President Obama’s simple line “If you like your current health plan you can keep it” is haunting him amidst reports that 3.5 million Americans who purchase health plans on their own, in the “individual” market, have lost that coverage as a result of Obamacare.
Very soon, small businesses will be faced with a similar fate.
They will also see their health plans canceled as a result of Obamacare.
Small businesses, with fewer than 50 employees, are not forced to provide coverage under Obamacare.
But when they do, policies sold in the small group market are subject to the same regulations now forcing the termination of millions of health plans sold directly to consumers.
But late last year, businesses that employed fewer than 50 employees began exploiting a loophole they found in the Obamacare text. If the businesses renewed their policies early, before the end of 2013, then those plans would not be subject to Obamacare’s costly mandates for a full year, in many cases until December 31, 2014.
But that clock is already ticking. Starting in October 2014, many employees of small businesses will start getting the same notices that are now being mailed to individuals, informing that their existing health plans are also being canceled.
These small businesses will be faced with a bleak choice.
Find another policy that’s compliant with Obamacare, but also more costly. Or put their employees into the Obamacare exchange.
For many of the largest insurers, including Aetna, United Healthcare, Wellpoint, and Cigna; the small group market is among their most lucrative insurance products. For this reason, these big insurers are likely to try and hold onto some of this business.
But they will not be able to fully shield businesses from the new costs.
While a smaller percentage of business plans may get canceled (relative to the fraction of individual market plans that are now being terminated) the small group market is nonetheless much bigger than the individual market. Even if Obamacare materially affects a smaller fraction of the business plans, it will still encumber far more people than the 3.5 million individuals now losing coverage.
Insurers that are dumping their individual market policies are doing so now to meet a January 1, 2014, deadline to either comply with Obamacare or terminate their plans. They need to give consumers 90 days notice under HIPPA rules.
In contrast, by renewing their policies “off cycle,” the small businesses were able to lock in another year before they have to comply with Obamacare. Many of these small business plans won’t be subject to the law’s mandates until January 1, 2015.
This means that employees of small businesses won't get their cancellation notices until October or November of 2014. That’s because these plans are subject to ERISA rules. These regulations require businesses and health plans to notify consumers 60 days before they plan to change or terminate policies. News of cancellations will go directly to employees, just like the termination notices now arriving in the mail.
(Some individual market policies were also renewed "off cycle" and bought themselves more time. Many of these plans will also get terminated next year).
A hint of these woes could start to filter out earlier. Health plans have to submit their products to state insurance commissioners (and get rates approved) in the spring of 2014. That’s when politicians will start to get a more precise view on how many policies will be canceled.
And how much will the remaining small businesses plans be affected once they are also made subject to the full brunt of Obamacare?
Aetna has already warned in its marketing materials that dramatic increases in premiums might be in the offing. “Factors such as essential health benefits, maximum plan deductibles, the application of new taxes and fees and new rating rules will combine to push insurance premiums up substantially for some small businesses,” the insurer said.
In December, Aetna Chief Executive Mark Bertolini said he expects that premiums for individuals or small groups seeking coverage on health insurance exchanges will rise by 20% to 50% in 2014, after the grandfathering expires.
This is what really has Democrats so worried. These cancellation notices are going to hit small businesses one month before the next election.
Congress could introduce legislation to allow the existing small business plans to be extended indefinitely. Most of these are good plans already subject to strict regulation. There is no reason Obamacare should force changes.
It’s another painful blow set to befall consumers as a result of Obamacare.
Every time another layer of this law gets peeled away, or another provision gets implemented, another block of Americans gets harmed.
Small business policies are the next to fall.
You can follow Dr. Scott Gottlieb on Twitter @ScottGottliebMD