Health Law Presents Options, Challenges For Colorado Small Businesses

Jim Noon, owner of Denver cardboard box seller Centennial Container, has offered his employees health care coverage for three decades, but he isn’t sure he will continue to offer the benefit after this year.

“I don’t know what I’m going to do, but it’s on the table to just let them all go to the exchange and get out of the health insurance business,” he said. “It’s one viable option, especially if it’s going to be as complicated as it is now.”

Late last year, Noon received an early renewal offer from his insurance company that will be good through the end of the year with an 8.6 percent premium increase. To get a policy compliant with Affordable Care Act requirements — one that covers birth control, which his current plan doesn’t — would have cost Noon 50 percent more, according to documents Noon provided from his broker.

“I hate to be paying double the rates doing it as an employer if people can go to the exchange (as individuals) and pay less and qualify for subsidies,” he said.

About half of small businesses in Colorado are seeing double-digit premium increases under the ACA while the other half are seeing the typical single-digit increases they have had for years, said Jim Sugden, small-business marketplace manager for the state exchange. He was not surprised that some companies are getting out of providing health insurance for employees.

“We anticipated there was going to be a market shift,” he said. “Businesses have to do what’s best for themselves and their employees.”

Businesses with fewer than 50 employees don’t have to buy health insurance for their workers, and can opt to drop their coverage. Companies with 50 to 99 workers must cover their workers beginning in 2016 or face fines, while businesses with 100 or more must start buying coverage next year.

Neither the exchange, Connect for Health Colorado, nor the Colorado Division of Insurance has numbers of how many small-group plan employers with 50 employees or less are dropping coverage or signing up for the first time through the exchange.

The number opting to buy coverage through the exchange is small. About 220 small employers had enrolled as of April 14, the exchange said.

In 2012, there were about 31,000 small businesses with health plans covering about 252,000 employees in the state. There were an additional 5,100 businesses with a single employee who obtained health care, according to an insurance division report. The report showed people covered under small groups dropping steadily for the past decade.

Anecdotal information from insurance brokers shows about 10 percent of small businesses dropped their health insurance as a result of ACA changes, Sugden said.

But some small employers are signing up through the exchange for the first time.

The Colorado Latino Leadership, Advocacy & Research Organization decided to start offering its three employees insurance in September, and this year used the exchange to find a plan that saved the nonprofit about $250 a month for all three employees and cut the employees’ deductibles by more than half.

“Our mission is to support the Latino community, and if we’re out in the community, it’s important for us to make sure employees have health care,” said Amanda Gonzalez, who was executive director until last week. “But there’s always a sticker shock when looking at health insurance.”

To offset some of the shock, small organizations buying insurance through the exchange can get tax credits for up to 50 percent of premiums for businesses and 35 percent for nonprofits.

Gonzalez, using a calculator on the exchange website, estimated the nonprofit will get about $1,200 in tax credits for providing health insurance.

Sugden said 6 percent to 8 percent of small businesses have obtained credits, but many business owners may not realize they may qualify.

Noon, who has been active in conservative causes and chaired the Colorado Republican Business Coalition, received a couple of thousand dollars in credits in 2012, but he says it’s so complicated that he is not sure what he will get now if he goes through the exchange.

“They keep changing the rules, so who knows what the rules will be?” he said.

Rule changes are one of the biggest complaints small businesses have about the ACA.

“In general, there’s so much uncertainty,” said Tony Gagliardi, state director of the Colorado Federation of Independent Business. “Every day when we turn on the news, there’s a change.”

The changing rules and increasing costs led Colorado Springs insulation company Scandvic Enterprises to drop health insurance for its employees after providing it for 20 years.

“We decided that we’re out of it,” said executive vice president Mike Scandrett. “It’s up to the guys to take care of it.”

Scandvic offered to subsidize health care for his employees by increasing their salaries if they went to the exchange, but so far none have taken him up on the offer.

“I would say we’re saving money because of it, but it’s not the way we wanted to do it,” he said. “We wanted to pay for their coverage.”

Dropping insurance from employer coverage also has tax ramifications. Employees who receive insurance on the exchange have to pay premiums with post-tax dollars, though they might qualify for a subsidy, while most employer plan contributions come out of pre-tax dollars. And employers pay any subsidies in the form of higher salary with taxable dollars.