Health Care Reform Forces Small Businesses to Adjust Plans

Small businesses are braced for premium increases and benefit changes as they renew health coverage under the new rules put in place by the Affordable Care Act. But even as some express cautious optimism, they are short on the answers they need to make plans for next year.

Many insurance companies responded to the changes in the law by scrapping their old small-employer plans and designing new ones. In addition, the law changed the method of calculating premiums, which are just beginning to be released.

That leaves a lot of uncertainty surrounding a major business expense. And with only two months to go until new policies start for companies that renew coverage on Jan. 1, premium information is still in short supply.

“We got a letter from our insurance provider in February, saying, ‘Your current plan will be discontinued in January 2014,’ ” said Claire Zweig, co-owner, with her husband, of Glenbrook Technologies Inc. in Randolph, N.J. The letter didn’t give any other options, she said. “And I still don’t have an option.”

She needs to know her choices “so I can present them to my employees, so they can decide what they want,” she said. “This kind of benefit is a major part of our budget – major!” The company, which manufactures X-ray equipment, has traditionally paid the full premium for its employees.

“Where are the 2014 rates?” asked her broker, Jeffrey Ingalls of Stratford Financial Group, an insurance consulting firm in Wayne, N.J. “We need to make this decision.” Insurance carriers are waiting until the last minute to release their premiums amid the turmoil in the industry, he said.

Companies like Glenbrook, with fewer than 50 workers, are not required to offer insurance under the law popularly known as Obamacare. But as they have in the past, many will continue to do so, to attract and retain valued employees.

Next year, however, under the law, each policy must include coverage of 10 “essential health benefits,” such as prescription drugs, mental health, and pediatric dental and vision, which means adding benefits to some plans. And the effect of the new rating scheme – which calculates each employee’s premium separately and adds them together, instead of developing an average premium for the group and multiplying it – is hard to predict.

“Small employers in New Jersey are finding that they cannot keep their policies,” said Christine Stearns, vice president of the New Jersey Business and Industry Association. Premiums for most are rising, she said, in part due to the law.

A half-day seminar on the Affordable Care Act sponsored by the association last week attracted 200 employers, she said, and they lingered long afterwards with questions. “They look really tired,” she said. “For the next year or two, there will be significant transition in the marketplace. I’m not sure where it’s going to land.”

Some companies renewed their coverage within the past few months and won’t see the full effects of the Affordable Care Act until next year.

Henry Passapera, co-owner of P&R Trading, an East Rutherford, N.J., company that buys and sells aircraft parts, said he’s optimistic.

“In the long run, (the law) will help us all,” he said. “I don’t care what they are saying right now. It will be fixed. Our websites break down every so often, and this one the government is trying to run is such a massive operation.”

His firm provides insurance to everyone in his office who needs it, he said, currently six people. “It’s renewed every year,” and just was renewed recently.

Action Graphics, a printing firm in Lincoln Park, N.J., also renewed coverage with Horizon Blue Cross Blue Shield of New Jersey for its 25 employees. They faced a 20 percent increase, said Dale Park, Action Graphics president.

“I firmly believe that if we didn’t have Obamacare, Blue Cross Blue Shield would have had some other reason,” he said, saying that he has faced double-digit annual increases for years.

Other small businesses have health coverage that is not set for renewal until well into 2014, so they don’t know yet how their policies or premiums will change.

“We renew next August, so we have not been impacted at all,” said Noemi Perez, office manager of Modera Wealth Management in Westwood, N.J. “Who knows what 2014 is going to bring us?” She said the company faced a 5 to 7 percent increase this year on the two plans it offers. Modera has a total of 31 employees, split between the office in Westwood and another in Massachusetts.

Similarly, Jim Greenbaum of Greenbaum Interiors in Paterson, N.J., with 47 employees, hasn’t seen any effects of the law yet. Insurance coverage has been expensive, he said, adding that he hopes the Affordable Care Act will help control costs.

“I think it will help us,” he said. “Every year, the cost was going up 12 to 15 percent. It really ate away at a lot of our profits.”

Like Greenbaum, Tom Gramegna, who employs 23 people at Bergen County Camera in Westwood and Gallery 270 in Englewood, N.J., said he has dealt with steadily increasing health insurance costs. “When I started in business (in 1980), my rent was twice my health care costs,” he said. “Now the health care is twice my rent.”

He pays 85 percent of his employees’ health insurance premiums, and thinks supplying the coverage is important. “So many people look at their employees as a bill they have to pay, but they’re a vital part of what makes a business succeed,” Gramegna said. “You want them to be happy and healthy.”