PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Will Small Businesses Finally Get Relief from ObamaCare?

By at 18 November, 2016, 11:10 am

Health Insurance

The Cost nightmare can end with smarter policies and reforms

by Raymond J. Keating-

President Barack Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010. And according to President-elect Donald Trump’s key campaign promise, ObamaCare will not be around to see its seventh birthday.

Make no mistake, the end of ObamaCare replaced by sound policies that lower prices and encourage competition would be a welcome development for small business, investment, economic growth and job creation.

Wrong Prescription from the Start

Anyone understanding basic economics and how government operates understood at the time it became law that ObamaCare’s mix of more government regulation, mandates and controls, increased taxes, and ramped up government subsidies and spending would mean increased costs, dampened job creation, and diminished economic growth.

In an SBE Council piece published the day after ObamaCare was signed into law, we warned, “President Obama and Democratic leaders twisted arms and made promises to get big government ObamaCare narrowly through the U.S. House of Representatives. Now, the hard part comes for those of us in the real world. That is, dealing with the many and significant costs to be imposed. Obviously, small businesses owners – the innovators and job creators in our economy – will get hit hardest.”

The obvious lesson for those who constructed ObamaCare is that they should have listened to small business owners and entrepreneurs – and they did not.

In another piece days later, SBE Council noted that polls showed a majority of Americans opposing ObamaCare and supporting repeal just days after it was passed. But the Obama administration and allies in Congress assumed that people would come to like it once they understood it. SBE Council countered:

“This has been the major error – or act of arrogance – committed by President Obama and leaders in Congress. That is, they actually believe that people did not understand ObamaCare, and that’s why majorities opposed it. These ideologically blinded politicians missed the reality that the more people understood the measure and its effects, the less popular it became. Few reasons exist to believe that ObamaCare will gain in popularity as time passes. That is especially the case given the looming costs for entrepreneurs and the business community. After all, with each passing year as this effort is phased in, the commensurate costs will only increase.”

We don’t gloat in “I told you so’s,” but….

And within a month of passage, the call for repeal was clear: “The fight over ObamaCare is not over yet. Indeed, from a small business perspective, it better not be. After all, if the battle is over, the entrepreneurial sector faces the inevitability of skyrocketing costs, including higher health coverage premiums, reduced choices in the marketplace, and increased taxes… Small businesses will get socked – directly or indirectly – by increased taxes on higher income earners, pharmaceutical firms, medical device makers, and health insurers; expanded paperwork requirements; a mandate that individuals have health insurance or pay a tax; a mandate that businesses with 50 or more workers either offer health insurance coverage or, effectively, pay a per employee tax; the huge taxpayer costs of expanding government health care programs; and a broad expansion in other government mandates and regulations.”

Costly Predictions have Come True – with Small Businesses Bearing the Brunt

Again, the predicted woes of ObamaCare have come true – including increased costs, diminished competition, and continued public opposition to ObamaCare. This will only get worse as more aspects of the plan would take hold in coming years. Consider the following points from assorted recent reports and analyses:

• As noted in an August 2016 FoxNews.com report, major insurance companies face mounting losses thanks to ObamaCare, and pulling back from the law’s state exchanges. It was reported:

Earlier this month, Aetna, once one of ObamaCare’s biggest cheerleaders, slammed the breaks on its expansion plans and became the last of the five major national health insurers to project significant losses tied to the Affordable Care Act. 

CEO Mark Bertolini blamed “structural challenges” associated with the health care overhaul and said Aetna intends to withdraw all its “2017 public exchange expansion plans” and undergo “a complete evaluation of future participation in our current 15-state footprint.”…

Already, rates on the exchanges are skyrocketing. From 2013 to 2016, almost every state has seen an increase in monthly premiums. In Michigan they are expected to jump 17.3 percent this year. In Virginia, the average premium increase could hit 37.1 percent, Bryan Rotella, attorney and founder of the Rotella Legal Group, warns.

“In fact, two of three federal programs to manage this exact risk are due to expire in 2017,” Rotella wrote in an opinion piece for The Hill. “Without these programs to fall back on, many insurance companies likely will need to jack up their premiums even higher or bail out of the exchanges all together.”

As for the co-ops set up under ObamaCare to provide another competitive alternative, “To date, 70 percent of the original co-ops have folded due to financial strains, with only seven of the original 23 operational. ‘The only remaining question is when will all the co-ops collapse, not if,’ Josh Archambault, senior fellow at the Foundation for Government Accountability, told FoxNews.com. ‘Some might take slightly longer than others, but the future looks bleak, even after billions of federal taxpayer dollars were spent to get them off the ground and keep them afloat.’”

• The title of one Townhall.com piece summed up the entire matter – Survey Shows Small Businesses Suffering Under ObamaCare. It was reported:

Although numerous groups are facing difficulties related to ACA, few are struggling as significantly as U.S. small businesses. According to an online survey produced by LevelFunded Health, a national health insurance agency “with a hyper-focus on Affordable Care Act ‘alternative’ employee benefit programs for the small employer market segment,” 87 percent of those small businesses who offer “group health care” saw health insurance premiums rise by 25 percent since 2014, with 12 percent seeing premium increases of 50 percent or higher…

The survey found 56 percent of the 2,500 small businesses polled say they are losing quality employee candidates because of the rising costs associated with employer-provided health care plans under Obamacare.

Later in the report, SBE Council’s small business expert and advocate Susan Solovic was tapped for further insights on the ills of how small business hiring is being limited under ObamaCare:

Susan Wilson Solovic, a New York Times bestselling author and former ABC News business analyst, says to avoid any potential penalties associated with the 50-employee rule, small businesses are choosing to outsource many of their jobs to online freelancers, rather than hiring more staff.

