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Many small firms to opt out of health benefits in 2015

J.K. Wall
January 20, 2014
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Brian Adams had made up his mind. He was going to stop providing health insurance to his 15 employees at Indianapolis-based Godby Hearth & Home.

Then in October, Adams decided to renew his group health plan early, extending coverage until Oct. 31, 2014.

After that, however, he plans to work with his employees to help them buy insurance through the Obamacare exchanges.

Many employers with fewer than 50 workers followed Adams’ lead last year. They kept their health plans for 2014, but a growing number say they’ll drop group coverage at the end of this year.

“It’s very hard for a small-business owner to deal with this. It is very complex,” Adams said. “And it is dealing with what is probably the most crucial benefit that an employee can have.”

Things were already trending this way before Obamacare, known officially as the Affordable Care Act.

The percentage of employers with 50 or fewer workers offering health benefits in Indiana declined from 44 percent in 2000 to just 29 percent in 2011, according to a study by the Robert Wood Johnson Foundation.

Nationally, the percentage of small firms offering health benefits dropped 10 points, according to both the RWJF study and an annual employer survey by Kaiser Family Foundation.

Obamacare does not require that small employers offer health benefits, as the law does for employers with 50 or more workers. But the law does encourage them to do so by offering sizable tax credits to offset the cost of health benefits.

If Obamacare does induce small employers to rush to end their health benefits, it will be both good news and bad news for the effectiveness of the law.

On one hand, it shows that Obamacare’s overhaul of the individual insurance market has made that market a far more attractive option, by guaranteeing coverage even for unhealthy consumers and offering individual tax subsidies to lower the cost of insurance. That is allowing some businesses to pursue what they call “an individual strategy” of helping their employees obtain health insurance, but not actually buying it for them.

 On the other hand, Adams and other small-business owners are considering an end to their group benefits because they expect other provisions of Obamacare to send their group plan premiums skyrocketing at the end of 2014.

“My hands are going to be forced,” said Adams, who was an accountant before buying the Godby business. “Once this thing settles through, our group rates will jump to the point where we will not be able to sustain it.”

Community rating

Health insurers such as Anthem Blue Cross and Blue Shield and UnitedHealthcare have told small-business owners that they face premium increases of 50 percent, 60 percent, 80 percent and sometimes even 100 percent at the end of 2014.

Those predictions were given to employer clients to induce them to renew their current plans early—before the Obamacare rules kicked in Jan. 1, but business owners and insurance brokers take them seriously.

Obamacare will increase insurance rates for many employers because it will not allow health insurers to charge their oldest customers any more than three times as much in premiums as they charge their youngest customers. Previously in Indiana, the oldest customers paid six or seven times more than the youngest.

The new rules, called community rating, mean that companies with younger-than-average workers will face a big increase in insurance rates. For businesses with older-than-average workers, the new rules will probably lead to lower health insurance premiums.

Those rules apply only to individual insurance customers and employers with fewer than 50 workers.

The Indiana Department of Insurance predicted that small employers’ health insurance premiums would rise 8 percent on average this year due to Obamacare. But for all companies with younger-than-average workers, the new rules mean they’ll be paying more.

“I can’t absorb a 60-percent increase. It’s a complete deal-breaker,” said Mike Hutson, owner of Westfield Lighting Co.

He received a projected premium increase from UnitedHealthcare of 60 percent for the end of 2014, which would mean he would pay $50,000 more per year for health benefits for his 17 workers.

He currently pays nearly $5,000 per worker for health insurance, which is a bit lower than national norms.

So instead, Hutson switched his health plan to Anthem on Dec. 1, paying just 6 percent more than he did the year before. That Anthem policy, since it was sold in 2013, does not have to comply with Obamacare’s new community rating rules. But come Dec. 1, 2014, it will, which will likely send Westfield Lighting’s premiums soaring.

At that point, Hutson said, he’s almost certain to send his employees to the Obamacare exchanges. He doesn’t expect to be alone.

“I believe that most small businesses, eventually, will punt,” Hutson said. “I think there will be a tidal wave of this.”

Half could drop coverage

Health insurance consultants who work with small employers agree.

Matt Kleymeyer at Bernard Health, a health benefits consulting firm for individuals and small employers, said he has worked with 40 companies that plan to drop their group health plans, but only four of those did so on Jan. 1.

