Health insurance hazards

Small businesses wrestle with costs, benefits of providing health insurance

Posted on Apr 1, 2016 :: Insight On
Sean P. Johnson
Posted by , Insight on Business Staff Writer

Joe Gonyo will unreservedly argue health insurance is a critical benefit for employees.

He truly believes in it. But after years of double-digit increases and the unanticipated effects of the Affordable Care Act, he’s just not sure how much longer his company can afford to provide it.

“Since the company was founded, this has been an important part of what we do for our people,” says Gonyo, vice president of operations for Berlin-based W.C. Russell Moccasin Co. “If I don’t offer it, I’m not sure I can keep or attract the talent we need.”

That may be one of the unanticipated dilemmas created when ACA was passed.

While small businesses — those with fewer than 50 employees — are specifically exempt from the requirements of providing health insurance to employees under the ACA, many provide it as a way to retain and attract talent. However, some of the changes brought on by the health insurance law have made it harder for those small companies to keep the benefit.

Despite the challenges, coverage offered to employees has increased among small businesses nationally, ticking up in 2015 to 54 percent of firms with 50 or fewer employees from 52 percent the year before, according to a recent Kaiser Family Foundation study. Roughly 96 percent of the nation’s employers are small businesses with fewer than 50 employees.

For starters, small businesses were exempted from the requirement to offer insurance because ACA expanded access and provided subsidies for workers to purchase individual policies. However, with fewer employees needing insurance, small companies lose some of their purchasing power to drive down rates. Additionally, some of the mandated coverages and changes in ratings continue to drive up the cost.

Combine that fallout with a tight labor market and a true dilemma for small business owners emerges: a benefit they need to be competitive is rocketing out of their reach.

“It has become an expensive benefit that I no longer feel I have control over,” says Gonyo, who has 32 employees eligible, 15 carrying the insurance.

For Chris Hanson, stories like Gonyo’s have become all too common the past few years as small companies wrestle with the new insurance realities. With the market making individual policies a better option for employees, small businesses will likely struggle with providing the benefit, particularly those looking to add it as a new option to their benefit package, says Hanson, president of Hanson Benefits, a health insurance consulting firm in Appleton.

Small companies that already offer health insurance may gain a bit more breathing room as many non-ACA compliant plans can continue to be renewed until 2018, she says.

“We’ve got one more renewal cycle to go,” Hanson says. “What we are seeing on the market right now is that it costs less for an individual to go to the marketplace than it costs for a small business to start up an insurance plan. But that could change as we continue to see rate increases in the individual market.”

Even with the extended window, small companies are battling rapidly- escalating costs and limited options as they look into group policy renewals.

For example, while preparing for its latest renewal, W.C. Russell Moccasin was quoted a 22 percent increase in rates for its group policy. A second company quoted an 11 percent increase, but had inadvertently used Winnebago County as the location instead of Green Lake County.

With the marketplace diminishing, Gonyo says the company is investigating a self-funded plan going forward, which may better control costs, but it also carries financial risks if there is catastrophic illness or accident.

“The problem is there is no market and no competition,” he says.

Gonyo is not alone in his frustration.

Lee Heeter, a partner with Neenah-based Access, Inc., has been watching premiums for his employees, particularly the younger employees, skyrocket the past few years. Heeter says the company has always offered insurance to employees and their families, both as a competitive benefit and a desire to help employees, 17 of whom utilize the company plan.

“It was pretty easy to do when the rates were reasonable,” Heeter says. “Unfortunately, ACA has done nothing but make that problem worse.”

Many of the mandates imposed by ACA have driven up costs by eliminating flexibility in the plans available, he says, particularly for young and single employees. So far, the company has opted not to change providers because of the costs involved in underwriting. A self-funded plan is not an option, he says.

The type of small business can make also make a difference when it comes to providing health insurance. Seasonal businesses such as landscaping companies have found keeping up with the costs too much of a financial burden to continue.

Karri Wolff, owner of Lakeshore Cleaners, a landscaping and snow removal company, previously provided health insurance to her employees in a setup where the company paid the monthly premiums during the off-season and the employees paid during the busy season.

Wolff is no longer able to afford to offer any type of health insurance and worries that her employees may not be utilizing the marketplace to find alternatives.

“It hurts us because to get guys in, we can no longer offer it,” Wolff says. “It’s sad because the guys really deserve it and we should be able to provide that per