With aspects of the Affordable Care Act already taking effect or taking place in the next years, some small business owners, such as Linda Kelly and Ellen Mann, say they are concerned because of a lack of answers and a few aspects of the act not appearing small business friendly.
The two women own the Charleston business Andrews Floor and Wall Co., which employs nine full-time workers.
Providing health insurance to their employees always has been important, Kelly and Mann said.
"Our dad, Dewey Mann, started the company back in the 1950s," Mann said. "He started way back then, when other people weren't providing insurance for their people. He paid 100 percent of the premium."
And Kelly said she and Mann want to continue this.
"That's a priority," she said. "The health insurance exchange is of interest on how that might help us to continue providing that to employees."
Effects on small business
These co-owners, along with several other business owners, attended the Feb. 15 West Side Main Street training course on the Affordable Care Act.
Perry Bryant, executive director of the West Virginians for Affordable Health Care, was the keynote speaker of the event, and he listed positives and negatives of the act in how it affects small businesses.
And Kelly and Mann could be rare for their employer subgroup.
Bryant said small businesses, especially those with fewer than 10 employees, are the least likely to offer health insurance to their employees.
According to an issue brief by the West Virginians for Affordable Health Care, only 59 percent of employees with three to nine employees offer health benefits.
"These are good people and we are trying to do the best we can for them," Mann said. "With the economy the way it has been, business hasn't been the same as it has in past years. It's getting harder and harder each year."
That same issue brief said currently, small businesses "pay more than 20 percent more than larger businesses for the same health insurance policy."
"Small businesses struggle to provide health insurance," Bryant said.
However, small employers with fewer than 10 employees, like Kelly and Mann, do not have to provide health insurance.
Yet, according to the issue brief, in 2014, employers with more than 50 workers may face a penalty if they do not provide these benefits.
Jill Rice, a Morgantown attorney with Dinsmore & Shohl, said many of the obligations can be intimidating to business owners, especially those involving the individual mandate.
"Employers essentially have to pay or play," she explained. "One of the funny things is that the act defines a large employer as 50 or more employees, which most of us would agree that 51 employees or 50 full-time employees is not what we would consider a large employer. But yet, the act does."
Rice said those who are critical of the Affordable Care Act have expressed concerns that the act will discourage growth of small businesses.
"They say that those with 50 or fewer actually will want to stay under 50 full-time employees because the obligations grow when they hit that threshold."
Additionally, Rice said full-time employees working 30 or more hours a week would have an obligation to pay for health insurance under this act. There is a seasonal exception this rule, she added.
For employers who would have to pay a penalty for not offering group plan insurance, the first penalty would be imposed in 2014.
Bill Freedman, a Dinsmore & Shohl health care attorney in Cincinnati, said employers with at least 50 employees must meet two requirements, lest they pay a penalty.
"The first requirement: these ‘applicable large employers' must offer coverage in an employer's sponsored group health plan to all of the employer's ‘full time employees,'" he wrote. "If an applicable large employer fails to offer coverage to all full time employees, the employer must pay a penalty equal to $2,000 times the number of full-time employees in excess of 30."
As an example, Freedman said if an employer had 40 full-time employees and 30 non-seasonal part-time employees, "the 30 part-time employees are the equivalent of 17 full-time employees," he said noting the IRS provides guidance on converting part-time employees to equivalent full-time employees. "Since the total is 57, which is more than 50, this employer is an ‘applicable large employer,'" he explained.
Furthering his example, Freedman said if the health plan only covered full-time office employees and 31 of those 40 full-time workers are office employees, that plan would not offer coverage to all full-time employees.
"Therefore, the employer owes a penalty equal to $2,000 x(40— the number of full-time employees— minus 31, or 17). $2,000 x 17= the amount of the penalty," he wrote.
Freedman said the employer would owe this penalty only if at least one of the excluded full-time employees decides to go to the exchange to get an individual pan and also qualifies for the new tax subsidy.
According to the issue brief, small employers started qualifying for tax credits in 2010. These tax credits are up to 35 percent of the employer share of premium costs.
"Employers with 10 or fewer employees and average wages of $25,000 or less qualify for the maximum tax credit of 35 percent of the employer's contribution to premiums," the issue brief further stated.
Tax credits would be on a sliding scale. However, sole proprietors are not eligible.
In the second phase of health care reform, the issue brief continues, small businesses will be eligible for tax credits if they purchase health insurance from the exchange.
The maximum amount would increase from 35 percent to 50 percent, the brief states.
"Again, this applies to employers that pay at least 50 percent of the total premium," the brief added.
But these tax credits don't last forever. Employers can only take these credits for two years.
"It doesn't do a lot for small businesses to assist in providing insurance to employees after 2014," Bryant said. "That's a real limitation to the Affordable Care Act."
A business owner at the Feb. 15 forum said his business tried to collect the credit but couldn't because three of the employees were classified as officers of the company. Bryant explained this credit is for employees only; so, of course, even if owners are technically employees, they still would not qualify.
"I wish it was much better than it is," Bryant said in the seminar. "It is cumbersome to apply for. You pay the premium all year and get a premium at the end. It's helping some businesses but it's not nearly as effective as I hoped."
Another area that will affect small business is administrative costs. The issue brief states insurance "companies with administrative costs that exceed 20 percent will have to provide a rebate to their small business customers."
Part of this includes a medical loss ratio. In 2012, insurance companies were required to have at least an 80 percent ratio, the brief states, or they could "provide a rebate to their small business customers." The U.S Department of Health and Human Services will publish that ratio.
