Lurching into the future

We all know health insurance is expensive. Now we’re learning that not having insurance is expensive, too.

That’s because, under the Affordable Care Act’s “individual mandate,” in 2016 uninsured adults will pay a penalty of $695—money to be taken from their federal tax refund. Uninsured families with children will pay $347.50 per child, or 2.5 percent of household income, whichever is greater.

A recent study by the Henry J. Kaiser Family Foundation estimates that the average household penalty in 2016 will be $969, a 47 percent increase from the average estimated penalty of $661 in 2015. Whether the penalty will be sufficient to compel people to buy insurance remains to be seen.

Individual consumers aren’t the only ones who could face penalties. Obamacare’s “employer mandate,” which went into effect on Jan. 1, decrees that any business with more than 50 full-time-equivalent employees must provide them affordable “minimal essential coverage,” according to an IRS website. That “minimal essential coverage” is equivalent to the bronze-tier plan, the least expensive of the four plans offered in the health-insurance marketplace operated by Covered California. That high-deductible plan pays 60 percent of a person’s medical bills.

If this all sounds rather onerous, that’s because it is. But the ACA won’t work if only sick people sign up for insurance; it will quickly go bankrupt. Nor will it work if employers refuse to offer coverage. So the government has given young, healthy people, who will pay more into the system than they will take from it, a disincentive to remain uninsured. And it has given businesses an incentive to offer health insurance to their employees.

The reality, however, is that most local businesses with 50 or more employees already offer their employees health insurance. Transfer Flow, which manufactures after-market fuel tanks at the Chico airport, is a good example. It was providing its employees with full coverage long before passage of Obamacare, said Mark Forwalter, its human-resources officer.

What’s new is that the company, which has more than 50 employees, now will have to begin proving to the federal government that it is providing minimal and affordable coverage, which he said was an expensive bureaucratic hassle.

He’s not alone in his complaint, as a recent survey by the International Foundation of Employee Benefit Plans confirmed.

“Employers need to devote significant time and energy to maintain compliance with the law,” explained Julie Stich, director of research at the foundation, in a news release. “The extensive amounts of data that employers are required to collect can take hours [of labor] and even require complex IT infrastructures. The process has meant a cost increase for many, especially smaller organizations.”

Actually, Transfer Flow’s insurance plan offers employees far more choices than Covered California’s plans. “We want our employees to have insurance they can actually use,” Forwalter said.

Leanne Chrisman, president of Healthy Solutions Insurance Services, a Chico-based brokerage that specializes in health insurance, estimates that of the 150 to 160 companies her firm serves, only about 25 have more than 50 employees. And most of them purchase insurance outside the Covered California marketplace.

Besides, she asked, “What good does it do if a person can’t get in to see a doctor?” In her experience, local physicians aren’t accepting new patients insured by Covered California plans because, much like Medi-Cal, they don’t pay enough to cover costs.

Katie Simmons, president and CEO of the Chico Chamber of Commerce, made a similar observation: “The word on the street is that Covered California isn’t finding enough doctors to handle the new patients,” she said.

Six years after its passage, Obamacare remains a controversial work in progress. Reorganizing the American health-insurance system is no small task.

“The ACA has good components and bad components,” Chrisman said. Among the good components, she includes, are its extension of coverage to people with pre-existing conditions, its mandate that children be able to stay on their parents’ plans until age 26, and the many millions of people who have obtained health insurance for the first time.

According to a study from the Centers for Disease Control and Prevention, the uninsured rate in the United States has dropped to 9.2 percent, the first time its been in the single digits.

“Unfortunately,” Chrisman said, “the Affordable Care Act has lost its affordability aspect.”

Its innovatively transparent insurance exchanges, such as Covered California, were meant to spur competition among insurers, thereby pushing premium prices down for the consumer or at least keeping them from becoming egregiously inflated. That’s worked to some extent in California, where statewide rates are up by only 4 percent this year.

But elsewhere they’re rising much faster. According to data compiled from 37 states and Washington, D.C., by the Washington Examiner, the number of policies with double-digit rate-increase requests nearly doubled to 231 in 2016 from 121 requests in 2015.

In Butte County, rates rose by 11 percent.

Costs are rising even faster among non-ACA insurance plans. “It’s become much more expensive to provide the same quality of insurance—especially in the last five years,” said Transfer Flow’s Forwalter.

Such increases hit smaller businesses—those with fewer than 50 employees—especially hard. Chrisman said several of her clients saw recent increases of 40 percent or more.

A special program, called Covered California for Small Business, offers a 50 percent tax credit to employers who purchase insurance through its marketplace. The credit is available for only two years, however.

Interestingly, the International Foundation of Employee Benefit Plans survey found that, while a majority of its respondents believed Obamacare had had a negative impact on their company, nearly all of them—96 percent—anticipated they would continue to offer health insurance into the future.

“Health care benefits are seen as essential for attracting future talent and retaining current high-quality employees,” said the foundation’s Stich. “Employers may change the structure of their health care plans or shift some of the cost burden to their employees, but it doesn’t appear they will stop offering health-care benefits anytime soon.”