This is the fourth day of a five-day series where GateHouse Media Illinois heath care reporter Dean Olsen examines the Affordable Care Act and its expected impact. This series will be posted in its entirety at http://bit.ly/ACAseries. If you have questions about the ACA, email them to email@example.com. Olsen will round up the best questions and publish the answers in the newspaper and online in the coming days.
* Online calculator to estimate premium subsidies offered through the ACA
Many people in Illinois were relieved when President Barack Obama's administration delayed for a year the penalties that were going to be leveled in 2014 and beyond for certain employers not offering health insurance to their workers or for offering insurance that was deemed too expensive or inadequate.
"We applauded the decision," said Laura Minzer, executive director of the Illinois Chamber of Commerce's Healthcare Council.
But she said many business leaders still question whether the penalties, known as the employer mandate, are needed at all and whether other parts of the Affordable Care Act will have the desired effects or actually make health coverage less affordable.
All of the new regulations facing employers are causing headaches, Minzer said.
And beginning in 2015, employers will face $2,000- or $3,000-per-employee annual penalties if they employ more than 50 full-time-equivalent workers and either fail to offer those workers health insurance, offer inadequate insurance or offer it at a cost that exceeds 9.5 percent of an employee's gross pay.
"It's going to be hugely confusing for the employer," Minzer said. "It's also going to be 10,000 times more confusing for the employees."
Impact on business
Because of the complexity, insurers and other observers say implementation of health-insurance exchanges in every state could be rocky, especially in the first year, though the delay of employer penalties reduces the pressure somewhat.
Page 2 of 5 - The number of employers directly affected by the penalties nationwide is relatively small. Of the 6 million employers in the United States, 96 percent of them are small, with fewer than 50 workers, and they aren't subject to the penalties.
About 200,000 employers have more than 50 employees, and 94 percent of those employers already offer health insurance, with almost all offering coverage that would be considered adequate by the ACA, experts say. Fewer than an estimated 12,000 employers — which employ up to 1.5 million people in total — don't offer insurance and would be subject to penalties.
But all small businesses will be affected by changes that the ACA is making in the way insurance is priced, Minzer said. Those changes could boost or reduce insurance rates for small businesses, depending on the makeup of their work forces.
Small-business owners also are affected by the law's individual mandate, which requires that most Americans have health insurance or face tax penalties, Minzer said. Many of those owners may earn too much to qualify for federal assistance reducing the cost of monthly premiums, she said.
Business officials wonder whether the ACA does enough to get health-care costs under control in the future, even though the law requires certain preventive services to be covered with no co-payments or deductibles and contains initiatives to promote more efficient and high-quality care by hospitals and doctors.
If costs continue to rise precipitously, experts say, even federal subsidies and competition in insurance exchanges may not be able to keep coverage affordable.
Minzer supports more-aggressive steps to control costs, such as malpractice reforms that she says would reduce the wasteful practice of "defensive medicine."
The Illinois Health Insurance Marketplace, the insurance exchange that will operate online, by phone and through in-person counselors, won't directly affect employers already providing insurance for their workers. In 2014, Illinois employers with 50 or fewer workers can use the marketplace to purchase a plan, even though their options will be limited in the first year.
Having more people covered by health insurance could help moderate future price increases for employers, according to Jeffrey Ingrum, president and chief executive officer of Urbana-based Health Alliance Medical Plans.
In theory, there will be less "cost-shifting" as hospitals and other health-care providers have less need to boost prices to cover the unpaid cost of care for the uninsured, he said.
But insurers say the law, with its end to exclusions based on "pre-existing conditions" and the creation of new restrictions and taxes on insurers, will lead to double-digit increases in insurance rates in the individual and small-group markets.
For people buying insurance through the Illinois marketplace, at least some of the increases will be offset by a sliding scale of federal subsidies for people earning up to 400 percent of the federal poverty level, or up to $46,000 a year for an individual and $94,200 for a family of four.
Page 3 of 5 - "Affordability will be an insurer's biggest challenge," said Elena Butkus, a Chicago-based regional vice president for Aetna Inc.
Mike Mahorney, a benefits adviser at Springfield's Nicoud Insurance Services, was more blunt: "It's an absolute mess, with so many components."
Some critics contend that the law's flaws will lead to a Canadian-style "single-payer" system, similar to the "Medicare-for-all" option that Congress debated before passing the ACA.
But advocates say the expected startup problems, while not insignificant, shouldn't be used as an excuse to repeal the law.
"Some people will take it to say this is another failure in government," said Jim Duffett, executive director of the Champaign-based Campaign for Better Health Care.
He said the law's good points "override all of the negatives."
The ACA was the culmination of 100 years of legislative battles for universal health care in the United States, he said.
