The struggles of a business trying to survive.
In my recent posts, I have told the story of how I started to explore my options for renewing my insurance this year. It’s been my habit in writing for this blog to try to convey useful information, derived from my experience as an ordinary small-business owner, in the form of narrative episodes.
Most posts have told a story, with a beginning, a middle and — I hope — a useful conclusion. Having spent the last two weeks fully immersed in the baffling world of health insurance, I’ve decided that I need to present some information in a different way. If you need to renew your policies before Jan. 1, as I do, there is no time to waste.
Let me start with a caveat: my experience is based on my own company and its location (near Philadelphia). I am a small manufacturer, who currently offers coverage to my employees. I have an insurance agent who has been my primary point of contact with the insurance market. Because I am in Pennsylvania, a state that does not have its own exchange, I am forced to use the HealthCare.gov site. However, the local market is dominated by three large private insurers — Independence Blue Cross, Aetna, United Healthcare — that all have their own websites where business owners can shop directly.
With that in mind, I offer seven hard-earned conclusions I have reached about the new world of small-business health insurance.
1. The Affordable Care Act has fundamentally restructured the insurance market. Business owners now have a better way to shop for coverage, with more plan choices and a more uniform set of standards that make comparing options much easier. There are lots of ways to save money while also offering employees a wider range of choices. As everyone knows, the new system is a mess right now, but it is a vast improvement over our previous mess.
2. That said, none of the players in my market, including HealthCare.gov, my agent, and the private insurance companies, have figured out how to communicate the precise nature of their offerings and the best path to a decision. None of the sites I looked at is easy to understand and use. Nobody has figured out a good way to deliver pricing information. All of the quotes I got were confusing and showed only a small subset of my actual set of choices. Truth to tell, I came to a good understanding of my options only by spending hours on the phone with a vice president of sales at Independence Blue Cross who called me after my last post — and even he was baffled by many of my questions.
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3. If you are currently offering coverage, and you like what your agent dropped on your desk, sign it and be done with it. You can always come back and dig into your choices next year, when the dust has settled.
4. If you are not currently offering insurance, do not start now. Your people can get it themselves on the exchange. (Or not, and they can pay the penalty.)
4a. That said, I cannot comment on state-run exchanges. I have not heard anything bad about them, and you might well have access to one that works. In that case, you might want to give it a try.
4b. If you want to give your people one piece of advice before they try the exchange, tell them this: Don’t bother getting pricing without creating an account — because pricing varies widely with age. The quick quotes you can get without an account do not specify the age of the people used to generate the number. As a result, the price can be off by a factor of two or more in either direction (here is another take on this).
By contrast, the quotes you get after you make an account are tailored to your age and the ages of family members, and will be accurate. The wide discrepancy between these two numbers is causing a lot of disappointment. It is not clear to me why this mismatch has not been better explained, or why it was baked into the system in the first place.
5. The federal SHOP exchange for small businesses remains dysfunctional. As of Friday, the only information available in the SHOP was for sample individual plan costs, which are highly misleading as noted above. You still cannot enter your employee census online and get actual quotes for your business. This still must be done with a paper application. I mailed mine 16 days ago, on Nov. 6, and have heard nothing. My enrollment deadline is fast approaching, and the SHOP exchange has given me no path forward.
The main reason to use the SHOP exchange is if you have lower-wage employees and might qualify for the tax credits. A business owner must buy through the exchange to get the credits. As best I can tell, businesses that qualify — mine does not — are just out of luck until the SHOP exchange is truly operational.
6. For owners of businesses like my sister’s restaurant in Boston — where she currently offers insurance but only a small percentage of her employees actually buy it — I would suggest that they stop offering insurance. Their lower-paid employees will have a better set of choices on the exchange and may well qualify for federal subsidies. And if these businesses have fewer than 50 full-time employees, there will be no penalties. (I should note that my sister has not decided to do this — it’s just what I happen to think she should do.)
7. Those owners who have part-time employees they have been allowing to buy insurance in their group should probably cut them loose. These employees can buy on the exchange, and they might well qualify for substantial subsidies that will reduce their costs. Owners will need to write a uniform policy as to eligibility for part-time employees but simply making everyone who works fewer than 30 hours a week ineligible should work.
I have lots more to say — especially on the subject of plan design and pricing. The Affordable Care Act has totally transformed how this works, and I will be devoting subsequent posts in this series to my discoveries — including what I offered my employees and how much money I will save. So stay tuned.
Tuesday: What I needed to understand about insurance.
Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.