Archive for June, 2013

Trouble Ahead For Smaller Businesses: Higher Healthcare Costs

June 10, 2013

If pundits from all sides of the question are right small businesses face higher healthcare insurance rates and employee dissatisfaction because of the Affordable Care Act.
While the most onerous provisions directly affect companies with 50 or more employees, there are still enough in the new law to raise concerns for those managers under that threshold.
The most glaring obstacle is the lack of knowledge about the law’s provisions.
Three years after the Affordable Care Act was signed into law, a majority of Americans and two-thirds of the uninsured say they still don’t know how it will affect them, according to the latest Kaiser Family Foundation poll.
What is perhaps more frightening is the statistic put out by Daniel P. Kessler: “In total, it appears that there will be 30 million to 40 million people damaged in some fashion by the Affordable Care Act—more than one in 10 Americans.” Kessler is a professor of business and law at Stanford University and quoted in The Wall Street Journal.
Add to this the uncertainty many small business leaders have about the law and what it means to them and there is the real chance of chaos this fall when yearly healthcare insurance contracts are renewed.
Data from a variety of sources, including Information Strategies, Inc. the company I am Executive Chairman of, indicate many smaller firms are already experiencing double digit premium increases.
Hardest hit on premium increases are expected to be companies under 50 employees. That is where insurance companies have the greatest pricing flexibility under the new law to increase premiums to smaller businesses.
Inevitably, workers will share the pain as employers ask them to pick-up costs or no longer offer the healthcare benefit.
That means higher morale issues, greater employee disgruntlement and less working hours for many as small businesses move to keep their full-time employee count below 50.
While surveys show many smaller companies intend to keep their present healthcare plans, there is no rush to add these as an employee inducement by those enterprises who currently do not offer such plans.
Pundits also say the costs of individually purchased plans are rising as The Affordable Care Act mandates higher levels of services, community rating, and acceptance with previous conditions.
If employees are expected to purchase their own insurance even with subsidies no one expects the final costs to be lower.
Whenever there is change of the magnitude of the Affordable Care Act there is dislocation and small enterprises already have enough on their plate just keeping afloat.
Explaining the new law to employees will also be a headache for many smaller firms with less HR resources and little help expected from insurance agents, because their commissions have been cut to less than two percent.
In short, a perfect storm is gathering which will in the end hurt owners and employees.