The NY Times reports on one of the many obvious yet "unexpected" consequences of ObamaCare - small employers are realizing that it makes no sense to offer employee health coverage:
Dropping Health Plans, to Pick Better Coverage
By STACY COWLEY
For nearly 20 years, Keith Perkins offered health insurance to employees of his small electrical contracting company in Greencastle, Pa., and footed most of the bill. This year, with the arrival of the Affordable Care Act’s insurance marketplace, he decided to stop.
Mr. Perkins, who is 54, did the math and calculated that most of his employees, who are spread across Maryland, West Virginia and Pennsylvania, would come out ahead if he dropped his group policy and let them buy insurance individually through the new federal and state exchanges.
He knew the move would be unpopular with some employees, but he was tired of trying to choose one plan every year to cover all of their diverse needs.
“Some of my guys are on the lower end of the wage scale,” said Mr. Perkins, who typically has 10 to 18 employees. “When I did the subsidy calculator, I realized many of them would actually be better off if we didn’t offer coverage. We took the amount of money we were paying for health insurance and dumped it into their paychecks instead. And this way, they get to make the choice, not me.”
No kidding. Employer-sponsored health insurance was a consequence of government regulation (WWII wage controls overlooked fringe benefits such as insurance) and has remained alive due to its tax advantage (employees get coverage with pre-tax dollars). Changing the regulations and financial incentives changes behavior - who knew?
The Times gets in the trenches with some live anecdotes:
Kelly Fristoe, an insurance broker in Wichita Falls, Tex., estimates that the employees at nearly half of his small-group clients would be better off if the companies dropped their coverage, gave some of the savings directly to the workers and let them shop for their own insurance. Four clients have already decided to do that for 2014.
Steve Hooper, president of the Health Economics Group, a Rochester, N.Y., company that manages corporate benefit plans, said many of the workers in his region, including most of his own employees, have incomes low enough to qualify for the federal subsidies available to those who earn up to four times the federal poverty level, about $46,000 annually.
“We have a lot of part-time people and single moms with kids,” Mr. Hooper said. “The New York exchange offers some tremendous options for them that are better than anything else out there.”
A self-described data fanatic, Mr. Hooper, 74, spent months studying the law’s nuances and exploring various situations for his 25-person business. He knew what he paid his employees, but he did not know their overall household incomes. So he created a staff survey and arranged meetings with his employees to discuss their individual situations.
It became clear that many, especially those with children, would be better off without the option of buying company-sponsored insurance. Employees who have access to an “affordable” employer plan can buy a plan instead through the exchanges if they choose, but they cannot collect any subsidy that they would otherwise be eligible for. And those with children face an extra pitfall: The law’s calculation of “affordable” does not take into account the cost of adding dependents to the employer’s plan.
In 2013, to insure 11 workers, Mr. Hooper’s company contributed $283 a month for each employee toward health care premiums, covering more than 80 percent of the cost for an individual. Employees paid an additional $55 a month, or more if they needed coverage for dependents. For 2014, Mr. Hooper is taking the $30,000 to $40,000 he will save by canceling the group’s plan and using it to fund flexible spending accounts for each employee.
So far, he said, only one person is facing higher premiums, and he plans to add extra money to her flexible spending account to fill the gap. And while his company’s old plan carried a $2,500 annual deductible, he said the typical deductibles on his employees’ new plans range from zero, for those who qualify for Medicaid, to $2,000.
Unsurprisingly, the numbers don't work if the employees are highly paid:
Paul Hamborg isn’t sure. Mr. Hamborg is trying to decide whether his company, Enrollment Research, a consulting firm based in San Antonio, should renew its group insurance in 2014. None of the company’s five employees would qualify for subsidies individually, and he is weighing the advantages of switching to individual coverage — more choice for his employees, less administrative overhead for him — against the increased tax bills for them. That issue, said Mr. Hamborg, who is 40, “is the one thing about the Affordable Care Act that’s a real disappointment, from my standpoint.”