All Systems Go

Federal health care moves forward, but insurance affordability remains unknown

Back Article Aug 1, 2012 By Rich Ehisen

For business owners like Zennes Faljean, the Supreme Court’s decision to uphold President Obama’s federal health care overhaul marked far more of a beginning than a conclusion.

Zennes says his reaction to the court’s approval of the Affordable Care Act was twofold. “First was that I need to learn more about this for my own business and personal needs, but — and this might be even more important — I really need to know what to tell my clients,” he says.

Faljean has trepidation about both. The owner of Chico-based Faljean Management Group, a business consulting firm, he says the bulk of his clients are “micro-businesses, sole proprietors and mom-and-pops” that rarely are in a financial position to afford health insurance. It is a position he knows all too well: Faljean also forgoes health coverage for himself and his family. His wife, Tina, has faced serious health issues, including breast cancer, which make her all but impossible to insure — and certainly not for a premium he can afford to pay. Although hopeful the law will rectify his own situation, he remains wary.

“There is a strong perception among many business owners that any time we are forced to do something it means it is going to cost more,” he says. “But I’m withholding a final opinion until I learn a lot more about all of this.”

Ken Endelman is more confident of the law’s benefit. He is the owner and CEO of Sacramento-based Balanced Body Inc., which manufactures and sells Pilates equipment around the globe. He supports the law and believes it will level the playing field for companies like his that face stiff competition from overseas manufacturers with much lower labor costs.

“Not having to pay for their workers’ health coverage is a huge savings,” he says. “American companies are really at a disadvantage around the world.”

Endelman, whose company spends hundreds of thousands of dollars a year on health insurance for his 100-plus employees, says that, while he is not planning any major changes in his company’s current plan, he will definitely investigate all of his future options.

“We need to wait for the dust to settle a bit,” he says. “But then we’re going to be learning as much about the law and how it impacts us as we can.”

That dust won’t be settled for a while. Much of the law is yet to take effect, coming in stages through 2018. This includes the creation of state health care exchanges, a one-stop insurance shopping site where consumers and businesses can compare health plans for price and quality. California got a fast start building its exchange after the ACA went into effect in March 2010. When up and running, the exchange would allow individuals and companies to have significant group buying power that proponents claim would drive the cost of insurance down for everyone.

But getting there remains a work in progress. California Health and Human Services Agency Secretary Diana Dooley says the state “is now in full-go mode” and will meet the mandatory Jan. 1, 2014 deadline to have the exchange up and running. But Dooley, also a member of the California Health Exchange Board, the agency tasked with creating and running the exchange, admits, “There are still big steps ahead of us.”

Those steps include creating the final rules by which an estimated 2 million uninsured Californians would obtain affordable health insurance through that exchange. This would entail, in part, enforcing the “essential benefits” each insurer must offer. The ACA has established minimum standards for this but left it up to states to decide if they want their own requirements to be more stringent. California’s health insurers are worried lawmakers might do just that, though Exchange Board Executive Director Peter Lee has said such additions would not be eligible for federal subsidies, making the chance remote.

Of bigger concern to most employers is the law’s carrot-and-stick approach to their role in how people will obtain coverage. The carrot to date has been tax credits, in effect since 2010, which allow some small-business owners to receive up to a 35 percent credit of their health insurance costs. Come 2014, however, the stick comes into play: Companies that have 50 or more employees and either don’t offer insurance or offer unaffordable or substandard coverage could face penalties of up to $3,000 per worker.

To Micah Weinberg, a senior policy advisor at the Bay Area Council, a business advocacy group, the positives far outweigh the negatives for California business owners.

“Business needs certainty,” he says. “I believe most business people are relieved to at least know what is required of them. Politics aside, the real world does move on at some point.”

He says much of the fear over how the law would negatively impact employers ignores the positive benefits. For instance, in addition to the benefits of tax credits, there is no mandatory insurance requirement on employers with fewer than 50 employers, which means no penalties. And companies that are happy with their current plans can keep them as long as they don’t make any major changes. The law also requires insurers to provide no-cost preventive care services, and small employers could earn wellness grants to encourage their workers to improve their health. That alone could pay major dividends in a country where the Centers for Disease Control and Prevention says the average employer loses $1,685 per employee in productivity each year, more than $225 billion annually.

But Weinberg acknowledges the law is still fuzzy on perhaps the most critical element of the entire debate: affordability.

“It’s not at all clear yet how all of this makes health care more affordable,” he says. “It is an enormous challenge.”

What is clear and equally challenging is that more than two years after its inception, many employers still don’t know much about the law or seem inclined to seek out its benefits. According to the Government Accountability Office, for example, only 170,000 companies took advantage of the tax credits in 2010, a fraction of the number thought to be eligible. According to research by Small Business Majority conducted in June, 51 percent of California small businesses did not know they were eligible for those credits.

Dooley from the California Health Exchange Board says the agency knows it needs to do a better job making sure employers are aware of the benefits available to them, and it’s planning a major media outreach campaign early next year to educate both employers and the general public.

In the meantime, Faljean says he will be learning as much about the law as he can.

“I have a lot of questions about all this,” he says. “The biggest is still cost. It really doesn’t matter what is offered — if I can’t afford the cost, it won’t matter much to me at all. But for now, I’m going to learn as much as I can, and if the new system will help me or my clients, I’ll certainly take advantage of it.”

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