The Ohio Department of Insurance said most companies statewide will likely see their health insuance rates increase as a result of the the Affordable Care Act, the question is by how much.
State officials are still waiting for health insurers to file rate requests for the company-sponsored insurance plans they hope to sell next year in the private market and on the state’s federally-run online health exchange.
So far, it is difficult to determine how much premiums will rise, said Ohio Lt. Governor and Ohio Department of Insurance Director Mary Taylor. But many small businesses — defined by the health care law as those with up to 100 employees — could be in for serious sticker shock.
“Based on what we’re hearing from small businesses, we believe that group could see the largest increases in costs,” she said. “Larger employers are impacted less for a lot of reasons. The plans that they offer may be more closely matched to the type of benefit plans that will be offered under the ACA.”
Taylor was referring to an actuarial study commissioned by ODI two years ago that found some small businesses could see their rates rise between 50 and 85 percent as a result of health reform, and in some cases as high as 150 percent. That was before medical inflation.
The new law is expected to boost premiums by requiring companies to meet a minimum benefits standard while limiting cost-sharing with employees and preventing insurance carriers from discounting premiums based on health status of individual workforces.
Still, the average rate increase for most small businesses are expected to increase between 5 and 15 percent next year, according to the ODI study, while some companies could even see rates declined by as much as 40 percent. Medical inflation would add as much as 10 percent to premium costs.
“We’re still waiting, but our hope is that within the next couple of weeks we’re going to see more insurance companies filing with us,” Taylor said.
The act requires health insurance be available to millions of uninsured individuals and small businesses beginning Oct. 1.
ODI must submit all qualified health plans for the exchanges to the federal government by July 31, and it has established a June 21 deadline for insurers to submit their plans, according to the insurance department’s website.
The reason rates might vary so widely are tied primarily to the health care law’s new rules for underwriting health insurance policies, which require insurers to weigh potential health risks for an entire community rather than a particular workforce, said John Bowblis, a Miami University economics professor and health expert.
“If you were a business that had a relatively young, healthy workforce, you would pay a lower premium based on the relatively lower risk of your workforce,” Bowblis said. “Now, with the community rating, everybody is required to get the same premium.
“The premium is going to based on the average risk of everybody in that community, so if you had an older sicker workforce paying higher premiums they may actually end up paying lower premiums now because of the community rating.”
The uncertainty surrounding the cost of health insurance going forward continues to paralyzed many small business owners and threatens to stall economic growth.
Dave Dysinger of the Dayton-based precision machine business, Dysinger Inc., said business is booming, putting pressure on the firm with just under 50 employees to expand its workforce.
But if the company crosses the 50-worker threshold, it would be forced to comply with the provisions of the health care law or pay a fine.
The cost of insurance could skyrocket if Dysinger brings on a fresh new crop of younger workers, but the law would limit how much of that cost he could pass onto his employees in the form of deductibles, co-payments, and coinsurance.
“I am very concerned about what’s going to happen with the cost of health care,” Dysinger said. “But I’m going to save my whining until I actually see what’s going to happen.”
In addition to the way premiums are determined, beginning in 2018 employers will be subject to a 40 percent excise tax on plans that cost the company $10,200 per individual employee and $27,500 for families, otherwise known as the Cadillac tax.
For some companies, the health care law would allow their insurance plans to be grandfathered, making them exempt from the minimum benefits standard and community ratings rules.
But maintaining grandfathered status requires that the benefit plan not to have changed significantly since the law was passed. And once a plan loses grandfathered status, it cannot be regained.
“There’s a misconception out there about grandfathered status,” Taylor said. “Once those plans start making any kind of changes, it’s so difficult to maintain that grandfathered status that we believe there will be very few grandfathered plans that still exist” after the health care law is fully implemented.