“If you’re going to be faced with a 50-[percent] or 60-percent increase, you may not have an option to keep a group plan,” Kleymeyer said. “Groups need to be aware of this. They need to start communicating to employees early. They need to think about a reimbursement program. And they need to take time to roll it out.”

The main thing that kept Adams, who is one of Kleymeyer’s clients, from dropping Godby’s health benefits was that the majority of his employees would have paid more for health insurance in 2014 on the Obamacare exchanges than in Godby’s group health plan.

But if premiums spike at the end of this year, as Adams expects, the exchanges will become the most attractive option.

Tony Nefouse, a health insurance broker for individuals and small businesses at Indianapolis-based Nefouse & Associates, is also seeing small employers end their group health benefits.

“I’m chopping up groups left and right,” Nefouse said in late 2013, noting that about half his clients with fewer than 50 workers have either already dropped coverage or have decided to drop it at the end of this year.

It’s firms with fewer than 30 workers that are most likely to end group coverage now, Nefouse said. And among firms with fewer than 10 workers, about 80 percent are working to drop coverage.

Employers with lower-wage workers, or that have had low participation rates in their group health plans, are most likely to drop coverage, Nefouse added.

“With skyrocketing premiums over the years, you have employers who feel like their profits are all going to health insurance premiums,” Nefouse wrote in an email.

 But more could add coverage

Certainly not all small employers are talking about ending health benefits. Some are even adding them, as Obamacare encourages them to do.

Indianapolis-based Sun King Brewing Co. decided to add health insurance for the first time, starting on Jan. 1. That was partly because the company expected to exceed 50 employees by the end of 2013 and partly because its owners felt it was the right thing to do.

“Since we founded the company, we planned to offer health insurance, as soon as we could afford it,” said Sun King President Omar Robinson.

In fact, several national studies have concluded that Obamacare will lead to a slight increase in the number of firms offering coverage.

For example, survey data collected by the National Federation of Independent Businesses last fall found that 13 percent of employers with 50 or fewer workers planned to add coverage in 2014 — wice as many as planned to drop it.

Also, a simulation conducted in early 2013 by California-based RAND Corp. found a slight increase in small firms offering insurance by 2016. Small-business coverage will decrease in some states, Rand’s model found. But in either case, the change will be modest, with increases topping out at 5 percent and decreases bottoming at 2 percent.

Obamacare tries to encourage the smallest employers — those with fewer than 25 workers — to continue offering health benefits by allowing them to deduct as much as 50 percent of their health insurance premium contributions from their 2014 corporate income taxes.

Obamacare, since it was passed in 2010, has allowed small businesses to claim a tax credit equal to 35 percent of the money they spend on employee health benefits. But few small businesses have taken advantage of it, according to a 2012 report by the Government Accountability Office.

That’s surprising because so many employers could qualify for the credits, according to data crunched by two liberal health insurance advocacy groups, the Small Business Majority and Families USA.

In Indiana, an estimated 61,410 employers, or 71 percent of all firms with fewer than 25 workers, would qualify for a tax credit, which would average $857 per worker.

Westfield Lighting is one of the companies claiming the credit in Indiana. But Hutson said the tax credit won’t stop him from dropping his group health plan next year.

“While it helps, it is still a cash-flow killer,” he said in an email. “I have to put up the money and then wait for the benevolence of our ‘statesmen’ in Washington to give it back at the end of the year. No thanks.”

Also, a lot of small employers don’t qualify for tax credits. Adams at Godby Hearth & Home, for example, said his employees on average earn more than $50,000, making his firm ineligible for the credits.

Instead of paying for health insurance directly for 2015, Adams said, he will pay Bernard Health to guide his employees through the maze of choices and incentives that now exist for buying health benefits individually. Adams will also contribute what he was paying before for group coverage to subsidize his employees’ insurance purchases.

“It is really taking this responsibility of insurance out of the business owner’s hand and putting it into the individual’s,” he said. “The old system clearly was going down, heading toward a cliff, anyway. I think the simple point of empowering people to take control of their own destiny for health care is a good thing.”•
 

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  1. OK so I'll make this as short as I can. I got a call that my daughter was smoking in the bathroom only her and one other girl was questioned mind you four others left before them anyways they proceeded to interrogate my daughter about smoking and all this time I nor my parents got a phone call,they proceeded to go through her belongings and also pretty much striped searched my daughter including from what my mother said they looked at her Brest without my consent. I am furious also a couple months ago my son hurt his foot and I was never called and it got worse during the day but the way some of the teachers have been treating my kids they are not comfortable going to them because they feel like they are mean or don't care. This is unacceptable in my mind i should be able to send my kids to school without worry but now I worry how the adults there are treating them. I have a lot more but I wanted to know do I have any attempt at a lawsuit because like I said there is more that's just some of what my kids are going through. Please respond. Sincerely concerned single parent