Prior to 2016, many of the time-consuming regulations for small businesses with fewer than 100 employees but more than 49 employees were not enforced in order to give businesses more time to prepare for the rules. Now that many small businesses are going to be forced to comply with myriad health care rules and regulations they have been able to avoid in the past, many experts are expecting the number of Department of Labor audits to increase, adding to the growing confusion and costs being imposed on small businesses.

• An SBE Council Q&A by President and CEO Karen Kerrigan with Victoria Braden, President & CEO of Braden Benefits Strategies, Inc. and a member of SBE Council’s Advisory Council, opened: “The numbers are beginning to pour in, and they are not pretty. Many small business owners and self-employed Americans are shocked by their health insurance costs for next year. Plans and choices in the marketplace are disappearing, and many business owners and individual entrepreneurs are in angst about what to do next. (For example, see recent news stories on reported increases for Colorado, Connecticut, Illinois, New York, Florida, Michigan, and Washington.)”

Regarding small employers, Braden identified three trends:

One: Pre-ACA renewals, businesses who have stayed on the same plans who have not made the transition to ACA plans and therefore renewals are being calculated on the businesses specific claims/loss ratio. The increases are dependent on the group’s medical history for the past 12 months. Our agency’s average renewal in Georgia on pre-ACA plans is generally running less than 10%.

Two: Businesses that have transitioned to ACA plans with community rating – this is where we are seeing the HUGE increases. When the law was first being translated I think we all understood the annual increases were to be limited to 10%. Since then we have learned the 10% means just medical trend, not the actual increase in providing coverage. On ACA plans, we are generally seeing increases of 15% or more.

Three: Individual insurance, where the company does not offer group health insurance and employees are purchasing individual policies on or off the Exchange is the area, in my opinion, that has been hit the hardest! BECAUSE many of the health insurance carriers are no longer offering individual policies.

Nationwide, United Healthcare has withdrawn from the individual market. In my state, Georgia, Aetna and Humana are limiting their product to 1 individual policy, a very high deductible only plan with a very narrow network and limited prescription drug formulary. Our only viable options for 2017 are Blue Cross and Kaiser. Last year Blue Cross was, on average, 16% higher than comparable policies at either Humana or Aetna. For 2017, Blue Cross filed and received, an average increase of 21% on their individual policies. With the majority of individual policies in the metro-Atlanta area at Humana or Aetna, the average mathematical increase to purchase a comparable Blue Cross policy will be 37%. With no other options. It is not pretty.

• A report in the August 31, 2016, Investor’s Business Daily highlighted the fundamental woes of ObamaCare:

The individual insurance market existed long before ObamaCare came around. In fact, when President Obama signed it into law in 2010, there were 15 million people who bought plans on their own in this market, without any help from the federal government. It was competitive, and premiums for many were low.

In fact, as a Government Accountability Office report found, plans were available in almost every state that were far cheaper, and had lower deductibles, than what people can find in an ObamaCare exchange, in some cases even with subsidies.

The market had its problems, to be sure, particularly for those with expensive pre-existing conditions, but these could have been fixed without the massive, costly and intrusive ObamaCare machinery.

ObamaCare took what was a relatively healthy market and is now in the process of destroying it through government mandates, regulations and taxes.

None of this should come as a surprise to anyone, since several states experimented with ObamaCare-style market reforms in the 1990s, only to see the exact same problems: Premiums shot up, enrollment lagged, and insurers bailed amid big losses.

• Finally, the findings of an April 2016 Heritage Foundation study titled “Year Six of the Affordable Care Act: Obamacare’s Mounting Problems” authored by Robert E. Moffit, Ph.D. were summed up this way:

The Affordable Care Act (ACA, popularly known as Obamacare) is ripe for repeal. For the American public, there are ample reasons for dissatisfaction: higher costs; arbitrary and sometimes absurd rulemaking; bureaucratization of an already overly bureaucratized sector of the economy; incompatibility with personal freedom and religious liberty; enormous spending and heavy taxation; and widely acknowledged design flaws, evident in the ACA’s hopelessly complex and unworkable subsidy schemes, boondoggle bailouts, and collapsing co-ops. 

Obamacare Repeal and Reform is Here

Of course, just as was the case in 2010, people will ask, “What’s the alternative?”

Our answers have not changed because they are built on sound economics and sensible policymaking:

“Plenty of measures would expand choice and competition, and restrain or reduce costs. For example, allowing for health insurance to be purchased across state lines would free up individuals and small businesses from the significant costs and limited choices resulting from misguided state regulations and mandates. Equalizing the tax treatment for all health insurance premiums makes sense. Expand the incentives for pro-market, pro-consumer options like tax-free health savings accounts. Institute substantive medical tort reform, including limiting pain and suffering awards, and moving to a loser pays system. Indeed, the list of positive options is quite lengthy.” One of the additional items on the list would be sound state high risk pools to help those with pre-existing conditions.

And we will conclude now as an SBE Council analysis did in April 2010:

“Repeal is critical to clear away the dark clouds that ObamaCare now casts over health care, small businesses and the economy, and implement reforms that actually expand choices and competition in the marketplace. Quite frankly, anything less than repeal, keeps the U.S. on track to a complete government takeover of health care in this nation. And make no mistake, ObamaCare, with its negative effects for private insurers, expanded government funding and extensive regulatory controls, is all about government-run health care.”

SBE Council looks forward to working with the incoming Trump Administration and the 115th Congress on reforms that actually work for small businesses, entrepreneurs and their workforce.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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