Obama administration: Health law’s new rules will increase costs for most small businesses
Nearly two-thirds of small businesses that currently offer health insurance to their workers will pay more for coverage as a result of new rules in the health care law, as will millions of small-business employees and their family members, according to new estimates released by the Obama administration.
The Centers for Medicare and Medicaid Services, which has spearheaded the implementation of the law, has acknowledged that new rules requiring insurers to offer guaranteed coverage and renewal options to small employers will likely drive up the price of insurance for some companies. So will rules banning insurance companies from varying their rates based on factors like a company’s industry or the age of its employees.
On the other hand, some firms with exceptionally sick or at-risk workers will benefit from those provisions and see their premiums come down under the new rules, which took effect this year.
What we didn’t know was how many small businesses would see their rates rise and how many would see them fall. Now, it’s becoming clear.
“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,” CMS’ Office of the Actuary wrote in a new report. Conversely, “the effect on large employers is expected to be negligible,” because most large companies run their health insurance programs in house.
Officials later point out that, when employers are forced to pay more for their plan, they generally pass on some of those costs to their employees. Similarly, those who see their company’s premiums drop tend to pass on some of the savings to their staff in the form of lower employee contribution payments.
Consequently, according to the estimates, which the agency says are based on industry research and conversations with insurance experts, roughly 11 million of the 17 million individuals who have health care plans through a small employer will see their premiums increase as a result of the new rules on insurers in the law, while 6 million people will enjoy lower premiums.