Small Businesses are about to get hit by a freight train

Small businesses in Texas are sitting on a train track and most of them don't realize it. Off in the distance is a massive freight train known as "The Affordable Care Act" and it is bearing down fast.

January 1st, 2014 is bring major price increases for small businesses. It's no longer speculative. I'm looking at the numbers right now. Carriers are even offering small companies the option to renew on December 1st to lock in their rates for a year in an effort to avoid the 1-1 price hikes.

I'm looking at a 30 company sample of companies between 2-50 employees. In the sample, 3 groups are seeing a rate reduction come January 1. Two are significant, 25-35% reductions. The third is 1-9% reduction.

Every other group in the sample is a massive increase, ranging from 16% all the way to 69%. (Each group gets a 10 point range)

Companies that are sick, old or in a bad industry will benefit from the new pricing structure, but any small business that is relatively healthy, relatively young and in what was a previously favorable industry is going to get blasted.

Example: Auto Repair shops can expect increases of over 50%. Oil traders (white collar) can expect increased of over 30%.

The new pricing structure created by the ACA is going to be a disaster for small business, but unfortunately most of the employees who will lose coverage when small business drop these plans won't qualify for subsidies as they make too much money. (400% of poverty level)

Edit: Please note these are SMALL businesses. Unfortunately that is hard to define right now since Rick Perry and the Texas legislature have failed to act on the provision of PPACA that allows the states to define small group until 2016. Right now small group is 2-50, but it could potentially expand to 2-100 if Perry and the state decide that.

 

It is real companies so I can't post the list that has names, but I have no problem redacting the company names and posting.

Edit: Let me make sure it isn't protected somehow, but I can't imagine it is. If not, I will post it tomorrow.

 

Plead the 5th.

 

The main thing is that small business are no longer allowed to be rated on things like health history, utilization, gender or industry. There is also no more composite rating for small groups (so no more Employee Only Rate, Employee Spouse, etc.) as it is full community rating.

It's complicated to explain small group rate structures, but basically you have a manual rate and then it can be increased or decreased based on various factors. Currently it was industry, group size, medical history, age, gender, zip code, etc. In our current system, 3 out of 4 groups paid less than the manual rate due to beneficial factors and 1 out of 4 paid more than the manual rate.

Under the new system, that 1 group will see a rate reduction (potentially significant) while the other 3 will see a rate increase. This is due to cost being shifted to community rating vs real underwriting.

On a side note on that, underwriters are basically out of job beginning January 1st as PPACA makes it "discrimination" to charge someone more for using the plan. (PS, can't wait for the lobbyist that will fight to get my homeowners and auto insurance reduced because it is discrimination to charge me for a claim!)

As for the rule on 80% being used on claims, the carriers were already basically there. National average was less than 1% on the MLR rebates that got forced in. I suspect that the authors of the law expected that number to be significantly higher, believing the industry was truly jacking up rates on people unfairly.

 

They are 10 point ranges.

Other things that are jacking up prices:

Copays now count toward your out of pocket. This is significant as usually the copays were separate. Example: You might meet your deductible on a 100% plan, but if you went to a doctor or got a prescription it would still cost you $15 or whatever your copay was. No longer. Copays add to the out of pocket, so if you max out you no longer pay the copay for emergency room, Rx, specialists, or office visits.

Dental care mandatory for minors. All plans must now cover dental for minors. This is a big change as the way it works now you get to buy your dental separately if you want it.

The age 26 thing is not a big deal, was already the law in Texas.

Total revamp of CPT codes. In their wisdom, the government has mandated the long used CPT code system that all insurance companies and doctors are familiar with be done away with. They have to switch to a new program of codes that is significantly more complicated with something like 10x the number of codes.

There are a lot of little changes that people just don't know about.

 

Yep, it all has to count to the same out of pocket number which is also lowered and fixed by the law.

Side note here, the law originally capped deductibles at $2000, but it was discovered that it was impossible to build a bronze level plan that the HHS required that had a deductible of $2000 and still met all the other benefit requirements AND the percent of income requirement. HHS hasn't given guidance yet on what the new deductible limit will be.

Changed a few years back in Texas after a lawsuit from a UT student I believe, but many employers don't know about that and continue to enforce the full time student rule. (Note that self funded plans can have their own rules so they could have avoided this)