By: Dan Cohen – 11/13/14
Last week, I had a lengthy conversation with one of my clients about the 36% rate increase his business just received from Blue Cross. Of course, his business is not the only one to experience the sticker shock of its renewal rate. I have actually heard of a 45% rate hike in one case. If this is not enough to make you wonder what is in store for us, imagine the shock of seeing premium rates for older employees approaching double what they are for younger employees. In this particular case, the company had traditionally paid 85% of the premium cost of health care. But, when it costs 42% more to insure a 52 year old than a 30 year old, it seems somewhat difficult, if not impossible, to justify the 85/15 plan since the employer would be contributing nearly $3000 more annually to insure the older worker. Quite frankly and quite sadly, maintaining the 85/15 plan under these circumstances would argue against hiring any more older employees. So, what is going on? Is this yet another attempt by the government to throw seniors under the bus?
Let’s back up and take a look at some of the background. Under Obamacare, it was to be the younger generations’ participation that was to help make coverage affordable for everyone else. This was because younger people tend to have very low insurance claims, which explains why so many of them forgo insurance entirely. The concern was that if too many of them chose not buy insurance, then the rates charged to older Americans would have to rise in 2015 to make ends meet. Although I have not seen any statistics, I suspect that this phenomena offers part of the explanation.
The other event that has likely played into this reality is the extension of the deadline for plans to become compliant with the ACA’s minimum plan requirements. You will recall the backlash caused by all the plan cancellations last year, which stemmed from the big lie that “if you like your plan you can keep it.” The result was that plans could remain out of compliance throughout 2014. The insurance industry, therefore, could not cash in on premium hikes since they could not force their participants into more comprehensive and costly plans.
As we approach 2015, we are seeing the impact of both. Plans have become more costly and the price tag for seniors has become disproportionately greater. The irony is that the Millennials, who voted for Obamacare in droves, are the ones who aren’t running to healthcare.gov because they cannot justify paying for health care when they don’t have a job but do have monstrous student loan payments. So, while their health care is relatively affordable under ACA, they don’t want it. For the rest of us, including the job providers, we must now foot the biggest part of this bill.
It is for this reason that small businesses are weighing their health care options carefully and entertaining some of the following:
- Moving from 85/15 plans towards 50/50 plans;
- Moving their employees into higher deductible/ higher out-of-pocket plans;
- Moving their employees into self-funded plans with “stop loss” supplements to protect against catastrophic claims;
- Moving their employees into “skinny plans” which offer preventative services but don’t pay for hospitalization and doctor’s visits;
- Funding health savings accounts, at equivalent amounts regardless of age;
- Not offering health care at all and offering raises or stipends to employees, who will have to go purchase their own health care;
Health care is a moving target at this point. 2015 will bring more change as the employer mandate penalties come on line for employers with 100 or more full-time employees or employee equivalents. Employers will have to manage this uncertainty and the rising cost of health care like other parts of their business. Don’t just accept the increased costs. Do your homework. Talk to your agents and consultants and shop around.