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Study: Affordable Care Act raising health costs for small business

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The overwhelming majority of small-business owners with less than 100 workers continue to face rising health insurance premiums, according to a new survey by the National Federation of Independent Business, the first in a three-year study that will follow the same 921 small-business owners nationwide.

The NFIB found 64 percent reported paying higher insurance premiums per employee in 2013 than they did in 2012.

The survey was conducted last summer.

The results show the Affordable Care Act is not holding down health insurance costs, the NFIB said.

"The law's authors were primarily focused on increasing insurance coverage and expanding benefits — they gave little or no consideration to concerns about cost or who would foot the bill," said NFIB research foundation senior fellow and study author William J. Dennis.

According the study, the health insurance premium costs incurred by small businesses (employer and employee shares) average $6,721 a month ($80,652 a year). While two of three (67 percent) of plans maintained deductibles at the prior year's level, another 28 percent increased deductibles; only 4 percent lowered deductibles in their plans.

NFIB also found that the most common way small-business owners defrayed the increase cost of health care was to lower their profitability (66 percent), increase their productivity (48 percent), and the delay, postpone or eliminate business investment (40 percent).

Christine Stearns, vice president for health and legal affairs at the New Jersey Business & Industry Association, said the study is consistent with what the group has heard from its members.

"The cost of health insurance has been the major barrier to providing coverage to employees for as long as anyone can remember and that is not changing," she said. "Employers, particularly small businesses are working hard to comply with the ACA but getting the information they need has often been a challenge. And providing benefits will continue to be a priority because it's a top concern for employees."

Among the study findings:

- Fourteen percent of small employers who don't offer health insurance provide reimbursement or a direct payment to employees for the purchase of health insurance.
- Four percent of small employers currently offering health insurance self-insure, with larger employers more likely to self-insure. Four percent said a switch to self-insurance is "highly" likely in the next 12 months; another 7 percent say it is "somewhat" likely.

Tom Vincz, spokesman for Horizon Blue Cross Blue Shield of New Jersey said some of the insurer's small employer groups will see premium increases and others will see their premiums decrease. He said the increase or decrease will be based upon a variety of factors, including what type of plan they currently have and the demographics of the group itself based upon new rules of the Affordable Care Act.

He urged small employers to work with their brokers or call Horizon for information on their new coverage options and to find a plan that meets their employees' needs and their budget.

"Ultimately, health insurance premiums reflect the underlying cost of health care," Vincz said. "That's why Horizon is leading a collaborative effort with doctors and hospitals to change how health care is delivered, to increase efficiency and promote better patient outcomes through patient-centered programs."

Small employers often pay the entire health insurance premium for their employees: 38 percent for individual coverage, 23 percent for family coverage and 21 percent for plus-one coverage. The study also found that the more the employer pays (on a percentage basis), the more likely employees are to participate in the health plan.

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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