than expected costs.

    “The question is whether we can keep healthcare costs from rising so much that they become a crushing burden on small businesses,” he said.

    Pyles said because of those unexpected high medical costs, health insurers are at risk.

    “They’re trying to figure out if they can survive and how to do that with wide open liability and limited income,” he said, explaining that is why so many health plans are merging.

    He said that some health plans have figured out that the costliest patients are those with multiple chronic conditions. Learning how to treat those patients more effectively to avoid emergency room treatments and hospitalizations through better prevention, disease management and education help control costs.

    Michael Lujan, co-founder and chief strategy officer for San Francisco-based Limelight Health, which provides technical support for insurance agents and the insurance industry, said in California the majority of small business owners have opted to extend their grandfathered plans and delay decisions to better understand the law.

    “In November and December we will see many of those groups moving to ACA plans for the first time,” said Lujan, who is president of the California Association of Health Underwriters. “In some states as much as 80% of small businesses did early renewals,” he said.

    He said California has seen very moderate rate increases because it required plans to participate and compete on pricing. But he conceded that there may be higher deductibles and out of pocket expenses ahead.

    “Many employers will change from one plan to another and find the (healthcare provider) network more narrow offering less access to providers than they used to have,” Lujan explained.  

    He advised small business owners to consult insurance agents and brokers, who have invested in seminars and training on the ACA and have met certification standards to stay informed.

    He said the ACA, like Medicare when it was passed in 1965, was controversial. “Then, as now, there were many alarmist headlines and predictions of doom. Now Medicare is widely accepted,” Lujan said.  “And like Medicare, the ACA will evolve and improve.”

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