The Affordable Care Act has seen its share of bad publicity since the federal exchange debuted in October.
Since then website fixes and increasing enrollment suggest a positive turn, but more challenges loom as smaller employers weigh whether to keep or ditch their group plans.
Since the rollout of insurance exchanges, some insurance carriers are consolidating their plans and overhauling old ones to stave off costs associated with the law and increase profits.
For many Savannah employers, this has resulted in higher premiums and less coverage, according to David Rubnitz, managing director of Rubnitz and EbenConcepts, an employee benefits consultancy.
Rubnitz began preparing his clients for the changes head their way — both small businesses with fewer than 50 employees and larger groups — almost two years ago when the health law first passed.
Before the law was passed, he said, he would cater health plans based on the health and age of employees. Under the new law, which bars the collection of this information, the rates are standardized for everyone — but with that comes a downside.
“Unfortunately, the rates are higher, the plan designs are not as good for the most part and they have higher out-of-pockets that the employee has to pay,” said Rubnitz, gesturing to a silver plan on his desk with a $6,350 deductible.
Among the key changes is that any business with more than 50 full-time employees must offer health insurance or pay an annual fine of $2,000 per employee, not counting the first 30.
The law defines full time as 30 hours or more. The penalty increases to $3,000 per worker if the coverage offered by the employer is deemed unaffordable.
“There are new plan designs and new rules and regulations we’re having to deal with,” said Rubnitz. “For the small groups, the first question we get is, ‘Should we keep health insurance or should we drop it and let our employees go onto the government exchanges?’”
Among the hardest hit, Rubnitz said, are restaurants, hotels and other seasonal industries, whose employees typically earn lower wages and whose hours vary depending on the season.
Many of these hospitality and service industry workers could potentially earn subsidies to buy health insurance on the exchange if their employers do not.
Group plan vs. federal exchanges
The Crab Shack on Tybee, one of Rubnitz’ clients, was among those who found themselves with the tough choice of keeping or dropping their plan. The Crab Shack had offered a group plan that most were happy with for about 15 years, according to Virginia Ward, manager of business operations.
Ward said those who worked year-round or full time were able to buy in, and the younger servers, who came and went during the season, opted out. The Crab Shack employs 150-175 people over the year but only about 60 during the winter.
“Many in our industry are young, healthy and transient, so they choose not to buy in. They figure $38 a week is way too much money to spend for something they’re not going to use,” said Ward.
To comply with the employer mandate, Ward said, they thought about doing a hybrid option, offering a so-called “limousine” plan for $38 a week with $2,500 deductible including dental, vision and life insurance.
Then there would be a stepped-down version for $25 a week with a higher out of pocket and more limited practitioner list. Neither option was perfect for everyone, but they wanted to do what was best for the majority of their employees.
They soon discovered that offering this stepped-down plan would jeopardize the subsidies their employees might receive through the health care exchanges, especially those who worked only seasonally or less than 30 hours.
The Crab Shack brought in Rubnitz and his group to help their employees enroll on the exchanges, a process he described as slow and tedious, as the site was still suffering from glitches. He said he spent 13 hours with one person.
“You have to learn more about the employees than you ever had to learn,” said Rubnitz. “You gotta know, what do they make? If they’re married, what does their spouse make? Does the spouse have access to affordable coverage? All those go into play to decide whether you can get a subsidy or can’t get a subsidy. And the subsidy makes the biggest difference on whether it’s going to be affordable or not.”
Rubnitz said about 15 percent of his clients have dropped their plans so far and enrolled employees on the exchange. Some, like The Crab Shack, are doing a marking period, which allows them to count the number of full-time employees they have before determining whether they should renew a group plan.
Rubnitz said a tricky aspect in counting the number of full-time employees is that employers must include younger workers who are still covered on their parent’s plan and those who are covered by a spouse’s insurance. Essentially, full time is anyone working more than 30 hours a week for more than four months.
Ward said the sign-ups were a mixed bag, with only about 25 of her 60 employees participating. Some servers opted not to sign up and instead pay the penalty.
She said other workers didn’t even have email addresses to sign up on the exchange and had to create accounts. Still others were denied subsidies because they made too much money in tips or because they were denied Medicaid in the past.
For those who did sign up, they may still face a $6,300 out of pocket with no co-pays on the silver and bronze plans through the exchanges.
“The main thing our owners want is that we abide by the letter of the law, and if we can make a choice that benefits our employees one way better than the other, then we’ll do that,” said Ward.
Who’s on the exchanges so far?
Since October, about 58,611 Georgians have selected health plans through the online exchanges, according to the most recent report by the U.S. Department of Health and Human Services. About 78 percent of those received some form of financial assistance or subsidy.
About 26 percent of Georgia’s enrollees are between the ages of 18-34, the demographic considered critical to offsetting the costs of covering the elderly and sick.
Ward said many of her servers said they’d opt to pay the penalty, right now about 1 percent of their yearly earnings. So for a server making $25,000 a year, this would equate to about $250, still less than contributing to a health plan with a high deductible.
“I saw the target group that’s expected to enroll to fund the program offer to pay the penalty,” said Ward. “Our little microcosm here shows that the younger, healthier ones aren’t taking it as seriously as they should be.”
Sticker shock
It’s not just employers but employees who are starting to realize the costs associated with insurance.
Rubnitz said one client had an employee making $44,000 a year. At that pay, she did not qualify for a subsidy on the health care exchange, but if she was making $40,000, she would qualify for just over $3,600 in subsidies.
“That $4,000 a year taxable did not net her out $3,600. So it was actually worthwhile to her to go to her employer and say, ‘Give me a pay decrease from $44,000 down to $40, because at $40 I’ll get a subsidy — I’ll actually have more spendable money at a lower paycheck,’” said Rubnitz.
Rubnitz said it’s possible once more employees see what a pay raise will do to their subsidy, they won’t want one.
“I did another analysis on another client of mine, he was going to give everyone a pay raise equal to what they paid for their health insurance,” said Rubnitz. “And in some cases, the employees lost more subsidy than the pay raise they were going to get.”
HEALTH CARE BREAKDOWN
Georgians who have signed up on the federal exchange as of Dec. 28, 2013: 58,611
Percent with financial assistance — 78 percent
Percent without financial assistance — 22 percent
Women — 57 percent
Men — 43 percent
Type of plan Georgians selected:
Bronze plan — 12 percent
Silver plan — 57 percent
Gold plan — 12 percent
Platinum — 19 percent
Catastrophic — 2 percent
Source: U.S. Department of Health and Human Services