  2. California Sex Offender Management Board (CASOMB) End of Year Report 2014. (page 13) Under the current system many local registering agencies are challenged just keeping up with registration paperwork. It takes an hour or more to process each registrant, the majority of whom are low risk offenders. As a result law enforcement cannot monitor higher risk offenders more intensively in the community due to the sheer numbers on the registry. Some of the consequences of lengthy and unnecessary registration requirements actually destabilize the life’s of registrants and those -such as families- whose lives are often substantially impacted. Such consequences are thought to raise levels of known risk factors while providing no discernible benefit in terms of community safety. The full report is available online at. http://www.casomb.org/index.cfm?pid=231 National Institute of Justice (NIJ) US Department of Justice Office of Justice Programs United States of America. The overall conclusion is that Megan’s law has had no demonstrated effect on sexual offenses in New Jersey, calling into question the justification for start-up and operational costs. Megan’s Law has had no effect on time to first rearrest for known sex offenders and has not reduced sexual reoffending. Neither has it had an impact on the type of sexual reoffense or first-time sexual offense. The study also found that the law had not reduced the number of victims of sexual offenses. The full report is available online at. https://www.ncjrs.gov/app/publications/abstract.aspx? ID=247350 The University of Chicago Press for The Booth School of Business of the University of Chicago and The University of Chicago Law School Article DOI: 10.1086/658483 Conclusion. The data in these three data sets do not strongly support the effectiveness of sex offender registries. The national panel data do not show a significant decrease in the rate of rape or the arrest rate for sexual abuse after implementation of a registry via the Internet. The BJS data that tracked individual sex offenders after their release in 1994 did not show that registration had a significantly negative effect on recidivism. And the D.C. crime data do not show that knowing the location of sex offenders by census block can help protect the locations of sexual abuse. This pattern of noneffectiveness across the data sets does not support the conclusion that sex offender registries are successful in meeting their objectives of increasing public safety and lowering recidivism rates. The full report is available online at. http://www.jstor.org/stable/full/10.1086/658483 These are not isolated conclusions but are the same outcomes in the majority of conclusions and reports on this subject from multiple government agencies and throughout the academic community. People, including the media and other organizations should not rely on and reiterate the statements and opinions of the legislators or other people as to the need for these laws because of the high recidivism rates and the high risk offenders pose to the public which simply is not true and is pure hyperbole and fiction. They should rely on facts and data collected and submitted in reports from the leading authorities and credible experts in the fields such as the following. California Sex Offender Management Board (CASOMB) Sex offender recidivism rate for a new sex offense is 0.8% (page 30) The full report is available online at http://www.cdcr.ca.gov/Adult_Research_Branch/Research_Documents/2014_Outcome_Evaluation_Report_7-6-2015.pdf California Sex Offender Management Board (CASOMB) (page 38) Sex offender recidivism rate for a new sex offense is 1.8% The full report is available online at. http://www.google.com/url?sa= t&source=web&cd=1&ved= 0CCEQFjAA&url=http%3A%2F% 2Fwww.cdcr.ca.gov%2FAdult_ Research_Branch%2FResearch_ documents%2FOutcome_ evaluation_Report_2013.pdf&ei= C9dSVePNF8HfoATX-IBo&usg=AFQjCNE9I6ueHz-o2mZUnuxLPTyiRdjDsQ Bureau of Justice Statistics 5 PERCENT OF SEX OFFENDERS REARRESTED FOR ANOTHER SEX CRIME WITHIN 3 YEARS OF PRISON RELEASE WASHINGTON, D.C. Within 3 years following their 1994 state prison release, 5.3 percent of sex offenders (men who had committed rape or sexual assault) were rearrested for another sex crime, the Justice Department’s Bureau of Justice Statistics (BJS) announced today. The full report is available online at. http://www.bjs.gov/content/pub/press/rsorp94pr.cfm Document title; A Model of Static and Dynamic Sex Offender Risk Assessment Author: Robert J. McGrath, Michael P. Lasher, Georgia F. Cumming Document No.: 236217 Date Received: October 2011 Award Number: 2008-DD-BX-0013 Findings: Study of 759 adult male offenders under community supervision Re-arrest rate: 4.6% after 3-year follow-up The sexual re-offense rates for the 746 released in 2005 are much lower than what many in the public have been led to expect or believe. These low re-offense rates appear to contradict a conventional wisdom that sex offenders have very high