Entrepreneurs #PublicHealth
Robb Mandelbaum, CONTRIBUTOR
Feb 24, 2017 12:00 PM 2,839
Since the Affordable Care Act became law in 2010, health [+]
Can we all agree on one thing, that the Affordable Care Act is forcing small business owners to pay ever-higher costs for their employees’ health insurance? Right? Can’t we?
Certainly, Obamacare’s most ardent opponents have no trouble deploying a business owner devastated by premiums increases, usually described as “
skyrocketing,” for an appearance in a
news story or at a
Congressional hearing. But even among people who are not dogmatically hostile to the health reform law, there is a widespread sense that it has made insurance plans for small businesses more expensive. The
main argument is that the law’s requirements to cover certain “
essential health benefits,” including some
preventive care, as well as others to insure people with
pre-existing conditions and
abolish yearly or lifetime caps on benefits, are forcing many employers to buy insurance plans that are too generous for their employees, and therefore costlier.
Except that it doesn’t seem to be true. Health insurance premiums have been rising for decades, almost (though not quite) as stubbornly reliable as an eastern sunrise. And it turns out that these increases actually slowed after the Affordable Care Act became law in 2010. That’s according to
data collected by the U.S. Department of Health and Human Services, which tracks a range of topics around spending on health care in its
Medical Expenditure Panel Survey. The survey tracks the
health insurance offered by private firms big and small, and in all cases, the average rate of premium growth from the time the law passed in 2010 through 2015 was actually lower than from 2004 to 2010. And premium growth was lowest for firms with fewer than 50 employees.
A
similar study, prepared every year by the
Kaiser Family Foundation, shows a similar trajectory for premiums, and it continues into 2016. “Everything’s been slower because we had the recession and health care costs just haven’t been going up that much,” says
Gary Claxton, who directs the Kaiser Family Foundation’s Health Care Marketplace Project. “That’s still true, though it’s wearing off a bit now.”
This stands in sharp contrast to the individual insurance market, where the requirements imposed by Obamacare are similar. There, premiums have gone up significantly in the last year, because it appears that initially, insurers misjudged the population who would buy individual insurance, says
Sabrina Corlette, a professor who researches health insurance at Georgetown University. “In the individual market there is evidence emerging there was serious under-pricing in the first few years,” she says. The correction that began last year continued with steep premium hikes for 2017. According to the
National Federation of Independent Business (which opposes Obamacare). 41 percent of business owners buy their own insurance rather than get coverage through a group policy they buy for their employees.
Meanwhile, back in the small group market, depending on the type of insurance plan, small firms have managed to hold steady, or even lower, employees’ contributions toward premiums. And among the smallest firms — those with fewer than ten workers — a majority of employees still pay no premium at all. In fact, the share of employees paying no premium at all for individual coverage has held steady at about 60 percent since 2009. (Incidentally, a secondary argument that the law increases compliance costs for even the smallest business owners is
plainly not true. Businesses with fewer than 50 employees have almost no obligations under the law.)
Early on, Obama administration officials liked to suggest that reforms in the Affordable Care Act were responsible for the slower premium growth — average premiums for family coverage actually fell for larger small firms in 2013 — but Claxton says there is no evidence of that. But all this raises an interesting question: why haven’t all those rules in the Affordable Care Act raised premiums for the average small business? Why aren’t these rich plans full of gratuitous benefits digging deeper into owners’ pockets?
There are a couple reasons. First, all those mandated benefits are actually pretty standard for small business insurance plans. “The Affordable Care Act’s essential health benefits are modeled after the most popular small group plans,” says Claxton.
And he said that the law allows for cheaper plans where employers can push more out-of-pocket costs to employees. “A wide range of cost-sharing practices were allowed — there’s a lot of difference between
bronze and platinum plans,” he says. In general, deductibles are rising faster than premiums, though that was true in the years before the Affordable Care Act became law, too.
Overall, says Claxton, “changes to the group market were just not very big. Even the rating rules” — requirements that coverage be priced based not on a person’s health status but on age, gender, a couple other factors — “just moved groups around the average. Going from health status ratings to community ratings — some groups go up and some groups go down, but the average cost of heath insurance doesn’t change.”
But there’s something else: despite all the handwringing, many small business groups, perhaps most of them, have managed to cover their employees and still avoid most of those onerous benefit and coverage regulations.
