Small business insurance and decisions about health plans
No matter which part of the country you look at, there’s been a steady increase in the premium rates businesses are expected to pay for their group health plans. The blame for these increases is spread around fairly evenly. Washington is at fault because, in passing the Affordable Care Act, it failed to introduce any effective measures to control the cost of health care. The result has been an explosion in price of both drugs and the delivery of treatment in hospitals and clinics. Since none of the manufacturers or healthcare providers are sure what will happen in the future, they are adding extra margins to their prices now so that, if there are controls introduced in years to come, they will have a good cushion to play with.
In addition to the price increases, insurers have been increasing the deductible so that, in many cases, claimants are now having to pay $2,000 or more before the insurer parts with a cent. The final insult has been the proposed rate increases. For example, Aetna Health requested the NY Insurance Commissioner for increases of between 27 and 33% in 2010. Although the Commissioner reduced the requested increases by 10%, this is a startling hike when the general level of commercial activity is so low. With small businesses struggling to make a profit, they cannot simply increase their own prices. This is forcing some very tough choices. To pay for health insurance, small business are postponing investment or the owners are using their personal savings to subsidize their employees. Such are the needs of the day when so many owners think of their employees as part of the family.
Yet it’s at this point we come to a slightly strange phenomenon. You can say what you like about President Obama and the Affordable Care Act (and most probably say some unprintable things) but the man and his team are not without foresight. Included in the Act is a Small Business Health Care Tax Credit. Washington foresaw the possibility of short-term premium rate increases, so it decided to offer help to all small businesses that continued or introduced health insurance for their employees. The Treasury has just published a report showing only a fraction of small businesses have claimed their credit. When the Act was going through the House, the Congressional Budget Office estimated the initial demand for credits would cost the government some $2 billion in the first year of operation. Yet, of the more than four million small business that are eligible, less than one-quarter-million have applied for the credit.
It’s entirely possible the offer of help is considered an act of Big Government to be resisted, or perhaps small businesses live in ignorance of the credit, or the form to claim the credit is too difficult to understand, or the work to make the claim does not produce enough money to make the work cost-effective. No matter what the reason, the small business insurances portfolio is more expensive than it needs to be. Even if the savings are only marginal, small businesses should not deny themselves this help. Business insurance is expensive enough as it is without firms adding to their woes. This is something you should discuss with your accountant.
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