Insurers selling coverage inside and outside the marketplace won't be able to deny coverage or increase rates based on pre-existing conditions, but there will be an annual enrollment period and other controls to prevent people from waiting until they get sick before seeking insurance.
The additional healthy people enrolled in insurance will help spread the risk of covering sicker, uninsured people, but insurers must offer more comprehensive coverage as well as certain preventive services with no out-of-pocket charges.
Make out like 'bandits'?
The ACA's new rules on insurance plans primarily affect the small-group and individual markets, which cover less than 15 percent of Illinois' population. But the law's other regulations have a wide reach, Minzer said.
All insurers will face higher taxes. The Illinois marketplace will charge insurers a fee of 3.5 percent of the premium cost, which could be passed on to customers.
Insurers are required to devote certain minimum percentages of their revenues to medical care or issue rebates to customers.
Insurers are expected to serve more people because of the law's mandate that most people obtain coverage and the mandate that employers of 50 or more full-time workers offer comprehensive insurance to workers or face penalties.
Health Alliance, which currently covers 285,000 people through various plans, could serve 15,000 to 20,000 more people because of the ACA, Ingrum said.
Duffett said insurers "are going to be making out like bandits." Ingrum disagreed.
Large employers, which are more likely to be self-insured, aren't expected to see much change in their spending for health coverage, according to a 2012 study by the Urban Institute.
In fact, the study's authors write, the ACA "offers the potential, through cost containment, of slowing the growth in health-care costs, benefiting private along with public purchasers of health insurance."
However, insurance experts have predicted "rate shock" — a premium increase of 15 percent to 30 percent — for people buying individual and family coverage through the marketplace. Small-group coverage could rise between 5 percent and 10 percent, according to Minzer.
Page 4 of 5 - Any increases could be at least partially offset by subsidies, but even Quinn aides are uncertain about the potential impact on insurance costs in the marketplace.
"We've never done this before," said Deputy Gov. Cristal Thomas. "Overall, it's most important that people have coverage to lead healthier lives."
Tough to plan
Small employers no longer will face price increases connected with certain employees who have chronic health problems. As a result, some small businesses with older or sicker employees will see their 2014 rates drop, but Mahorney, the benefits adviser, said he also has seen projections in which groups would see increases of 30 percent or 40 percent.
"It makes planning very difficult for employers," Mahorney said.
Anthony Walker, owner of Walker's Limousine and Shuttle Services in Decatur, said the marketplace could benefit the 14 independent contractors who drive for him.
Because of their income, the contractors will qualify for federal assistance reducing their premiums. So will the three dispatchers he employs but to whom he can't afford to offer health insurance.
"I think it would be a great opportunity," Walker said.
Many of the uninsured people who work at Mark Burris' seven Subway restaurants in the Springfield area will be able to seek subsidized insurance through the exchange. He said he can't afford to offer insurance to employees who aren't managers.
But Burris, 61, doubts that many of his employees are even aware of the new insurance options they will have.
"I can't imagine that the regular employees will think that they can even afford it," he said.
Burris is a member of a small-business consortium affiliated with the Campaign for Better Health Care. The campaign has been at odds with the state Chamber of Commerce over a proposal for a marketplace, but Burris agrees with the chamber that the ACA is creating headaches for employers.
"I think every person in the United States deserves health insurance," he said. "The problem is how to pay for it."
The chamber opposes the ACA's requirement that employers with more than 50 employees provide "minimum essential coverage" to employees and dependents or face penalties if any of those employees end up receiving subsidized coverage through state exchanges.
Burris, a Glenarm resident, sold off his interests in several Subways, in part so he would be under the 50-employee limit and not be subject to the ACA's requirements and penalties.
The penalties, according to Minzer, are based on formulas that treat employees as full time if they work an average of 30 or more hours a week. The fines are $2,000 a year per employee for employers who don't offer coverage and $3,000 per employee for employers whose coverage is deemed unaffordable.
The law will help entrepreneurs, who may have had problems in the past affording insurance for themselves and their small workforces because of pre-existing conditions or chronic illnesses, Minzer said.
Page 5 of 5 - But she said the ACA could result in larger employers transferring more of the cost of health insurance to their workers.
Federal rules measure the affordability of employer-sponsored coverage as a percentage of an employee's income, but the percentage doesn't take into account the premiums that workers may pay to cover a spouse or children. This is a glitch in the law that could result in employers hiking premiums for dependents to hold down the cost of employee-only coverage, Minzer said.
And if the employees' dependents want to qualify for subsidies through the exchange, she said, the employee would have to drop family coverage through the employer — an inefficient and more expensive option for everyone involved.
Dean Olsen can be reached at (217) 788-1543. Follow him at twitter.com/DeanOlsenSJR.