Norma Smith vividly remembers the day Congress passed the Affordable Care Act in March 2010, effectively rewriting the rulebook for health insurance coverage in the United States.
"I thought, 'This is going to put me out of business!" says Smith, an account executive for the Murphy Insurance Group who works as a broker between businesses and insurance companies. "I really wondered whether I was going to have a job by Jan. 1, 2014, when it was officially going into effect. There was great concern whether employers would really even need us anymore."
As it turned out Smith, didn't need to worry. The complexity and changing permutations of the groundbreaking health care law has made insurance brokers like Smith indispensable to small businesses with fewer than 50 employees. This is a significant part of the national workforce, too — 96% of U.S. businesses are that size.
At 397,894 words, the ACA is not quite as long as Tolstoy's War and Peace but nearly double Dostoyevsky's Crime and Punishment. The bill is 2,300 pages long, but the "interpretation document" is much worse. According to Smith, it's a whopping 19,000 pages.
Putting together the best and most affordable coverage under these new and changing circumstances has been extremely challenging for longtime pros like Smith. The fact that many small businesses can't afford a human resources administrator or benefits manager to comb through all the information makes the role of brokers even more valuable.
"We knew that brokers who worked with the larger companies would be all right, but in Dane County, let's face it, 90% of your business is the small employer with 20 employees or so," Smith says. "But rather than fight the ACA, I think most brokers decided to try to grasp it. We just had to learn and keep learning."
A rise in premiums
Archie Vorwald says the number-one challenge for small businesses under Obamacare has been to find affordable plans that keep out-of-pocket costs for employees roughly the same as they were before. Employee wages, after all, have likely not changed.
"Historically, health care in our area has been fairly affordable, in part due to the competition of insurance companies here such as Unity, Group Health Cooperative, Physicians Plus and Dean," says Vorwald, president of employee benefits for Tricor Insurance & Financial Services.
Insurers in the past could vary premium rates based on prior or expected health conditions. The Affordable Care Act prohibits this. Now insurers must develop "adjusted community ratings" for individual and small group insurance policies that cover up to 50 employees. Under this rating method, insurers may vary the rates established for a particular plan based on just a few factors: family size (individual or family), geography (rating area), age and tobacco use.
"That blended rate puts incredible pressure on the insurer to find the right price point that is both sustainable and affordable," Vorwald says.
So which businesses benefit under this scenario? Daycare providers might.
"I have several clients that run daycares," says Smith. "The daycare staff is predominantly female and typically 20 to 40 years old. In the past, their rates were probably higher because they were of childbearing age and they're female. Now industries like that will benefit from the ACA because we have to take away the gender and childbearing factor."
But companies that hire young men — say, for outdoor labor work — will likely take a hit.
"They're paying significantly more than they would have paid in the past," says Smith.
As Adam Bluestein writes in inc.com, "Community ratings for companies whose employees are generally young and healthy are seeing their premiums rise dramatically as they are tossed into the same risk pool with older, sicker ones."
A recent estimate of businesses nationwide from the Center for Medicare and Medicaid Services comes to the same conclusion: Those with a higher average number of sick or at-risk employees may see their rates drop, but 65% of small firms will likely see an increase in their premium rates.
Small businesses are still under a grace period of sorts. The Obama administration is temporarily allowing insurers to offer plan renewals that are noncompliant with the new guidelines. So for this year and very likely until at least October 2016, small groups can keep their old plans. At the same time, insurers have been working with their actuaries to set the new rates based on the ACA guidelines, so they've been forced to work on the old and new rate platforms simultaneously.
Despite the growing pains inherent in a national program of the ACA's scope, many will benefit even if it's been difficult for small businesses.
"The people happiest with the ACA are those who are uninsured now and will be able to get insurance, or people who had preexisting heath conditions," says Amy Olson, an account executive for M3 Insurance Solutions Inc. "But for employers the ACA creates a greater administrative burden — for many, higher costs, potential for penalties, and real questions about the level of benefits they're ultimately able to extend to their employees."