sexual re-offense rates. The full report is available online at. https://www.ncjrs.gov/pdffiles1/nij/grants/236217.pdf Document Title: SEX OFFENDER SENTENCING IN WASHINGTON STATE: RECIDIVISM RATES BY: Washington State Institute For Public Policy. A study of 4,091 sex offenders either released from prison or community supervision form 1994 to 1998 and examined for 5 years Findings: Sex Crime Recidivism Rate: 2.7% Link to Report: http://www.oncefallen.com/files/Washington_SO_Recid_2005.pdf Document Title: Indiana’s Recidivism Rates Decline for Third Consecutive Year BY: Indiana Department of Correction 2009. The recidivism rate for sex offenders returning on a new sex offense was 1.05%, one of the lowest in the nation. In a time when sex offenders continue to face additional post-release requirements that often result in their return to prison for violating technical rules such as registration and residency restrictions, the instances of sex offenders returning to prison due to the commitment of a new sex crime is extremely low. Findings: sex offenders returning on a new sex offense was 1.05% Link to Report: http://www.in.gov/idoc/files/RecidivismRelease.pdf Once again, These are not isolated conclusions but are the same outcomes in the majority of reports on this subject from multiple government agencies and throughout the academic community. No one can doubt that child sexual abuse is traumatic and devastating. The question is not whether the state has an interest in preventing such harm, but whether current laws are effective in doing so. Megan’s law is a failure and is destroying families and their children’s lives and is costing tax payers millions upon millions of dollars. The following is just one example of the estimated cost just to implement SORNA which many states refused to do. From Justice Policy Institute. Estimated cost to implement SORNA Here are some of the estimates made in 2009 expressed in 2014 current dollars: California, $66M; Florida, $34M; Illinois, $24M; New York, $35M; Pennsylvania, $22M; Texas, $44M. In 2014 dollars, Virginia’s estimate for implementation was $14M, and the annual operating cost after that would be $10M. For the US, the total is $547M. That’s over half a billion dollars – every year – for something that doesn’t work. http://www.justicepolicy.org/images/upload/08-08_FAC_SORNACosts_JJ.pdf. Attempting to use under-reporting to justify the existence of the registry is another myth, or a lie. This is another form of misinformation perpetrated by those who either have a fiduciary interest in continuing the unconstitutional treatment of a disfavored group or are seeking to justify their need for punishment for people who have already paid for their crime by loss of their freedom through incarceration and are now attempting to reenter society as honest citizens. When this information is placed into the public’s attention by naive media then you have to wonder if the media also falls into one of these two groups that are not truly interested in reporting the truth. Both of these groups of people that have that type of mentality can be classified as vigilantes, bullies, or sociopaths, and are responsible for the destruction of our constitutional values and the erosion of personal freedoms in this country. I think the media or other organizations need to do a in depth investigation into the false assumptions and false data that has been used to further these laws and to research all the collateral damages being caused by these laws and the unconstitutional injustices that are occurring across the country. They should include these injustices in their report so the public can be better informed on what is truly happening in this country on this subject. Thank you for your time.

  3. Freedom as granted in the Constitution cannot be summarily disallowed without Due Process. Unable to to to the gym, church, bowling alley? What is this 1984 level nonsense? Congrats to Brian for having the courage to say that this was enough! and Congrats to the ACLU on the win!

  4. America's hyper-phobia about convicted sex offenders must end! Politicians must stop pandering to knee-jerk public hysteria. And the public needs to learn the facts. Research by the California Sex Offender Management Board as shown a recidivism rate for convicted sex offenders of less than 1%. Less than 1%! Furthermore, research shows that by year 17 after their conviction, a convicted sex offender is no more likely to commit a new sex offense than any other member of the public. Put away your torches and pitchforks. Get the facts. Stop hysteria.

  5. He was convicted 23 years ago. How old was he then? He probably was a juvenile. People do stupid things, especially before their brain is fully developed. Why are we continuing to punish him in 2016? If he hasn't re-offended by now, it's very, very unlikely he ever will. He paid for his mistake sufficiently. Let him live his life in peace.

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