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With ACA, real deadline is year away for small businesses

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Proponents of the Affordable Care Act are celebrating its successes in granting access to health care to thousands of New Jerseyans as the law approaches the close of enrollment for the first year. Many business owners in the state, however, are not in the mood to party.

For them, experts say the ACA has meant very little has changed: They're still facing double-digit premium increases. And they are coping as they've done for years — cutting back benefits and passing more of the cost along to their workers.

But unlike previous years, business owners — especially small business owners — are not confident they will be able to continue in the health insurance game.

Experts say one-year workarounds, such as renewing policies before the full impact of the ACA were felt, will not be available in year two, leaving small business owners facing plans that will bring higher premiums to them and much higher deductibles to their employees.

Simply put, some big bills are going to come due, and business owners, especially small business owners, don't know what they are going to do.

Vaughan Reale, an executive vice president for employee benefits at CBIZ, said employers "are making huge changes" to avoid skyrocketing premium increases, which he said range from 20 to 40 percent and average about 25 percent this year.

"A lot of small employers are embracing high-deductible health plans more than they ever have done before," he said.

Worse, he said employers are finding that under Obamacare are "narrow networks" with fewer choices for doctors and hospitals, designed to reduce costs.

They are also finding less flexibility in plan design and less choice overall.

Reale said employers are looking long term at dropping health benefits and giving employees money to shop for their own coverage at Healthcare.gov.

That analysis is going on right now, in places such as KWG Industries in Hillsborough.

Kurt Grimm has owned the company, which manufactures precision machine parts, for 18 years.

In each of those 18 years, he's been able to provide affordable health care coverage for his employees, which now total 16.

Grimm fears his company may no longer be able to offer that coverage. And if it does, he said, it will be at a huge increase to his employees.

To stave off the price increases from the ACA, the company renewed the health insurance plan for one year under the old rules in December 2013, Grimm said. Otherwise, Grimm said his premiums would have gone up more than 70 percent. By renewing in 2013, he held the increase down to 14 percent.

But eventually, the company will have to comply with the new ACA mandates.

"If we get hit with that kind of a premium increase, we will have to cancel the plan," he said, pushing employees to purchase their coverage on the new ACA exchange at Healthcare.gov.

He said it makes him "very uncomfortable" to consider dropping the health plan.

"We have provided benefits for 18 years, and it has always been a cost that we could manage," he said.

Finding a solution will become the next big issue with the ACA, said William Corson, vice president of group benefits for AEPG Wealth Strategies in Warren.

Corson has about 170 small business clients and encouraged more than half of them to renew their old policies in 2013, thus giving them a full year under the old, pre-ACA rules — and more time to prepare for the law.

"We were able to help our clients save tens of thousands of dollars in this first year (by postponing compliance with the ACA)," he said.

Groups that made the switch to an ACA plan in 2014 gave a glimpse of the future.

A number of them switched to high-deductible plans to reduce their premiums and then gave workers health reimbursement accounts, which is money the employer allocates to help employees with the additional costs that go along with a high-deductible plan.

"We've been able to show our clients some very significant savings" by leveraging a high-deductible plan with an HRA, Corson said.

Another option Corson sees getting more traction with small employers in the years ahead are the so-called "defined-contribution" health plans, where employers give workers a set sum of money to shop for a health plan and then work with a third-party provider to offer a choice of health plans.

Employees who want richer plans can pay for them with their own money.

"The defined-contribution plans are interesting but still a long way off (from being widely used)," he said.

He said none of his clients has gone to a private exchange so far, "but I definitely have people looking at them."

Something clearly needs to be done.

David L. Knowlton, chief executive of the New Jersey Health Care Quality Institute, applauds the ACA and its attempt to "implement new payment models that reward value instead of volume." But he recognizes its shortcomings, including narrow networks and plans with high levels of cost-sharing, where the consumer shoulders significant medical bills.

In addition, Knowlton questions the stability of the law, which has had repeated changes and extensions, including the end of the open enrollment phase, which was originally slated to end on March 31 before getting a late extension.

"Stakeholders from consumers to hospitals to insurance companies are facing tremendous uncertainty as to whether or not this will actually work and what the market will look like in five, 10, 15 years," Knowlton said.

E-mail to: beth@njbiz.com
On Twitter: @bethfitzgerald8

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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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