Possible help for small business hit by rate hike

Ted Trevorrow is an ACA navigator.
Ted Trevorrow is an ACA navigator. (RHD)
Posted: May 25, 2014

For most of an hour Wednesday morning, Ted Trevorrow sat across the desk from small-business owner John F. McGeever III, asking questions about his workers and group health insurance plan.

Trevorrow, a certified Affordable Care Act navigator with Resources for Human Development, was trying to learn whether McGeever had missed something in his Small Business Health Options Program application that would qualify him for tax credits to offset group insurance costs.

McGeever was all ears.

You may recall McGeever, owner of Charles Schillinger Co., a small Bensalem metal-spinning and fabrication company his grandfather founded in 1929. Last week in this space, it was erroneously reported that, after 19 years, McGeever had ended the company's group health plan because it was too expensive.

The fact is, he could have stopped offering his employees group insurance without any repercussions. The Affordable Care Act does not require businesses with fewer than 50 full-time employees to provide health insurance. Or he could have offered to cover just his employees and not their families.

He did neither. "That wasn't an option for me," McGeever said. "I know how these guys struggle week in and week out."

This year, McGeever suffered sticker shock when he received a 37 percent increase in his group health plan. At first, he considered absorbing the premium hike. But after running the numbers, he realized the company would have to increase sales by $100,000 a month to cover the suddenly pricy group policy. It was unrealistic.

McGeever eventually settled on increasing the company's 2013 monthly contribution of $439 to each employee's health insurance plan by five percent. He did have to stop covering adult children under 26.

"I had to cap my cost somehow," said McGeever, 58. "The younger guys, say anybody under 46, they still don't pay anything. But the guys from 47 to 64, depending on their age, they are paying the difference" between the company contribution and the cost of the policies they chose.

Several factors play into the spike. Depending on whom you talk to, three to eight percent of McGeever's premium hike is traceable to the Affordable Care Act, said Mike Kapustin, senior vice president of Brown & Brown's Alpha Benefits Group in Plymouth Meeting.

The Affordable Care Act "has something to do with it, but not everything," Kapustin said.

Perhaps the biggest influence driving the staggering jump is a change in group-policy pricing. For instance, under McGeever's old plan, monthly premiums for each category of employee were set. Age and smoking status didn't affect the overall rate.

A single employee cost $439. The premium for an adult and child was $783 a month, including an employee contribution of $19.84 a week. An adult couple ran $1,010 with a weekly employee contribution of $32.98. A family with children cost $1,288 with the family kicking in $49.02 a week.

The new group plan, however, incorporates age and smoking (up to a 50 percent surcharge) into premiums. And with 23 of McGeever's 27 employees older than 47, many of them smokers, monthly rates soared.

The older guys "got whacked the hardest and they are also your best employees," McGeever said. "They come to work every day and they have the most knowledge."

So a 27-year-old single employee who cost McGeever $439 a month last year actually costs less, $311, this year. But the 59-year-old welder who was covered at the same monthly rate of $439 last year now has a monthly premium of $966.

"In 2013, it didn't matter how old you were or how many kids were in the family," McGeever said. "Now I have single guys that have to pay and some older guys who are paying up to $120 a week toward their health insurance."

The policy rating change is hitting McGeever's older employees with families even harder. Last year, the company contributed $1,076 a month to cover an entire family. This year that number has gone up to $1,129 but covers only children under 21.

McGeever helped each employee choose a plan in the group policy that best suited his or her needs. All but two chose Independence Blue Cross' group Gold HMO Premier plan. The other two took a Silver Premier plan with a higher deductible.

"They made some tough choices as to how much out of pocket" they can stand, he said. "Some of them are rolling the dice."

That most of his employees are paying more for fewer benefits and higher deductibles concerns McGeever. So he was happy, if skeptical, when Trevorrow volunteered to look into the situation. Trevorrow doesn't think McGeever will qualify for a 2014 tax credit. But the navigator plans to deliver an estimate of costs for a few Small Business Health Options Program plans to McGeever next week. "I'll look at the alternatives," McGeever said. "If it's cheaper and I can offer better benefits to my employees, I'd love to do that."

This article was done in partnership with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.



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