New Jersey employers are concerned about the rising cost of health insurance – and they worry that federal healthcare changes will make it worse.
While experts say these views – reflected in two recent surveys of business owners in the state -- are rooted in long-term worries about rising health costs, they also pointed out that the impact of the 2010 Affordable Care Act on businesses remains an open question.
The national consulting firm Mercer, which has offices in Hoboken, Morristown and Princeton, found that New Jersey employers estimated their healthcare costs would rise by 8.4 percent if they made no changes to their plans, but that they could lower this increase to 5.1 percent by making changes in the coverage they offer.
In addition, 7 percent of business owners in the state said they were likely to drop health coverage entirely in the next five years.
The New Jersey Business & Industry Association, the state’s largest business group, found in its annual survey of members that 80 percent expected their health costs to rise this year, with 46 percent expecting increases of at least 11 percent.
Sixty percent of respondents said they expect the ACA to have a negative impact, while 16 percent predicted no impact and 6 percent expect a positive impact.
Both surveys were completed in September, ahead of the troubled launch of the new federal insurance marketplace website, healthcare.gov.
“I expect the negative impact number would be higher now,” said Christine Stearns, vice president of health and legal affairs for the NJBIA.
She added that she was surprised that the Mercer survey reported that only 7 percent of business owners thought it was likely they would drop coverage within five years.
“How employers will feel about the Affordable Care Act in a few years is very unclear,” Stearns said, noting that rising healthcare costs have been the top concern of employers for several years.
The most significant requirement that the ACA placed on employers with at least 50 workers – that they offer insurance to all workers if they offer it to any, or else pay a penalty – has been delayed until 2015. The federal government also recently delayed until November 2014 the marketplace, or exchange, website for small businesses. Employers will still be able to enroll through insurance brokers or directly with insurers.
John Sarno, president of the Employer Association of New Jersey (EANJ), said employers’ views of the law have become more negative since the surveys were completed, due to the problems with the federal website as well as cancellation notices that small-group employers have received from insurers.
The cancellation notices were mailed to employers in recent weeks, at the same time that insurers cancelled some individual insurance policies. The plans that are being offered as replacements provide more coverage, but employers are reporting that they’re also more expensive. The ACA provides tax credits to small employers that employ primarily low-wage workers.
The EANJ, which provides advice to business owners on employment law, has been enrolling businesses in its multiple employer welfare arrangement (MEWA), which allows businesses to self-insure as part of a group with other employers.
Sarno believes that, in the long term, the ACA will not be a primary reason why employers decide whether to offer insurance. He said factors like the need for employers to compete for qualified workers, as well as structural changes in the economy, will have a larger impact than the ACA.
“The jobs being added now are low-end, low-paying jobs,” which traditionally don't provide health insurance, Sarno said. These workers are more likely to received federally subsidized insurance through the ACA marketplace or Medicaid, he said.
Stearns agreed that this is an important trend, but said the ACA could have a significant impact by making coverage more expensive to employers who are already struggling to offer insurance.
“For most of them that I talk to, it just comes down to cost and whether they can afford it,” Stearns said.
The ACA has been controversial among employers since it was passed in 2010. One of the largest groups representing small businesses, the National Federation of Independent Business, opposed the law since before its passage.
NFIB New Jersey spokesman Jack Mozloom said business owners aren’t pleased with the changes to their insurance plans and are seeing increases in the premiums they pay for coverage.
“Our members have been opposed to the law from the beginning because they were very suspicious of the federal government’s ability to centrally manage a big part of the economy,” Mozloom said.
Joe Olivo, president and CEO of Perfect Printing in Moorestown, is one of those concerned NFIB members. He said he’s “terrified” of the price quote he will receive in January for insurance coverage to replace his current plan, which expires in March. He said his insurance broker is “so swamped right now he can’t even return my call” due to the ACA. He also expressed frustration that he can’t compare plan prices easily since the federal small-business marketplace website is delayed.
“I’m just frankly just horrified and really worried about what we’re going to do,” said Olivo, adding that he may reimburse employees who buy individual insurance rather than continuing to provide it for them. He also said he won’t consider expanding beyond his current 48 employees until he understands the impact of the insurance mandate for employers with 50 workers in 2015.