Brooke and Andrew Lee can’t imagine being without health insurance.
So for the past seven years, that’s meant digging deep into the earnings of their video production agency in St. Petersburg. It’s expensive, but Brooke Lee says the alternative is worse.
“Even though costs are high, I’ve just always been somebody who has health care. And I would be really nervous… for the unknowns to happen, some major accident or health problem that would put us out of business and pretty much ruin everything we’ve worked so hard on if we didn’t have health insurance,” she said.
They would love to have company benefits and are curious about a feature of the Affordable Care Act called the Small Business Health Options Program, or SHOP. It offers tax credits for up to half of the premium costs an employer covers.
The online rollout of the program – as part of the federal HealthCare.gov marketplace — was delayed a year ago. Companies with 50 or fewer workers instead had to work with an insurance agent, and submit the application on paper.
It’s not clear how many business owners in Florida and other states purchased SHOP plans last year through the paper application process. But a federal review of small business signups in states that operated their own online exchanges shows little enthusiasm for the option.
The General Accounting Office report released last week, found that fewer than 12,000 companies with 50 or fewer fulltime workers bought plans. Those businesses employed a total of about 78,000 workers, the report said.
Andrew Lee — who co-owns Roundhouse Creative Studio with his wife — wonders if it can help them afford something they can’t provide now – health benefits to their one full-time employee.
“We would definitely be interested in seeing what those costs are. It is a value that we would love to offer to our employee. It makes their lives better, it makes our lives better,” he said. “It makes them want to stay with us for a longer term, so we definitely would be absolutely be interested in that.”
Sabrina Corlette is Project Director at Georgetown University’s Center on Health Insurance Reforms. She says the Affordable Care Act created SHOP to provide options to employers priced out of the traditional group plan market. But it’s not a mandate.
“Unlike for large businesses, there is no mandate that small employers cover or provide coverage to their employees,” she said. “So if you work for a small employer that currently does not offer health benefits there is nothing in the affordable care act that requires them to start offering it.”
Brooke Lee says it may be just a matter of being able to afford costly health premiums.
“It can be doable if you have one, two employees depending on how you’re doing that year businesswise,” Brooke Lee said. “But we have some friends who are up to about to 10 fulltime employees and I just don’t know if that kind of cost burden is manageable.”
Tampa insurance agent Eric Brown has helped small businesses sign up for the SHOP exchange plans for the past year. Even with the employer tax credit, insurance may be out of reach for workers who still have to pay monthly premiums and other out-of-pocket costs.
“The out-of-pocket expenses are too high. And when you have employees who are low to moderate income employees, they can’t afford it,” Brown said. “The bottom line is when you boil it down, and you look at the policy do you really have insurance if you can’t afford to use it?”
SHOP insurance – like other employer-based insurance – doesn’t provide subsidies for individuals. Instead, companies get a tax credit for their investment in employee insurance.
The tax credit – which only lasts for two years – is why Brown predicts SHOP won’t stand the test of time.
“In my opinion, I do think that the SHOP will eventually go away because I really don’t see the benefit,” Brown said. “It’s just like traditional health insurance, except that you get a subsidy, but the subsidy is only there for a short period of time and then it goes away.”
In fact, he’s already watched a few businesses drop health benefits all together, and instead ask Brown to help educate workers about the individual marketplace.
Employers, Brown says, think workers can get more affordable health insurance by heading to HealthCare.gov on their own.
That may be proving a double-edged sword for the federal government. As employers try to minimize expenses under the health law, the Obama administration has warned them against paying high-cost workers to leave the company medical plan and buy coverage elsewhere.
Such a move would unlawfully discriminate against employees based on their health status, three federal agencies said in a bulletin issued this month.
Brokers and consultants have been offering to save large employers money by shifting workers with expensive conditions such as hepatitis or hemophilia into insurance marketplace exchanges established by the health law, Kaiser Health News reported in May.
The Affordable Care Act requires exchange plans to accept all applicants at pre-established prices, regardless of existing illness.
Because most large employers are self-insured, moving even one high-cost worker out of the company plan could save a company hundreds of thousands of dollars a year. That’s far more than the $10,000 or so it might give an employee to pay for an exchange plan’s premiums.
“Rather than eliminating coverage for all employees, some employers … have considered paying high-cost claimants relatively large amounts if they will waive coverage under the employer’s plan,” Lockton Companies, a large brokerage, said in a recent memo to clients.
The trend concerns consumer advocates because it threatens to erode employer-based coverage and drive up costs and premiums in the marketplace plans, which would absorb the expense of the sick employees. The burden would fall on consumers buying the plans and taxpayers subsidizing them.
Administration officials approached independent lawyers about the practice in May, saying, “We don’t like this, but how can we address this?” said Christopher Condeluci, principal at CC Law & Policy, a legal firm. This month’s guidance, he said, “is the first time that they’ve come out explaining how and why the administration believes it violates the law.”
The Affordable Care Act itself doesn’t block companies from paying sick workers to find coverage elsewhere, lawyers said. But other laws do, including the Health Insurance Portability and Accountability Act and the Public Health Service Act, according to three federal agencies.
Specifically, paying a sick worker to leave the company plan violates those statutes’ restrictions on discriminating against employees based on medical status, the departments said in their bulletin.
“If you were to cherry-pick your high-cost individuals and offer them money to send them over to the exchange … this would be a violation of HIPAA,” according to the regulators, said Amy Gordon, a benefits lawyer with McDermott Will & Emery.
The agencies publishing the guidance were the departments of Labor, Treasury and Health and Human Services.
Starting next year, the health law requires large employers to provide medical insurance to most workers or face fines.
How many companies have offered to pay workers with chronic conditions to find coverage elsewhere is unclear.
“I know there are some brokers out there that were pushing this, but it was a limited number that I had heard about,” Condeluci said. Even so, he added, the attitude of the administration was: “We don’t want it to become widespread. Let’s nip it in the bud now.”