Bryant said the Affordable Care Act will not decrease administrative costs but will hold it down.
However, premiums may not be held down. Bryant said premiums are expected to increase from 1.9 percent to 2.3 percent in 2014, or approximately $30 a month. He said all fully insured policies are subject to a tax.
"There is not a small employer exemption for this tax," he said. "Fully insured plans are subject to a tax."
Another major element in small business coverage is the health insurance exchange. Bryant compared the exchange to a travel web site like Travelocity, where a person picks the best plan for their trip.
Only with the exchange, individual people and small businesses alike would come to the marketplace to shop for health insurance.
According to the West Virginians for Affordable Health Care issue brief, small businesses will be eligible to shop at the exchange in 2014. Businesses can use tax credits to purchase four levels of plans, ranging from bronze to platinum.
Bryant explained the platinum plan would pay for 90 percent of claims, the gold would pay 80 percent, the silver would pay 70 percent and the bronze would pay 60 percent.
Employees shopping at the exchange as individuals will receive tax credits on a sliding scale if their income is $43,300 for a single person and $73,000 for a family of three, the brief also states.
Bryant explained small businesses with fewer than 50 employees can use the health care exchange market place but they don't have to do so.
"This is an option for many, many small businesses in West Virginia," he said. "According to a WorkForce study out, there is an estimated 42,000 business in West Virginia that have 50 or fewer employees."
Kelly said the four insurance plans options is a plus.
"If the employee decides to do bronze and we do silver, there is the option to pay the difference," she said. "That's a plus."
Kelly and Bryant said another positive effect will be the elimination of pre-existing conditions. According to the issue brief, in 2014, insurance companies will not be allowed to "sell policies charging higher premiums for employees with pre-existing conditions."
They also will be prohibited, the brief continues, from "selling a policy covering everything but the pre-existing condition or even refusing to sell a policy to a small employer because one or more employees have pre-existing conditions."
Bryant said one positive effect on small businesses is there is no medical underwriting.
"Every small business owner who offered health insurance and had one employee to have cancer, premiums go through the roof because of the medical underwriting," Bryant said. "They no longer look at the health of your employees. That doesn't mean you always get the lowest rate. You just will not see it skyrocket in the amount you have seen in the past. The medical loss ratio holds down administrative costs."
Questions of coverage
However, questions linger.
"Businesses are looking forward to trying to comply but there is so much still left unanswered that right now, it is just fear and uneasiness," said attorney, Jill Rice.
One question many business owners had at the seminar was whether it would be more cost effective to let the individual employee go to the health insurance exchange, rather than going to it as an employer.
"It may well," Bryant said. "There is controversy whether a business would drop health insurance and send employees to the marketplace for that. There's good data on both sides of that issue."
Another business owner asked whether the insurance essentially would be the same if employees went to the exchange themselves, rather than going through the business directly.
Bryant said he wished he could answer that.
"I know Oct. 1, the marketplace is going to be more transparent than current small business or individual market provides. There is pressure on those insurance companies to go to the marketplace to keep prices down and provide essential health benefits and cover prescription drugs. … The individual market is a much richer package than before."
Another business owner said he was concerned there would be a lack of options in the exchange, citing three major plans in West Virginia.
He asked if other carriers would bother with the Mountain State because it has higher instances of chronic diseases.
"It will be interesting to see," Bryant said. "Premiums are based on health status. It would not be that the insurance company would participate in Ohio and won't come to West Virginia. They would change premium status based on West Virginia. We will see how well it will operate. There is a lot of controversy about that."
Kelly said personally, she has a concern whether the medical community will be able to absorb the influx of people. Bryant said the act does have efforts to address this, noting loan repayment for doctors and nurse practitioners who go to underserved areas.
"What we need to do is have a scope of practices set at the state level to see if we have nurse practitioners and others making sure they don't have to work rules to make sure they are practicing up to the highest potential of education and background," Bryant said.
Kelly said she also was concerned about who is a part of the insurance exchange and how an organization enrolls.
"If it's just going to be three companies, that's not going to help anything," she said.
As a whole, Kelly and Mann said small business owners will have to take a "wait-and-see" approach to the Affordable Care Act.
"There is a real concern. This act is in effect and there are a lot of unanswered questions," Mann said, noting the questions about the health care exchange. "Even the people in charge can't answer some of the questions."
Bryant said more and more answers will become available every day.
"Some of the answers exist, but I'm not able to provide them," he said. "But someone could. It's a work in progress, and as it continues to unfold and we know more and more of the details every day. There are a lot of moving parts to this."
"Providing health insurance to the uninsured will help small business be able to use the marketplace, so they can easily compare plans and make it easier for them to provide health insurance to their employees is a positive thing," he added. "It's the same large businesses have to attract and attain high quality employees and giving them additional tools to do that is a significant plus."
However, Bryant did acknowledge that there are positives and negatives to the act.
"I can't say this is categorically great for small businesses," he said in the seminar. "I wish the tax credit wasn't limited to two years and employees instead of owners."
"Health care has become such a partisan issue and that's regretful," he added. "West Virginians are some of the least healthy people, and providing them with a health insurance card doesn't solve that. It is a first step, but there needs to be good public health initiatives to reduce obesity and smoking and to get people into primary care and prevention to get them better. Improving the health status of West Virginia is a once-in-a-lifetime opportunity and we ought to take advantage of that to improve the health of West Virginia."