NJ Small Businesses Wait and Wonder on Healthcare Reform

Mary Jo Patterson | May 19, 2010
With steep hikes and shrinking coverage still the norm, business owners and entrepreneurs try to anticipate the impact of federal health insurance provisions

President Barack Obama signed a sweeping healthcare overhaul bill into law March 23, but health insurance costs remain high — and are about to go much higher — at Rosenberg & Associates, a 52-person firm supplying court reporters and other services to law firms from a busy suite of offices in Roseland.

None of the law’s provisions takes effect immediately, and some will not become reality until 2014. But come June, owner Linda Rosenberg faces a nasty 33 percent increase her health insurance provider imposed earlier this year.

It’s the second steep rate hike she’s had since 2007, when a 22 percent increase sent her on a wild goose chase to find cheaper rates and comparable coverage for employees. The search ate up hours of company time but ultimately proved futile. No better deal seemed to be out there.

Now she’s comparison shopping again, and nearing the same conclusion. Many other New Jersey businesses are in the same boat. Relief — should it come — remains on the horizon.

“She’s been in continuous meetings, trying to see how she can offset it,” said Cathy Kane, vice president of operations at Rosenberg & Associates, a privately owned company founded in 1965 in Rosenberg’s West Orange basement. “Right now, it looks as if she’s going to absorb that 33 percent. She feels having it filter down to the staff would be too much of a burden.”

Premium Hikes and Layoffs

Small businesses make up 80 percent of New Jersey firms, but only 60 percent of them offered health coverage benefits in 2008, according to the federal Agency for Healthcare Research and Quality. The smaller the firm, the less likely it was to offer coverage.

Nationally, the share of businesses with 50 or more workers offering health benefits is 90 percent, but only 46 percent of the smallest firms offer coverage, according to a 2009 report from the Kaiser Family Foundation, a nonprofit that researches health issues. Employers that contributed to their workers’ annual health insurance premiums saw their costs increase 131 percent on average during the past decade, Kaiser said.

In fact, hikes have been so high that one in five small businesses across the country had to lay off an employee during 2008-2009, according to a survey by the National Small Business Association, a trade group in Washington, D.C. When asked, “What was the impact of health insurance increases on your business?” three in five small businesses reported not giving raises, while one in four said they lowered, or eliminated, 401(k) contributions.

In New Jersey and 13 other states, hundreds of small business owners and self-employed entrepreneurs felt so much pain they joined “The Main Street Alliance,” a group lobbying for health insurance reform. Kelly Conklin, owner of a woodworking company in Bloomfield, became the face of the New Jersey Alliance by testifying about unaffordable premiums before a House committee. Just before the vote on the reform bill, Conklin announced he had been hit with a 124 percent rate hike.

Generally dismal business conditions have intensified the misery at virtually every New Jersey business that chooses to cover its employees, including Rosenberg & Associates. In addition to procuring court reporters for legal proceedings, the firm helps clients manage documents and produces multimedia presentations for trials. Modern litigators have replaced easels and wooden pointers with animation, graphics and PowerPoint presentations.

“In our industry, when the economy is bad, everyone litigates,” Kane said. “Our business has not really decreased, but it’s taking a long time for people to pay their bills. Since October 2008 everyone has been looking at their overhead to see where they could cut.

“We did not cut any people,” she said. “But we did not give raises as in years before.”

‘You Want Your People in Good Health’

Rosenberg & Associates has always provided a healthcare option for its employees, although the benefit was not been required by state or federal law. It splits the cost of the insurance with workers.

“We feel, as a company, it’s something we have to do,” Kane said. “You want your people in good health. We also need to attract and keep talented people to help our clients.”

Under the current policy, Rosenberg pays $4,860 a year to cover a single individual and $16,000 for a family policy. Employees opting for a family policy, however, pay 50 percent of their own cost and 100 percent of coverage for family members.

That translates into $222 per month for Lori Dubreuil, a single woman who has worked for Rosenberg & Associates for seven years. She has been opting for coverage by a PPO, a form of managed care costing about $40 more than the HMO her company also offers. Seeing a doctor requires her to fork over a co-pay of $30.

“We’ve been told about the increase which, obviously, is huge,” she said. “It might cause me to switch to the HMO.”

Dubreuil is keenly aware of the crimp medical costs put in her wallet. Last year she asked her company’s insurance specialist to look into an alternative plan.

“From what I heard, you got to bank some of the money you didn’t spend,” she said. “You were also a little bit more in control, but because of the size of our company, it wasn’t an option.”

Changes Coming, Consequences Unclear

Like many others, Dubreuil does not know how, or if, the new healthcare law will affect her. She approves of the section saying no one may be denied coverage. With aging parents, she hopes Medicare coverage will improve, as promised. But she is not sure where costs for most consumers will fall.

Kane said that as a small business owner, Linda Rosenberg is not optimistic the new healthcare landscape will be any better. The overhaul requires organizations with more than 50 employees to offer coverage or pay a penalty, but she does that already. The legislation also calls for creation of state-based exchanges through which individuals and certain small businesses can purchase health coverage, but no one seems to know how that will work.

Most New Jersey firms seem just as uncertain. “Quite frankly, no one has a handle on all the intended, and unintended, consequences of the recently enacted federal healthcare reform,” the New Jersey Business & Industry Association tells members on it website. It promises updates.

When the New Jersey Chamber of Commerce scheduled a seminar April 29, “Understanding Health Care Reform on Its Impact on New Jersey Employers and Their Employees,” so many firms signed up that it scheduled another seminar for June.

“I think there’s still a lot of confusion among employers,” said Denise Angelman, an insurance specialist with The NIA Group, which co-hosted the event. She urged employers to start communicating with employees about measures that will take effect this fall, including the provision expanding coverage of dependent children to the age of 26.

“There’s a sense that things will change, but people are not sure how,” Angelman said. “The big question on everyone’s mind was, ‘Will this cost me less, or more?’ ”