Health insurance costs for small business owners have been rising for more than a decade, and some are concerned the health care law will drive their premiums higher at an even faster clip.
Many appear to be coping by passing some of the costs along to their employees.
A new study shows that the number of firms offering health care plans has held fairly steady in the past few years, but as prices have continued to climb, employers, particularly those at small businesses, are asking workers to pay much more for their care.
The research was conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, and for the first time since the group started taking readings in 1999, a majority of workers covered by a small employer (58 percent) now pay deductibles of more than $1,000, up from just 21 percent in 2007.
“The trend continues, especially in smaller firms,” Drew Altman, Kaiser’s chief executive, said during a press call about the study, calling the uptick “part of a quiet revolution in health insurance from more comprehensive to less comprehensive with higher deductibles.”
That revolution has left small business employees paying considerably more for their coverage than their counterparts at large companies. The average deductible for workers at small firms (those with more than two employees but less than 200) was $1,715, nearly double the $884 deductible paid by workers at large businesses.
In addition, the average annual premium paid by small business employees has steadily increased from $5,700 for family coverage in 1999 to $15,600 in 2013, according to Kaiser. Now, some say the health care law is driving those rates higher at an even faster pace.
Reliable Contracting Co., for example, which provides paving and utility services out of Gambrills, Md., has seen its premiums jump between 10 and 15 percent each of the past three years — too much for the company to bear on its own, according to the firm’s treasurer, Patricia Baldwin.
“We have absorbed some the costs and we have shared some of it with our employees,” Baldwin said, later specifying that annual deductibles for many employees have surged from about $1,200 three years ago to between $4,000 and $5000 in 2013.
Meanwhile, her company’s insurance provider, Carefirst, has told her to expect an even sharper increase this year.
In York, Pa., Fred Callahan’s small business is facing the same challenges.
He was looking at paying about 30 percent more this year to maintain the same plan his small business had in 2012. He says his insurance carrier informed him that “they’re protecting themselves by increasing rates now in anticipation of certain requirements that they’ll have to meet under Obamacare.”
In order to protect his bottom line, Callahan says he could not afford another steep jump in his rates, which had already spiked in the previous two years. His company, Colony Papers, which provides packaging products, switched to a less expensive plan earlier this year, which came with a significantly higher employee deductible.
“Obviously, it’s not been popular with our employees, but we’re trying to maintain as much coverage as we can afford,” he said in an interview, adding that his healthcare plan has traditionally been useful in hiring a holding onto talented workers.
Critics of the health care law say costs are rising for employers largely because costs are rising for insurers, who face new coverage requirements, limits on certain premiums, as well as a new tax on insurers — all of which they expect to be passed along, at least in part, to small firms in the form of higher premiums.
“We keep hearing that from small businesses, that they’re premiums keep going up, keep going up, and now this thing’s coming along, and they’re going to go up even more,” House Small Business Committee Chairman Sam Graves (R-Mo.) said earlier this summer in an interview.
The Obama administration and other backers of the legislation have pushed back against those concerns, arguing that new tax breaks for small firms and increased competition among insurers on new health insurance exchanges should halt the rate hikes on Main Street.
“Small employers in every state will be able to shop for health coverage on a competitive marketplace,” Ari Matusiak, the administration’s head of private sector engagement, recently wrote on the White House blog. “That brings unprecedented transparency to the market and gives small businesses the same purchasing clout as big businesses.”
It may take some time, but that should eventually help “increase access to affordable coverage options” for small businesses, Matusiak said.
But for now, costs are still rising, according to the Kaiser data, and Callahan says his company isn’t banking on that changing anytime soon. If the trend continues, he may be forced to again rethink the level of coverage he offers his employees.
“It’s that sense of uncertainty that is really the biggest negative right now,” he said. “It’s hard to tell what we may be confronted with in the future and whether we’ll have to keep changing or modifying our plan.”