Will Glaros has been helping Northwest Indiana businesses manage their employee benefits for more than three decades. But he has perhaps never had a greater challenge -- or opportunity -- than he has right now, assisting companies navigating the immense changes to health insurance brought on by the Affordable Care Act, the 2010 law often known as Obamacare.
Glaros, partner with the Meyers Glaros Group in Schererville, recently sat down with BusINess Magazine to discuss the myriad ways health reform has impacted small businesses and entrepreneurs. This interview has been edited and condensed for clarity.
Which individuals and businesses are subject to fines for not having or providing insurance?
From an individual standpoint, other than a limited, excluded group of citizens, everyone is required to have insurance. They actually were in 2014. That continues on in 2015 and into the future. The rationale behind that is we need to get everybody into the system in order to spread the risk, and the driver behind that are the penalties, and they basically increase year by year to force the issue.
For businesses, it's a little different. Those that are under 50 staff members are still exempt from having to provide insurance coverage for their employees. Groups that are over 50 [employees]but under 100 actually have a one-year exemption, pushed back to 2016. Those that are over 100 will have to provide coverage in 2015.
It gets a little more complex than that. I won't go into the detail, but it's basically how you count to 100 and it's not quite as simple as saying, "We only have 50 full-time employees. We don't have to comply until the following year." Because if you add in part-time employees with the calculations the government's developed, you could be well over 100 and have to comply this year.
Would you say insurance rates are going up both for individuals and businesses? If so, why?
I would say for the majority of the people, the costs are going up. There are a limited number of groups we've had where the costs have actually gone down.
Pricing went from being done on a partially experienced rating to a community rating, where people are basically rated on their geographic location, their age and whether or not they smoke. So if you have an individual who's rated previously for a bad health history or a group that's had a bad health history, when their recent pricing came into effect or if they moved into the individual market, they may very well have seen a decrease in cost. I'm going to guess about 15-20 percent of groups and individuals saw reductions. The majority are seeing increases.
You asked the reason for those increases: One, we're now covering pre-existing conditions, which we weren't covering in the past. They've extended coverage out for children to the age of 26. You've got preventive health care covered at 100 percent with no copays, no coinsurance. There's no longer any medical underwriting, so the risk is picked up immediately. Clinical trials and experimental care that used to not be covered is now a covered item in health care. And then there are additional penalties and taxes that have been heaped on top of that cost to help fund the uninsured who will now be insurable with no pre-existing conditions.
How are the tax and penalty provisions of the Affordable Care Act changing the landscape for small businesses and entrepreneurs?
The impact has primarily been the health insurance tax, which is impacting the insurance companies and passed on to the individual companies. Then you have what they call the Patient-Centered Outcomes Research Institute fee -- that's passed onto the company, passed onto the individual in some portion. And then the reinsurance fee. But primarily those are costs that are adding to the cost of the coverage.
Originally the concept was that companies were going to be able to offer to their people the opportunity to go out and buy their own coverage (on the Affordable Care Act marketplace), and the company would get rid of their group health care plan, let them get into the individual market and then they would subsidize them for doing that. What the company would do is set up a special account they would contribute to and a separate account their employees would contribute to, and then when the premiums would come due, the company would make those payments for the individual. Basically the IRS shot that down. Now the penalty on companies who pay premiums for their employees to be in the individual insurance market is up to $100 a day, $36,000 a year.
The incentive to provide coverage outside a group plan isn't there, and if you're going to give them money on an individual basis it can't specifically be for that reason. You'd have to just say we're going to give everyone an increase, we don't care what you do with it: buy health insurance, live higher on the lifestyle basis, it's up to you. But it did, we think, kind of limit the opportunity for the individual to pick up coverage with that method.
Have you experienced small businesses going the route of giving employees raises and discontinuing their health insurance?
Actually not, surprisingly. The reasons it didn't take off quite as quickly was because it became a taxable event to the individual employee. So if an employer pays for your health insurance every month, $400 a month, that comes, on a group plan, tax free to the individual. The individual pays their $200 on their own.
Well, now if the money was being paid to that individual -- just giving them an income boost, not telling them how to use it, it's up to them -- that individual is going to lose about 30-plus percent of their spendable dollars because they now have to pay ordinary income tax on it, state tax, federal tax and FICA. It reduces their buying power by doing that.
Who do you think is happier about the Affordable Care Act: entrepreneurs or small businesses?
I would say entrepreneurs, and you're probably talking to one of them at this very moment. Everybody truly thought when that bill passed originally in 2010 that the intent was to have us out of business by the year 2020. In fact, the complexities and the ever-changing landscape, as the government adjusts what everything means, has made our time and our expertise that much more valuable. And we've actually grown 30-40 percent in numbers of cases and revenue simply because of the fact that people are looking for people that can help them meander their way through the process. So entrepreneurially it's been great.
