While they are currently exempt from the employer mandate to provide insurance and not considered part of the small-group market, small businesses with between 50 and 100 employees will find that all that changes for the worse in 2016, according to Mark Dietrick, CPA, ABV, author of The Financial Professionals Guide to Healthcare Reform and past chair of the American Institute of CPAs National Healthcare Industry Conference Committee.
Speaking at an American Institute of CPAs online conference called Health Care Reform: A Deep Dive into the Affordable Care Act, Dietrich explained that by 2016 the employer mandate will kick in for companies with between 50 and 100 employees, and they will be moved into the small-group market for insurance coverage.
In the small-group market, insurers charge higher premiums, not least because, Its cheaper to insure 200 people under a single contract than it is to insure 40 groups of five under 40 contracts, or 200 individuals Dietrich said. While the group had previously been for companies with 50 or fewer employees, the ACA raised the limit to 100 employees though the increase was put off to 2016 because the law gave states the option to postpone, which they all took.
It is one of the least understood parts of the ACA, Dietrich said. By 2016, those with between 50 and 100 employees will be pushed into the small-group, where the rates are higher. They need to think about it now, or they will be facing rate shock.
The reason theyre forcing these people into the small-group market is to expand the actuarial base and to absorb some of the expected losses, he said. At the same time, small-group premiums are likely to rise even more, he said, because of the benefit requirements in the ACA, which limit deductibles and dont allow insurers to turn down those with pre-existing conditions.
Worse yet, he warned, states may eventually merge the small-group market with the markets for individuals. If states dont get the enrollment of young people that they expect [to make state insurance exchanges viable], then the likelihood of states combining the small group and individual markets will go up.
If the two are merged, premiums will likely rise even more. Among other things, individual deductibles tend to be higher, but the ACA caps deductibles.
Dietrich noted that these rules dont apply to the large-group market and to companies that are self-insured.
Virtually every large company in the country is self-insured, he explained. They insure them themselves, but work through an insurance company. Ordinarily, I wouldnt have suggested self-insuring for a business with less than 100 employees, but the insurance industry is offering new products to help companies escape some of the more burdensome requirements of the ACA.
Hes seen a similar change in previous circumstances specifically under the health insurance reform program instituted early in the decade in Massachusetts, which many cite as the model for the ACA: The pattern of looking for self-insurance has been running in Massachusetts for eight years.