Small businesses struggle with health costs

bmilazzo@centredaily.comFebruary 9, 2014 

Work22

Jeremy Frank and his son, Eli, pull into the bicycle parking area of KCF Technologies. Frank and his son usually bike to work together before Frank drops his son off at day care. KCF Technologies has a commitment to employee wellness.

NABIL K. MARK — CDT file photo Buy Photo

Many Centre County small businesses weren’t surprised to see their health insurance costs change when the Affordable Care Act went into effect in October.

U.S. health care spending is expected to reach $4.8 trillion in 2021, up from $2.6 trillion in 2010 and $75 billion in 1970, according to an Aetna Health Insurance report.

The Aetna report said that means health care spending will account for nearly 20 percent of the gross domestic product, or one-fifth of the economy, by 2021.

The Affordable Care Act was signed March 23, 2010, as a way to get people into affordable group insurance plans. Eligible residents and businesses were able to begin enrolling in a number of plans under the act in the fall.

“Many consumers and small employers are struggling to afford their health insurance premiums. Some employers are not able to offer health care coverage at all,” the Aetna report stated. “For firms with fewer than 10 employees, only 50 percent offered coverage to their workers in 2012.”

Some Centre County employers said insurance costs skyrocketed this year, after they were told to expect about a 20 percent boost in costs with the ACA.

Bill Klaban, owner of Klaban’s Home Furnishings in Benner Township, has nine full-time employees.

Classified as a small business — a privately owned company with fewer than 100 full-time equivalent employees — Klaban said this year he had to change his health care provider so he could afford to continue offering his employees health insurance — something he believes is a must.

An FTE under the ACA is defined as a person who works an average of 30 hours per week, or at least 130 hours per month.

Shoveling out about $60,000 a year for health care, Klaban said it got to a point where he needed to make the change.

“We did change insurance carriers and everything,” Klaban said. “Prices have gone up, and coverage is changing for everyone. It got to the point that it was too much, so we had to weigh our options and get rid of policies.”

One policy was the family health care plan that costs about $24,000 annually.

“That’s about what one person can make in a year,” Klaban said.

With an insurance health care plan that Klaban said is still “pretty good,” his employees are not happy that they have to pay more for higher-deductible plans.

“I’m not sure anyone likes that, but everyone understands that is the way of health care lately,” Klaban said. “But it’s something that I think we’ll always offer. Health care is a necessity. It’s just now having to get used to changing times.”

Regularly speaking with a health care representative, Klaban said he is told that the plans under the ACA are still being altered.

“It seems like no one really knows what’s going on. It seems like it’s all a trial-and-error process,” Klaban said. “We talk to our insurance guys who tell us to ‘watch out,’ and that prices will soar by next year. So now we’re just waiting.”

Future still uncertain

While costs are on the rise since the inception of the ACA, the future of the act is still being determined, leaving business owners with a question mark, said a local health care expert.

“Circumstances are changing,” said Walt Whitmer, an associate with Penn State Extension — a branch of Penn State that provides outreach and educational programs and opportunities to communities around the commonwealth.

One way insurers are adjusting is by offering multiple plans that give employers and their employees more options.

Amy Bowen, public relation specialist for Geisinger Health Plan, said being flexible and offering numerous plans for businesses and individuals is the company’s key to keeping and recruiting new clients.

“One thing to understand is this is not unusual,” Bowen said about losing customers. “In the small business market, there is a lot of gain and loss year after year.”

She said, statistically, Geisinger Health Plan has recruited more clients since the ACA took effect in the region that covers the State College area.

Geisinger has a group of workers who specialize in health care that informs and educates businesses and individuals on the new system, Bowen said. In May, Geisinger Health Plan launched an educational campaign on the ACA and what it meant for everyone.

“What we’re seeing is that there has already been a lot of change with the ACA and making our plans flexible to work with those changes,” Bowen said. “The key through 2014 is we need to be flexible, because we’re working with what the government is doing.”

Small businesses employ 3.2 million workers in Pennsylvania, and 48 percent of small business owners report that they can afford to offer health insurance, according to statistics from Penn State Extension.

Small businesses with fewer than 25 employees and average wages of less than $50,000 qualify for tax credits to help with the cost of coverage for workers. Federal tax credits cover up to 50 percent of the cost of coverage, Whitmer said.

Online enrollment for SHOP — Small Business Health Options Program — will be available though the government heath care website in November for benefit coverage starting next year.

SHOP is a government-run health insurance marketplace where employers can purchase employee health insurance.

The Obama administration originally announced in November that it would delay the online small business insurance marketplace by a year due technical issues with the website.

Whitmer said it should have been available by the first of the year if a business applied by Dec. 15 of last year.

SHOP-eligible businesses must have 50 or fewer full-time equivalent employees and at least one employee on payroll in addition to a proprietor and spouse.

Whitmer said sole proprietors are considered individuals thus not eligible for small business ACA coverage.

By 2016, SHOP eligibility will increase to 100 employees, Whitmer said. Whitmer added that it is a service that would be available throughout the year.

If a small business qualifies for SHOP, Whitmer added that the employer must offer coverage to all full-time employees.

Budgeting for increases

For KCF Technologies in State College, it is undergoing similar price increases by paying more than $100,000 annually to insure its 25 full-time staff.

KCF Technologies is a local company that develops tech products for challenging applications for government-funded projects and further deploying it into a large-scale industrial applications.

President Jeremy Frank said that, by July, when the company’s fiscal year begins, he expects the company’s health care costs to increase by about 20 percent. But the increase is the least of his concerns.

“We want to provide the best health care possible,” Frank said. “Our employees come first and their wellness comes first. We’re already committed to spending a lot on caring for our employees.”

KCF covers 100 percent of employee expenses so there are no employee contributions.

“It has gone up some, but we’re on hold with rate plans,” Frank said. “We meet often and work with an outside company who helps guide us with the plans that we’re on and while we shop for health care. We have regular dialogue with these people.”

Frank said while the government works out “the kinks” of the ACA, his business is ready for those changes.

“I think it’s going to be rocky for a little while, but we’re prepared for a bumpy transition,” Frank said. “We’ve been told to expect increases by July. Part of my experience with health care is that it has a larger net benefit for our employees, because in total we should help restrain health care costs. We do business all over the world and what we spend on health care is far higher.”

At this point, Frank said, there is no amount the company will not pay to provide full health care coverage for its employees, even as the company continues to grow.

“We have doubled our growth five times in the last eight years, but it’s a commitment to have outstanding health care,” Frank said. “It’s not a big portion of our total expenses, but its appreciated by our employees. We just look at it as another bill to pay.”

Whitmer said his biggest tip is for businesses to research what the plans have to offer.

“As an employer, explore all of your options long before you commit yourself to anything,” Whitmer said. “It’s hard. It takes some work. It’s a little bit complicated. But there’s a lot of options to figuring out what the best opportunities are for you and your business and your employees.”

Starting this year, small businesses under the ACA will only be able to offer one plan to all employees. In 2015 that changes so businesses can offer a variety of plans, Whitmer said.

For all other individuals eligible for ACA, open enrollment began on Oct. 1 and runs through the end of March and links individuals with coverage options.

Britney Milazzo can be reached at 231-4648. Follow her on Twitter @ M11azzo.

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