Roper Insurance in the Wall street Journal June 6, 2013

The Wall Street Journal

How the New Health Law Could Raise Costs for Young, Healthy Employees

The younger and healthier a small business’s workforce, the greater its chances of facing a big spike in health-insurance premiums next year.

That is because the Affordable Care Act’s impact on small employers will split largely on generational and industry lines, putting entrepreneurs like Eileen Hasson, owner of a technology-services firm with mostly male employees in their 20s and 30s, at a disadvantage.


Brady Stanton

Academic Impressions owner Amit Mrig says he’ll take the hit on insurance premiums because his business is personnel driven.

Starting in January, insurers will no longer be able to set premiums for small-group plans—which apply to employers with fewer than 50 or 100 employees, depending on the state—based on a firm’s industry or the health or gender of its staff. Insurers will still be able to take into account the age of a firm’s workers, though to a lesser extent, and whether or not those people use tobacco.

The result: the cost of health care will be more evenly spread among small businesses, as employers with mostly young and healthy workers pick up the costs of firms that comprise the opposite. The rebalancing will drive up premiums for some companies in industries with lots of young, healthy workers, such as technology, while moderating rate increases for firms with older and sicker workers, and in higher-risk industries such as industrial manufacturing.

“If you are a small business with young and healthy workers, you’ll pay more,” says Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, a nonprofit in Washington, D.C.

To be sure, premiums are expected to rise under the law next year for most small-group plans because of new fees, taxes and a requirement that 10 essential areas be covered, says Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group. These include maternity care, substance abuse and mental-health services and prescription-drug coverage, which aren’t standard for all such policies today, he adds. Normal rises in the costs of medical services drive up premiums, too.

It is still unclear as to what exactly premiums will look like in 2014 for many businesses. But brokers say small businesses with similar demographics can anticipate being affected by the law more than others, depending on the current rules that insurers must follow in their respective states.

For example, Ms. Hasson’s 23-person firm, the Computer Company Inc., is in Connecticut, a state where insurers today can set premiums for small-group plans according to factors that won’t be allowed next year under the law, such as employee gender. The firm’s broker, John Kaufman, estimates that next year its premiums could rise 25% to 45%, up from 13% to 17% in recent years, due to the changes.

“My clients with younger age groups will suffer the consequences of health-care reform’s rate compression,” he says.

While Ms. Hasson won’t be required to keep providing health insurance next year—the law’s employer mandate only applies to businesses with 50 or more full-time equivalent employees starting in 2014—she says cutting the benefit isn’t an option. “We have to offer it to be competitive in our industry,” she says. “I haven’t really come up with a solution.”


Companies with fifty or more full-time employees will soon have choices to make to comply with the Affordable Care Act. WSJ’s Jason Bellini breaks down the options.

Ms. Hasson, who started the Computer Company in 1996, pays 75% of premiums for employees and 25% for dependents. Her team, including 29-year-old Art Desrosiers, could therefore also feel the effects of the law next year.

Paying for health insurance, even if it costs more next year, “would bother me but it would still be worth it,” says Mr. Desrosiers, a data-center administrator, whose premiums currently total about $113 a month. “You don’t know what’s going to happen to you.”

By comparison, Winsted, Conn.-based HDB Inc., a manufacturer of metal hinges that does business as Homer D. Bronson Co., is among those whose premiums could rise by a lower percentage next year. Owner John Zoldy says his broker estimates that the 16-employee firm, with an average age in the early 50s, could be charged a rate increase as low as 10%, down from last year’s 18% increase.

“It’s better but it’s still too high based on inflation,” he says. Mr. Zoldy contributes 70% toward premiums for single and family plans. “If you don’t offer [health insurance], people may not want to work for you,” he adds.

Denver-based broker Steve Roper says his small-business clients are considering various options for absorbing premium increases next year. For example, some are looking at cutting back on the percentage they contribute toward employees’ costs or no longer covering dependents. Others, mainly firms with fewer than 50 employees, are thinking of dropping their plans and directing workers to the state insurance exchanges.

Mr. Roper notes that his clients’ greatest concern is over how such moves might affect their ability to hire and retain employees. “They want to keep their staff and keep them motivated,” he says.

One such client is Amit Mrig, owner of Academic Impressions, an educational-services provider to colleges and universities in Denver. Mr. Roper estimates that the firm’s premiums could rise by as much as 40% next year, up from just 10% in past years, due to its mostly young and healthy workforce of 25 people.

“It’s going to take money out of my pocket,” says Mr. Mrig, because he’s afraid that he could lose employees if he were to cut back benefits, hiring or pay raises to cope. “We’re a totally personnel-driven organization.”

Daniel Fusch, one of Mr. Mrig’s employees, says that health benefits play a “significant” role in where he chooses to work. The 32-year-old director of publications and research is on a family plan and has a daughter who is disabled. “That’s mainly where the package is especially important,” he says. “Her medications are pretty expensive.”

Mr. Fusch has been with Academic Impressions for seven years and describes its health benefits as “far superior” to what past employers have provided him. If the company were to drop its coverage, he says he might have to consider changing jobs. Health-insurance “is one of the two or three key factors for me,” he says. “It’s a big deal.”

—Christopher Weaver contributed to this article.Write to Sarah E. Needleman at [email protected]

A version of this article appeared June 6, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Young, Healthy Employees? You Will Pay More.