A Ohio Association of Health Underwriters survey shows that the end of transitional relief plans—often referred to as grandmothered health-insurance plans—will bring significant rate increases to small businesses when they renew in 2016. Their analysis found Obamacare-compliant plans will cost employers an additional $2,434.67 per employee per year.
The survey gathered data from 625 small businesses that are OAHU members, and the findings are staggering. A whopping 563—more than 90 percent—will see an average increase in premiums of 37.9 percent. In many cases, not only will the rates be shocking, but employees will find reduced benefits. Obamacare’s mandated metal tiers for benefits eliminate many options for small businesses, including some of the most popular options that were sold in Ohio.
For employers with less than 50 employees, the health-insurance system was working—not to perfection, but definitely better than Obamacare. They had flexibility in benefit design and went through an underwriting process that protected them from catastrophic conditions. Businesses were also allowed to stand on their own by rating premiums on employee health status.
More importantly, the small-group market already had all of the key protections of Obamacare. It had guaranteed issue. It had no pre-existing conditions, with the caveat that someone had prior insurance coverage. Plans provided coverage for many of the essential benefits required under Obamacare. While it didn’t limit the maximum out-of-pocket, according to Kaiser’s employee benefits surveys many of these plans carried an average of around $3,000 per person.
Compare that to Obamacare’s maximum of $6,850 per person for 2016, and it’s easy to argue that under the law employees of small businesses have lost significantly more than they have gained. It’s also a key reason why the Obama administration rushed through a rule to allow people to keep their current plans.
The End of Transitional Relief
Transitional relief was created late in 2013 by the Obama administration for two other reasons. First, it provided a Band-Aid for the jugular-wound lie of “if you like your health care plan, you can keep it.” Second, the administration knew from insurance company filings that Obamacare-compliant insurance rates were going to be significantly higher. Thirty-four states elected to allow insurers to continue offering old policies.
Next year, grandmothered plans will be gone. They will be replaced at renewal on or before October 1, 2016. Now is the time when small businesses are budgeting for next year, and benefits professionals are working with these clients discussing strategies and sharing the impact these new benefits and rates will have on their bottom lines. With health insurance being one of the largest line items in a small-business budget, it will be hard for many of these companies to continue to offer the benefits they have today.
With huge rate increases and less benefits, small-business owners will face a tough decision. It leaves them with three options. One, they can absorb the high cost increase. Two, they can reduce benefits to bring them to their current costs, or they can reduce employee wages and try and maintain the same level of benefits. The third thing they can do is simply stop offering insurance and allow employees to purchase on their own.
Obama promised us the moon. Premium savings of $2,500 per family, if we like our plans we can keep them, and if you have coverage through your employer nothing will change except better benefits. His administration stood by these promises while delaying any negative realities over and over again. We are five years into Obamacare, and the president now tells us: “We can now say this for certain: the Affordable Care Act still stands, it is working, and it is here to stay.”
Fortunately for small business and the middle-class Americans that work hard for them, they haven’t felt how it is “working” yet. They have been saved by the bell time after time with delays. Now we are approaching the end of delays to the employer mandate and grandmothered plans.
Will the Obama administration delay the law again? Maybe, but they can only delay the inevitable for so long. Until then, I can say for certain that, while Obamacare still stands, it definitely isn’t working, and once the 80 percent of our population who receive insurance from their employers are negatively impacted it definitely won’t be here to stay.