The Pittsburgh Tribune-Review cherry-picked data surrounding the Affordable Care Act's (ACA) effect on health care premiums for small businesses, failing to explain that a small rise in prices for some will allow a more fair premium rating policy for all and could save small businesses money in the long term.
The March 11 editorial references a misleading Investor's Business Daily editorial which cites a Center for Medicare & Medicaid Services (CMS) claim that a number of small businesses will see health care premium increases as a result of the ACA by 2016:
The latest ObamaCare fabrication, exposed by the health system's own numbers cruncher, is that government-directed medical care somehow will reduce small-business premiums by 4 percent -- and by as much as 25 percent in 2016.
But the dream proffered back in 2009 by President Obama has become today's nightmare, as detailed by the actuary for the Centers for Medicare & Medicaid Services: 65 percent of small businesses offering insurance will see their rates go up.
And that will affect about 11 million workers, according to Investor's Business Daily.
Although the actuary's report doesn't say how much rates will rise, studies cited by Investor's Business Daily peg the hike between 12 percent and 20 percent. Which businesses are likely to see their rates inflate? Why, those that employ younger -- and healthier -- workers, who under ObamaCare inevitably must pay more to keep the scheme afloat.
However the CMS report cited by the Tribune-Review and Investors Business Daily provides a narrow look at how small businesses are affected by the ACA by leaving out other factors which could relate to premium prices. In addition, CMS also admits "there is a large degree of uncertainty associated with this estimate" (emphasis added):
This analysis focuses on the number of people with health insurance coverage through their employer whose premium rates are expected to increase or decrease as a result of the guaranteed issue, guaranteed renewability, and premium rating provisions of the ACA only. Other factors affecting rates such as changes in product design, provider networks, or competition are not considered. In addition, other provisions of the ACA, including the coverage expansions, the extension of dependent coverage to age 26, the individual mandate, and the employer mandate will impact the availability of coverage, the take-up of that coverage, and the premium rates charged to those who currently have employer-sponsored insurance, but those impacts are not included in this estimate. We prepared a more complete report on the financial effects of the ACA in 2010.11 As mentioned previously, the effect on large employers is expected to be negligible, therefore our evaluation examines the impact on employees of fully-insured small firms.
There is a rather large degree of uncertainty associated with this estimate. The impact could vary significantly depending on the mix of firms that decide to offer health insurance coverage. In reality, the employer's decisions to offer coverage will be based on far more factors than the three that are focused on in this report so understanding the effects of just these provisions will always be challenging.
In addition, the Tribune-Review also fails to explain the reasoning behind the estimated rate rise for some small businesses: a leveling of the health insurance playing field.
One of biggest benefits of the ACA is new regulations on premium rating rules, which apply to all insurance plans and dictate the variables insurance companies can use to adjust premium prices. For the first time, there are established federal rules which ensure that insurance companies cannot price gouge certain sectors of the population based on gender, health status, tobacco use, or age while providing extremely low prices to health individuals. As an American Cancer Society factsheet explains, some states with unregulated markets charged older, sicker individuals 9 times as much for the same policy as younger healthy individuals. The lower rates charged to healthy individuals made up approximately 65 percent of the insured population, that same 65 percent that could see rate increases according to the CMS study:
Based on our review of the available research and discussions with several actuarial experts, we have estimated that roughly 65 percent of small employers offering health insurance coverage have premium rates that are below average.
Once the new premium rating requirements go into effect, it is anticipated that the small employers that offer health insurance coverage to their employees and their families would have average premium rates. Therefore, we are estimating that 65 percent of the small firms are expected to experience increases in their premium rates while the remaining 35 percent are anticipated to have rate reductions.
The CMS report also points out that the premium increases for those small businesses that will have to pay more will not be as large as the decreases in cost for the 35 percent who will get to pay less. As MIT health care economist Jonathan Gruber explained in the The New York Times, "The most expensive firms are very expensive, while the cheaper ones aren't that much cheaper. ... So what that means is that while the cheaper firms will lose, they will lose by less than the most expensive firms gain."
Rate increases on some small-business plans are nothing new, and by some estimates have been limited by the ACA regulations, such as the limiting of premium increases over 10 percent from the previous year. Premium prices and cost of care have steadily increased over the last 10 years, a trend that would continue even without the ACA regulations. However, according to the Urban Institute and Robert Wood Johnson Foundation, the ACA will actually slow the growth of these premium increases and reduce the average employer contribution to their business' health insurance plan:
The ACA will also provide small businesses an opportunity to access tax credits to reduce the cost of group insurance. According to the Small Business Majority, "businesses with fewer than 25 workers and average wages of less than $50,000 will be eligible to receive a tax credit." This will apply to more than 4 million small businesses across the country. The ACA also simplifies administrative procedures associated with group insurance and mandates that "80% of premium dollars be spent on care, not administrative overhead and executive compensation, for small group and individual plans."