How the New Health Law Could Raise Costs for Young, Healthy Employees

  • The younger and healthier a small business’s workforce, the greater its chances of facing a big spike in health-insurance premiums next year. That is because the Affordable Care Act’s impact on small employers will split largely on generational and industry lines, putting owners of firms with mostly male employees in their 20s and 30s, at a disadvantage.
  • Starting in January, insurers will no longer be able to set premiums for small-group plans, which apply to employers with fewer than 50 employees, based on a firm’s industry or the health or gender of its staff. Insurers will still be able to take into account the age of a firm’s workers, though to a lesser extent.
  • The result: the cost of health care will be more evenly spread among small businesses, as employers with mostly young and healthy workers pick up the costs of firms that comprise the opposite. The rebalancing will drive up premiums for some companies in industries with lots of young, healthy workers, such as technology, while moderating rate increases for firms with older and sicker workers, and in higher-risk industries such as industrial manufacturing.
  • Small-business clients are considering various options for absorbing premium increases next year. For example, some are looking at cutting back on the percentage they contribute toward employees’ costs or no longer covering dependents. Others, mainly firms with fewer than 50 employees, are thinking of dropping their plans and directing workers to the state insurance exchanges.

Ms. Hasson, who started the Computer Company in 1996, pays 75% of premiums for employees and 25% for dependents. Her team, including 29-year-old Art Desrosiers, could therefore also feel the effects of the law next year. Paying for health insurance, even if it costs more next year, “would bother me but it would still be worth it,” says Mr. Desrosiers, a data-center administrator, whose premiums currently total about $113 a month. “You don’t know what’s going to happen to you.”

By comparison, Winsted, Conn.-based HDB Inc., a manufacturer of metal hinges that does business as Homer D. Bronson Co., is among those whose premiums could rise by a lower percentage next year. Owner John Zoldy says his broker estimates that the 16-employee firm, with an average age in the early 50s, could be charged a rate increase as low as 10%, down from last year’s 18% increase.

Amit Mrig, owner of Academic Impressions, an educational-services provider to colleges and universities in Denver estimates that the firm’s premiums could rise by as much as 40% next year, up from just 10% in past years, due to its mostly young and healthy workforce of 25 people. “It’s going to take money out of my pocket,” says Mr. Mrig, because he’s afraid that he could lose employees if he were to cut back benefits, hiring or pay raises to cope. “We’re a totally personnel-driven organization.”

Daniel Fusch, one of Mr. Mrig’s employees, says that health benefits play a “significant” role in where he chooses to work. The 32-year-old director of publications and research is on a family plan and has a daughter who is disabled. “That’s mainly where the package is especially important,” he says. “Her medications are pretty expensive.”

Mr. Fusch has been with Academic Impressions for seven years and describes its health benefits as “far superior” to what past employers have provided him. If the company were to drop its coverage, he says he might have to consider changing jobs. Health-insurance “is one of the two or three key factors for me

*Modified from a WSJ article

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