A number of small business employers in West and Southwest Michigan are looking at discontinuing their health insurance plans, as alternative options for employees and premiums for firms increase.
Grand Valley State University announced recently the release of the Affordable Care Act Small Employer Survey, which indicates only a quarter of responding small firms in West and Southwest Michigan offering health insurance in 2013 and 2014 are planning to continue for 2015 and 2016.
The ACA Small Employer Survey examines the impact of the Affordable Care Act on small business employers in Kent, Ottawa, Muskegon, Allegan, Berrien, Eaton and Kalamazoo counties.
The study was conducted by Leslie Muller, assistant professor of economics at GVSU, in collaboration with Priority Health. It focused on how health reform was affecting health insurance plans and labor market choices for businesses with five to 49 full-time employees.
Roughly 80 firms responded to the survey out of the random sampling from the Demographics Now database in November 2014, with 17 percent of participating businesses representing the construction sector and 16 percent of respondents from manufacturing. Other industries represented were: retail; health care; professional, scientific and technical; nonprofit; accommodation and food service; education; real estate; financial services; and wholesale trade and distribution.
Based on the survey findings, 61 percent of firms offered health plans in 2013 while 55 percent continued to offer insurance in 2014. Only 40 percent of the respondents indicate they will offer employee benefits in 2015, with 16 percent undecided and only 28 percent of small business employers planning on extending coverage through 2016.
The fairly large percentage of small businesses that remained undecided or that were discontinuing coverage was one of the most important findings when looking ahead to 2015 and 2016, according to Muller.
“I think small businesses for quite some time — years now — have been strapped with continuing to offer health coverage,” said Muller. “A lot of small businesses — could be family businesses — have had the same people working for them for a while, and they want to do what is best for their employees.”
With less bargaining power to negotiate less expensive insurance plans, and underwriting costs for employees with pre-existing conditions, Muller said the premiums for small businesses have been higher than larger businesses, traditionally.
“The small business plans have been underwritten, which means if there is anyone in their workforce that has a pre-existing condition — a chronic condition, then the premiums go up, and that is not the case with larger businesses,” said Muller. “Now, that is changing; however, I think it has been hard for a lot of these employers and they haven’t had any options.”
A report titled The Affordable Care Act Increases Choice and Saving Money for Small Businesses, released by the White House, indicated from 1999 to 2009, average annual premiums for workers at small firms increased by 123 percent: from $5,700 to $12,700. The ACA Small Business Survey also noted while some small firms have experienced very little rate increase, others have had 50 to 60 percent increases.
Along with higher premiums, Muller indicated other factors contributing to small firms dropping health coverage included new ACA-imposed taxes on insurers potentially passed on to customers as higher premiums, increased minimum coverage requirements for 10 essential health benefits, and administrative reasons.
“We asked them, if you are not going to continue coverage, are you going to be doing anything differently? Are you going to compensate your employees in a different way? Are you going to encourage them to go out on the exchange?” said Muller. “Sixty-eight percent of them said they were going to encourage their employees to go out onto the public exchange.”
Although the impact on employees ranges from better to worse, under the ACA, workers can go to the individual market without the likelihood of being denied coverage or extremely high premiums, which was traditionally the case, according to Muller. Workers who earn up to 400 percent of the poverty level also are still eligible for federal subsidies if the employer does not offer coverage.
“For the employer, this could be one way to still feel the employee is getting coverage when they are not able to afford it anymore,” said Muller. “For the employee, it is very individual as far as the impact goes. The types of plans definitely differ, so there is a lot of moving parts.”
With the debut of the new Michigan Small Business Health Options Program, which launched in early 2014 and went live online in November 2014, there is another option for small businesses under the ACA.
“There hasn’t been a lot of uptake from small businesses, I think, because they are still getting the bugs worked out as far as running smoothly,” said Muller in reference to the online portal. “These plans are not underwritten; it is not going to hurt them if they have an employee who has a chronic condition. This is something small businesses should check out to see if it is an option for them.”
For those companies that maintain health care coverage, 87 percent of West and Southwest Michigan small businesses have already considered or are considering increasing the cost share burden on the worker, while 73 percent have considered or are considering using a high deductible health plan in an effort to contain health insurance costs for the employer.
Other significant findings from the survey: 46 percent have considered or are considering limiting or reducing the number of new hires, and 28 percent have considered or are considering reducing their current workforce.
Building on the 2013 survey that examined predominately medium- to large-sized businesses, Muller said some of the smaller firms that responded in 2013 indicated they weren’t going to continue coverage and prompted the interest in a more focused sampling this year.
“We saw some of the smaller firms were saying they weren’t going to continue coverage,” said Muller. “Given that smaller firms in our sample are those with less than 50 full-time employees and are not covered by the employer mandate that requires them to offer insurance, it was interesting as to why they would do this.”
Muller hopes to continue surveying both large and small businesses as the health insurance market continues to solidify amid the ongoing ACA changes.
“I would like to see if I could do both small and large businesses next year because things are continuing to fall out — meaning they are working themselves out,” said Muller.
“It is hard to tell what the overall effects are going to be, so as things proceed, I would really like to continue to do this survey.”