Affordable Care Act fines for businesses start in 2015

For businesses across Michigan and the country, the Obama administration's one-year reprieve from financial penalties under the national health care law is nearing an end, forcing some employers to chose between buying coverage for employees or paying fines.

At the same time, some small businesses that already offer health insurance are facing big price hikes next year as Blue Cross Blue Shield of Michigan — the largest carrier in the state — has stopped allowing businesses to renew policies that aren't compliant with the Affordable Care Act. In their place it is offering more comprehensive, but pricier, insurance policies.

The Blues and other insurers allowed businesses to keep pre-Affordable Care Act policies through this year. The Obama administration has permitted that option since coming under criticism that the law would otherwise contradict the president's pledge that if you like your health care plan, you can keep it.

Extreme Dodge Chrysler Jeep of Jackson was one small business whose expenses jumped when switching this year to one of the new health law-compliant plans.

The dealership used to offer health care to all of its 40 employees. But because the new plan cost over 40% more, the business was compelled by financial necessity to limit coverage to 29 employees, said Mark Trudell, the general manager.

"We can hopefully sell a few more cars and offset it," he said of the higher price.

The other employees obtained coverage through a spouse or, in the case of a few unmarried men, paid the $95 individual penalty for skipping coverage.

But now the dealership is preparing to switch to a self-funded health plan in 2015, as the renewal rate for its Blue Care Network plan would have jumped another 9%. The self-funded plan has lower premiums and deductibles, although its benefit offers are somewhat lower than that of their current plan.

Small businesses with self-funded plans can sidestep many of the Affordable Care Act's requirements. To manage the risk that an employee could need expensive care, the employer can purchase additional "stop-loss insurance" to cover such costs beyond a point.

John Dunn, a vice president with Blue Cross Blue Shield, said the insurer dropped its cheaper non-ACA compliant plans because, among other reasons, it has invested heavily in preparing for the health law and maintaining the old plans would require raising rates for the new ones.

The new plans generally offer more coverage, including free mammograms and colonoscopies, and take into account different factors such as age when calculating premiums.

Like the Dodge dealership, many employers have experienced sticker shock upon seeing the price tag for a new ACA-compliant policy.

"I've been delivering rate increases between 14% and 45%," said Mike Embry, secretary of the National Association of Health Underwriters and owner of Southfield-based agency Comprehensive Benefits. "When I'm going out and delivering 40% rate increases and telling (businesses) that they don't have any choice but to buy these plans, small employers are not pleased with that."

The Obama administration also gave businesses a free pass this year on the law's financial penalties. But that break is nearly over.

Starting in 2015, businesses with 100 or more full-time employees are required to offer health insurance to at least 70% of their workforce. Employers that don't start coverage will face penalties: an approximately $2,000 fine multiplied by every employee in the company, minus the first 80 employees. (That number lowers to 30 employees the following year)

Requirements tighten in 2016, when medium-size companies with 50 to 99 full-time employees must offer coverage or face the fines. And the required minimum for coverage will rise to 95% of a business's workforce, up from 70%.

Small businesses with under 50 employees are exempt from coverage requirements under the law, which defines a full-time employee as someone working at least 30 hours a week.

Bob Crisan of the Kapnick Insurance Group, an insurance brokerage firm, has been working with one pizza franchise that is mulling whether to extend coverage next year to 80 employees who will be newly eligible under for it under the health care law. The owner can't afford to offer the group the same coverage that it currently offer about 30 other employees.

One option for the company: direct those 80 workers to buy individual policies on the state's marketplace and pay the fine for not offering them coverage.

"That's a real possibility," Crisan said. "But at the same time, they don't want to be viewed as a negative employer — there's the pressure of what it looks like."

Crisan knows of two small businesses that have opted to pay the fines rather than swallow the larger cost of buying coverage for their employees. One is a regional grocer facing intense competition from the big grocery chains.

"It was about being able to stay afloat from a business perspective," he said.

A few small businesses in Michigan that did offer employee-sponsored health coverage are now preparing to stop next year because prices for the new ACA-compliant policies were unaffordable for them, said Michael Harp, owner of Michigan Group Benefits, an East Lansing-based insurance agency.

"They gave everybody a little bit of a raise and said, 'You're on your own. You have to go buy something on the marketplace.' " Harp said.

Some medium and large-size businesses in the state with lower-wage workers have gone a third route, offering their employees so-called "skinny plans." These super-cheap plans typically provide preventative services but lack basic coverage for hospitalization and doctor visits.

Critics claim that such plans exploit a loophole in the Affordable Care Act. Companies that offer them are shielded from the $2,000 penalty that gets multiplied across their workforce.

Embry, the underwriters association secretary, said he has moral issues with these because workers whose employers offer them will lack significant coverage but nevertheless become ineligible for the generous subsidies on the individual market's exchange.

A new online SHOP marketplace for businesses to buy insurance is scheduled to go live Nov. 15 using the same healthcare.gov website that individuals use.

Experts say the Michigan version of the site will be most helpful to business that qualify for the Small Business Health Care Tax Credit. To qualify, a business must have fewer than 25 full-time employees, have an average salary of about $50,000 or less and pay at least half of its workers' premium costs.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.

What businesses get Affordable Health Care Act fines?

Business of 100 or more full-time employees must offer insurance in 2015 or face fines

Those with 50 to 99 full-time employees must offer insurance in 2016

Businesses with fewer than 50 workers are exempt

What is the Affordable Health Care Act business fine?

A sum of $2,000, multiplied by every employee in the company, minus the first 80 employees. (The number lowers to 30 employees in 2016)