SYCAMORE – In coming years, the business of providing health insurance as a workplace benefit could drastically change as various provisions of the federal Affordable Care Act take effect.
Sycamore-based Ideal Industries, which sells tools and electrical equipment internationally, has worked with consultants who’ve helped design health insurance plans to analyze the potential impact. And the company is waiting to see how the act and the Oct. 1 opening of the Health Insurance Marketplace will affect its business.
The ACA, signed in 2010 with provisions being phased in through 2020, is meant to make health care more accessible and affordable for all Americans. It requires all Americans to have insurance and all businesses with a certain number of employees to offer it or pay a fine.
The Health Insurance Marketplace, also known as the Exchange, is one of many of the act’s initiatives that will allow people to purchase their own health insurance.
Tom Nohl, total rewards manager with Ideal Industries, said he thinks many employers are waiting to see whether the Health Insurance Marketplace has value. Ideal is waiting because the company has locations in other states where the effects of the act and Exchange might differ, he said.
“There’s no reason not to see what transpires,” Nohl said.
Insurance landscape changing
For decades, health insurance coverage in America typically has come from employers who provide it as part of an overall compensation package.
In 2011, the most recent year for which data were available, 54.7 percent of American workers had health insurance through an employer, according to a report issued in July by the Employment Benefit Research Institute. The study found that 22.4 percent of uninsured workers hadn’t been offered health benefits from their employers.
Proponents of the ACA have said it will help reduce the ranks of the uninsured.
One of the biggest changes the act will bring for businesses is the so-called “employer mandate,” which will require all businesses with more than 50 full-time equivalent workers to offer health insurance or pay a penalty. It was to take effect in 2014, but has been pushed back a year.
Those who advise businesses on the ACA stress that the extra year is not a time to relax.
“The first thing I advise any business owner is: Don’t stick your head in the sand,” said Elizabeth Milito, senior executive counsel for the National Federation of Independent Business.
She noted the rollout of the ACA appears to be fluid, with rules still being written and potential future legislation and executive actions could alter the timetable for various provisions.
Employers must be aware of what’s coming, she said, and prepare for each provision and for questions from their workers. For the employer mandate, for instance, the rules for counting employees under the ACA are not the same as those in other federal or state labor laws.
Milito has heard from some business owners who have reduced their full-time headcount by shifting more workers to part-time or redesignating them as “independent contractors.” The National Federation of Independent Business cautions against such tactics, she said.
“Beware of workarounds,” she said. “They can be problematic. It’s not going to get you out of the requirements under the ACA, and it may get you into hot water with other government agencies.”
A recent survey by workplace issues consulting firm Challenger, Gray & Christmas found many aren’t planning to go that route: 82 percent of companies surveyed said they plan to offer health care coverage next year.
Mike Deagle, an insurance broker through his company Deagle Benefit Group Inc., of Batavia, and president of the Illinois State Association of Health Underwriters, said there are other impacts of the law of which employers should be aware.
He noted that the law will greatly reduce the number of health plans offered by insurers. And the law has mandated changes to how rates are determined.
Previously, rates could be determined by a number of factors, including medical history, gender, lifestyle and occupation, among others.
Now, Deagle said, insurance premiums can only be rated based on the age of the insured, family composition, the geographic region in which they live, and, for individual policies, whether the insured smokes.
He said that will result in otherwise healthy individuals of different ages being charged different rates for health insurance, even under the same plan. Deagle said the changes will undoubtedly result in changes in how much employers must pay to insure their workers.
Effects of law still unknown
Sam Doty, co-owner of Doty & Sons in Sycamore, said he isn’t certain of the exact effect the law will have on his business, which pays 100 percent of health insurance costs for its 10 employees. He doesn’t see his employees dropping out the company’s health insurance for a different plan through the Exchange.
This year insurance rates went up 8 percent, and Humana is offering to lock them at that rate for another year, Doty said. But if rates keep going up, Doty & Sons employees might have to start paying part of their insurance premiums.
“If the expenses keep going up, they’re more likely going to have to be contributing to their insurance,” Doty said.
Although Nohl doesn’t see Ideal changing the way it provides health benefits for employees, he does see the company accruing costs to have to fund some aspects of the federal health care reform law.
The ACA imposes a fee on certain employers and insurance companies to help fund the Patient-Centered Outcomes Research Institute, according to the Internal Revenue Service. The institute is to conduct and examine research on the outcomes and effectiveness of aspects health care.
Because of such fees, Vicki Slomka, senior vice president of Global Human Resources for Ideal, said the company may have to increase prices for its products, make additional sales or find other ways to reduce costs.
Nohl said Ideal will, as mandated, notify its employees of the upcoming changes to health insurance requirements by Oct. 1. Nohl said it will wait until the last minute to ensure the most up-to-date information is distributed.
No matter where employees choose to get health insurance from, Slomka said. she hopes they select ones that benefit them and do their own research on what works.
For Slomka, the efforts to reform health care are more likely efforts to reform health insurance.
“Don’t get me wrong,” she said, “this is something that is needed because of how people are denied coverage because they are a higher risk.”