Small Talk: Small businesses temporarily sidestep health law
Many small businesses have found a way to temporarily sidestep some of the headaches brought on by the new health care law.
One of them is Huber Capital Management. The asset management firm is renewing its health insurance policy early, in 2013 instead of 2014. By renewing its policy this year, the company doesn’t have to buy insurance that conforms to the requirements of the new health care law. And it won’t have the surge in premium rates expected under the Affordable Care Act.
"We can just push this whole thing off and defer it for essentially one year," says Gary Thomas, chief operating officer of El Segundo, Calif.-based Huber Capital, which has nine employees covered by insurance.
The Obama administration says it won’t force employers with at least 50 workers to comply with the ACA until 2015, but the law will still affect businesses. The administration has delayed only the paperwork requirements for those companies. But any company that offers health insurance, including very small businesses, will still have to contend with the rest of the law starting Jan. 1. And that includes new insurance policies with government-mandated types of coverage.
Many insurance companies are raising their premiums sharply because they don’t know yet how many people will be covered by insurance. It’s expected that many young people who are healthy won’t want to pay for insurance, or sign up for it. Authors of the ACA are counting on a larger pool of insured people to bring down overall insurance costs, but if people forgo coverage, that may not happen.
Thomas got the idea to renew early from Huber Capital’s health insurance broker, who said the firm would likely have an 8 percent increase in premiums if it did renew in 2013, compared to an estimated 30 percent under a policy that complies with the ACA. The idea is also appealing to many companies because they can put off dealing with the law’s complex requirements. For example, companies with 50 or more workers must do calculations to determine whether they’re providing adequate insurance coverage. If they have employees who work less than 40 hours, owners need to determine whether those workers must be covered. By renewing in 2013, owners will get more time to educate themselves about the law.
"Some of the things that might be guesswork or estimates will be more of a known quantity than they are today," Thomas says.
Quantum Networks, an online seller of high-tech items, is also renewing on Dec. 1. Its broker says its premiums may be unchanged from this year under a renewed policy.
"We want to drag this on as long as possible," says Bita Goldman, vice president for operations. "For a small company like ours, every little bit helps."
Quantum Networks, based in New York, has 24 staffers. Health insurance accounts for about 15 percent of its expenses. CEO Ari Zoldan wants extra time to understand the impact of the law on his company.
"With the health ecosystem as complicated as it is, even the brightest of the brightest don’t understand this," he says. "Over the next year, we’re going to educate ourselves, we’re going to shop around, we’re going to speak to other business owners and ask, ‘what are you guys going to do?’"
Anthony Lopez, a small business specialist at online broker eHealthInsurance, says half the clients he’s spoken with are renewing early. He expects more after Oct. 1, when rates for 2014 are published.
But Lopez warns that insurance companies have different expiration dates for the option to renew their policies this year. While some allow small businesses to decide as late as December, others have earlier cutoff dates. But businesses that miss the deadline might still get insurance at 2013 rates if they switch to another carrier.
Higher Logic, a social media and mobile software company based in Arlington, Va., faced the specter of increasing insurance costs although it doesn’t have 50 workers yet. The company is growing rapidly, having hired 15 people this year. And its 45 staffers are scattered across 15 states, which makes buying health insurance complicated because states have different rules. President Andy Steggles has moved up the renewal date for the company’s insurance from Feb. 1.
"If we lock in now, we’ll know we have a 14 percent increase. If we hold off a renewal till Feb. 1, who knows what it’s going to be?" Steggles says. His broker said she can’t estimate the increase in his premiums under the ACA, but she gave him a range of 20 percent to 40 percent.
PURR-fect Solution’s insurance policy doesn’t expire until next May, but general manager Chett Boxley is renewing five months early, in December, because the premiums will stay the same. He hopes to set aside money to pay for future rate hikes for the four employees of his Salt Lake City-based company, which manufactures cat litter.
Boxley faced a 20 percent to 25 percent rate increase under the ACA.
"When I heard ‘no increase,’ I was pretty stoked to hear that. It was a no-brainer — we said OK."