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Business execs say health law hurts companies

Rochester Business Journal
January 31, 2014

Area CEOs and business leaders overwhelmingly see the Patient Protection and Affordable Care Act as hurting their businesses, and more than half favor repealing the law, a survey released last week found.

The controversial health care law, passed in 2010 and popularly known as Obamacare, took effect this month, rewriting much of the rulebook on U.S. health plans.

The act calls for individuals to buy health insurance and businesses employing 50 or more workers to provide a group health plan. Firms and individuals not in compliance with those mandates would have to pay fines.

Asked to rate the Affordable Care Act’s impact on their organizations, nearly three-quarters—72 percent—of 190 Rochester-area respondents in the RBJ-Siena Business Leaders Survey, a component of the Siena College Research Institute Upstate New York Business Leaders Survey, said they saw the health care law’s effect as negative. Some 70 percent said the law should be repealed.

A small fraction of Rochester-area respondents—4 percent—said the statute would have a positive effect on their business. Twenty-two percent had a neutral take on the legislation.

Nationally, big employers, including Wal-Mart Stores Inc., Target Corp. and Home Depot Inc., have cut benefits for employees working less than 30 hours a week, which is seen as spurred by an ACA provision requiring employers of 100 or more people to provide coverage to full-time workers, with 30 hours weekly as the cutoff point between full and part time.

The Affordable Care Act has prompted some local employers to make changes in health and employment policies, but more have not done so, the survey found:

  •  62 percent of area respondents said they had not been spurred by the ACA to switch from a percentage to a defined amount in contributing to employees’ premiums;
  •  75 percent said they had not hired more part-time workers;
  •  76 percent said they had not cut workers’ hours;
  •  63 percent said they had not cut benefits; and
  •  88 percent said they had not raised benefits.


The business leaders’ clear distaste for the act and their desire to see the law repealed do not quite track with the actions employers say they have taken or plan to take to deal with the health care legislation, said Donald Levy, director of the Siena College Research Institute.

But the minority of business leaders who said they had taken action still represents a significant slice of the group, he said.

Thirty-four percent of area respondents said the law had caused them to cut benefits. In addition, 32 percent reported switching to defined contributions, 21 percent said they were hiring more part-timers and 20 percent said they were cutting staff. Only 8 percent said they were increasing benefits to retain workers.

Roughly the same group whose answers revealed a generally more upbeat view of the economy also had made few ACA-related adjustments to their business practices and benefit policies, Levy said. Roughly three-quarters of the 63 percent of respondents who said they had not changed health offerings because of the act had a generally upbeat take on the economy. The correlation holds in virtually all cases, Levy said.

A possible conclusion to draw from that observation, he said, is that at least some of business leaders’ hostility to the Affordable Care Act amounts to blowing off steam; actions, or in this case lack of action, may speak louder than words.

Business leaders’ discomfort with the act is real and is related to actual problems with the law, but despite those problems, they see good reasons to put off dealing with it, said Robert Relph, CEO of Perinton-based Relph Benefit Advisors.

Relph is one of the 190 area business leaders polled in the survey. His firm provides health coverage to 110 of its 130 workers. As an adviser to area businesses on health benefits, Relph also has a close view of his peers’ take on the law.

While the individual and employer mandates’ implementation is postponed, Relph said, other ACA provisions that take a significant bite out of businesses’ earnings have taken effect.

A reinsurance tax costs employers $63 a year for each person covered by a company-sponsored plan. The assessment applies to non-employee family members as well as workers, so the cost can mount, Relph said.

And while the reinsurance tax is slated to decline annually until it ends after four years, a separate health insurance tax that adds 2.5 percent to employers’ premium costs is permanent and slated to rise annually.

More employers are not taking actions to counter or absorb the 4 to 5 percent the ACA adds to their health care costs because so many of the law’s provisions remain unsettled, Relph said. Whether the delayed employer and individual mandates will actually take effect a year from now and what form they will take if they do are open questions, and other rules in the complicated legislation have yet to be written.

“I tell people to plan but not do anything until something actually takes effect,” Relph said.

Business leaders’ hostility to the Affordable Care Act stems from what they already know of extra costs the law is creating and from uncertainty about what further changes it might bring, he said.

The ACA’s goals, to provide coverage to tens of millions of Americans who do not have it and end inequities such as claim or coverage denials for pre-existing conditions, are worthy, Relph said. But those aims bump up health care spending, and the law does not yet spell out who will pay the added costs.

Past actuarial data on individual direct-pay health plan subscribers would suggest that individual purchasers of insurance-exchange plans are likely as a group to rack up higher health care costs than group plan enrollees. Carriers used to adjust for that difference by charging higher rates to direct-pay customers and denying coverage to the riskiest.

The ACA forbids such measures, “and that’s a good thing,” Relph said. But in the meantime, carriers offering exchange plans are likely to be hit with extra claim costs. Until it expires, the reinsurance tax is meant to temporarily soften the blow for insurance companies.

Eventually, extra premium dollars rolling in as young and healthy subscribers, who make few claims, buy insurance are supposed to make up the difference. But with the individual mandate delayed and other ACA provisions still being worked out, whether that will happen remains an open question.

If it does not, Relph said, employers have to wonder: Will they be taxed to make up the difference?

Nationally, the ACA is meeting resistance as well. A Rasmussen Reports LLC poll taken among 1,000 likely voters found that 43 percent view the law somewhat favorably while 52 percent view it negatively. That is up from the split of 41 percent favorable to 58 percent unfavorable that Rasmussen found two weeks earlier.

1/31/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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