For the individual companies out there, I would say their problems have gotten a little more difficult. Because with the cost increases that happened in 2014, the options were to pay, on average, 10-25 percent more. But if you wanted the opportunity to improve the plan for your employee or to make it less costly and you went to an ACA-platform plan, you could actually end up paying 15-20 percent more on top of that. So it actually probably hurt the majority of the small employers.
How does the small business insurance exchange work, and are many small businesses using that option?
Actually last year it was kind of available, but then they closed it off. Everybody was looking with bated breath this year thinking that was an alternative. I don't think it's taken off that quickly. We've had a couple of accounts move that way because it made sense financially for them.
One of the drawbacks to the exchange, whether or not it's on the individual or the group side, is carriers have gone to very limited networks. As an example: I've had Blue Cross forever. I ask my doctor, "Are you in the Blue Cross network?" Every doctor, every hospital, says, "Yes." But when you become part of the exchange, the relationships reduce the numbers of physicians that were willing to sign their financial contract because it comes with deeper discounts. You may go into a physician who's been your physician for years who says, "I can't see you under that card because we're not part of that network."
The SHOP (Small Business Health Options Program), I think, is a year away yet, as people get more comfortable with it and as the market stabilizes. But I think people were a little hesitant this year.
Can you think of any unintended consequences the law has had on small businesses?
I think probably the major unintended impact was, and I think this would have been one you think they should have been able to see, is when you put in place a very specific set of benefits -- that everyone has to follow these benefit guidelines -- you begin to limit the amount of flexibility an employer has to pay his employees beyond employee benefits alone. He may want to pay his employees more in compensation, but that was just wiped out by this 20 percent increase -- or 40 percent increase if they go to an ACA product -- and I just think that time needs to settle out where people will get their handle on that and be able to think about using their financial gains to assist their employees in other ways than just offering benefits to them only. I think probably the major loss out there was flexibility by the employer.
You mentioned these ACA plans -- will businesses eventually be required to go to the ACA-compliant plans (which come with a minimum set of benefits)?
They will in 2016. What happened was originally everyone was to go in '14. And that was one of the reasons why the insurance companies over a year ago gave their clients the opportunity to renew early in December of '13, saying they would be able to defer their involvement with the ACA until December '14. What ended up occurring is the president decided to make a determination that groups, if they don't change their benefits at all, can maintain those plans for one or two more years. So we think we're good into '15 and probably into December '16. And by December '16 everybody will at that point have to be in an ACA product, assuming the federal government doesn't change anything again. And no one knows if that's possible because of the rapidity with which they've been changing things as they've moved forward.
Do you think the law will spur more people to become entrepreneurs and start businesses because they don't have to stay in jobs anymore just for the insurance?
I think there's definitely an entrepreneurial spirit, but it's more in solving the needs that have arisen because of the health care changes, on the plans being designed with these higher and higher deductibles. We're in the process actually right now of inputting into two of our plans video physician visits, where you can go online, pull up a doctor online. He can actually use your iPhone to examine you, looking down your throat, looking at an injury on your leg, and diagnose you and prescribe drugs for you on that videoconference.
So this takes an individual who can't afford, with this high deductible, to go to the doctor's office, even at a discounted rate, and pay $100. He can go to this video camera and pay online with his credit card for $40 an office visit. This plan is actually advertised on 'Dr. Phil,' It's called 'Doctor on Demand.' And, as I mentioned, we're putting it in our second plan as we speak. And it's a way to give people the opportunity to buy health care. So someone got entrepreneurial with the concept.
Another one was featured in the Times a few months back called 'My Fast Labs,' where people can get their laboratory testing done for 60-70 percent under the norm and which enables them to extend their buying power that way.
I think the entrepreneurship has commonly been on how to deal with the health care act. I don't know that I've seen anything yet that freed people up to break away from a company to go out and start their own business. It still is costly to do that.
Why has the Affordable Care Act had such a big impact on your business?
The major reason for that impact on the Meyers Glaros Group is that we've always been a benefit-consulting firm, and the majority of our time was spent actually coming up with creative solutions to maintain cost control for the employers. While we still spend the vast majority of our time on that, we've had to expand the hours that we invest in our customers and for our customers in advanced reporting systems, updates on legislative changes because with the law have come a myriad of compliance issues that the employers have to comply with.
And with that, the impact has been significant. We have to spend an inordinate amount of time updating our knowledge on a weekly basis and then passing that on to our clients, whether or not it be seminars, webinars, email blasts.
But it has expanded the time that is actually helping them comply, taking away some of our time from the creative portion of it, which I think is where it should be spent more. But we have to deal with the time frames that we have to solve the problems of our clients.