Corner Cases in Health Insurance Require ACA Tweaks

Scott Francis
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Most of the debate about the Affordable Care Act (ACA) has been with regard to wholesale passage or repeal of the act.  But here we are, five years later, and what we really need are tweaks to fix the problems that are manifest in any healthcare policy or reform.  In particular, to correct the assumption that small company owners are bad actors in the health insurance arena.

For example, ACA has previously defined requirements for small businesses with less than 50 employees.  Insurance has always been more expensive for such businesses, as compared to businesses over 50 employees. As a result, many small businesses tried to forego insurance or didn’t subsidize insurance very much.

New rules for the ACA attempt to classify small companies as including the 51-100 employee companies as well:

“It estimates that 64 percent of employers with 51 to 100 workers would see premium increases averaging 18 percent as result of being moved into the small market.”

“Insurers will not be allowed to reflect the group’s actual claims experience in setting premiums, to vary administrative expenses or risk charges based on group size, participation rates or industry, or make any of the other adjustments to a given group’s premium rate that are currently used in the mid-sized group market,” Oliver Wyman partner Kurt Giese testified.

This last part is what is really unfortunate.  Because high deductible plans encourage employees to be responsible with their healthcare spending even if they have the money set aside in their HSA accounts – it is THEIR money after all, and so they’re frugal with it.  As a result, healthcare costs are more reasonable. But these same employees and employers won’t benefit from that frugality because their own claims experience will have no effect on rates.

I’m generally okay with the reclassification, except for one thing.  What if you were a business that has always had insurance that qualifies under the ACA?  A business that has always paid the full insurance premium for all of its employees?  A business that has always paid the full insurance premium even for employees’ dependents?  A business that has always contributed to every employee’s HSA account to help with the high deductible? 

You would think such a business would be left alone to continue to do the right thing. BP3 is such a company. We’ve done everything right.  But we’ll be in jeopardy of this ACA rule due to having fewer than 100 employees in the USA.  Our ACA rates, for insurance coverage that we considered inferior to our current plan (higher deductible, and other changes that meant higher costs for our employees) also included a 60% increase in premiums (estimated) due to community rating. We switched our insurance to ensure grandfathering one more time, and our rates went up 2% – with equivalent coverage to our current plan.  We were able to escape the higher rates this time – but maybe not next time.

I think the baseline assumption was that small businesses like ours don’t take care of their employees – that they don’t pay for great insurance and fully cover it.  That the ACA plans would be better. But they’re not better. And there are companies like BP3 that take great care of the team.  It seems to me as long as we are providing insurance that complies with minimum requirements of ACA, we should be left alone. 

And this seems like something that our elected officials on the left and the right could agree to fix. I imagine there are lots of other corner cases that could be addressed using the same logic.