Small Business Faces Stark Choice on Health Benefits Under New Govt. Rules
Big companies are facing a 9 percent increase in the cost of healthcare next year, and smaller firms, if history is any guide, will see even more ferocious rate hikes. The last thing these employers want is the government telling them to expand the benefits they offer. But this might be exactly what will happen under some new federal rules that implement part of the Affordable Care Act (ACA).
The ACA requires minimum benefit levels for employer plans, including preventive services, access to ob/gyns and pediatricians, and coverage of adult children to age 26, even if they have other insurance. The law also imposes limits on cost-sharing with employees. But existing health plans (as of March 23, 2010, that is) aren't subject to these mandates unless employers cut benefits or significantly raise costs to employees. The new regulations specify the limits that plans must stay within in order to retain their exemption from the new government requirements.
As a result of the new regulations, some small employers will be forced to choose between switching plans to keep down costs and maintaining their current plans to avoid losing their "grandfathered" status. Big corporations are subject to the same rules, but they offer most of the benefits in question already, and they change plans less frequently than small firms do.
Under the government rules, if a plan dropped coverage of a particular condition -- even a rare one -- it could lose its exemption from the benefit mandates. The same might be true if coinsurance or copayments rose by more than a certain percentage. And if an employer cut its share of the insurance cost by 5 percent, its plan might lose grandfathered status.
What all of this portends is continuing difficulty for small employers as they try to obtain affordable insurance. New tax credits will help companies with 25 or fewer workers, but they'll still have a tough time between now and 2014, when the new insurance exchanges are expected to lower insurance premiums.
Predictably, the U.S. Chamber of Commerce has gone ballistic over the new HHS regulations. While the government predicts that health plans sponsored by half of employers (and about two-thirds of small firms) will lose their exemption, the Chamber's health policy director, James Gelfand, complains that the regulations are so strict that virtually no plan will be able to retain its exemption from the rules. If you believe that, I have a bridge you might want to buy.
Republican politicians are even more hysterical. Senate Minority Leader Mitch McConnell (R-Ky.) claims that the Obama Administration is breaking its promise that consumers will be able to keep the plans they have if they like them. But the loss of the exemption, while it would require changes in plan designs, would not force consumers to give up benefits: instead, it would increase them. And imposing limits on employee cost sharing would also be an advantage for workers.
As with many of the issues the Administration is trying to deal with, from the Gulf oil spill to Afghanistan, there are no good solutions here. All that employers can do is try to hang in there while health reform takes its course.
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