Dec. 11--When the cost of group health insurance became too expensive a few years ago, OML Worldwide Transportation, a limousine service in Northbrook, stopped offering the benefit to its employees. The small business is bringing back coverage for its 40 employees next year.
The company's turnaround illustrates several trends in the Illinois health insurance market. Premiums have spiked and provider networks have shrunk for consumers who don't have coverage through their jobs and have to buy insurance on their own. In the group insurance market for businesses with fewer than 50 employees, insurers have eased requirements and rates are less volatile, insurance brokers say.
For Dale Schahczinski, chief operating officer of OML Worldwide, the decision to again offer insurance to employees turned out to be simple.
"In the group market, the coverage is usually better and the network is better," Schahczinski said. "We looked at the numbers and they are reasonable."
OML Worldwide isn't alone. Brokers report that they are on pace to have a record year for submitting new applications for small-group policies that take effect on Jan. 1. Blue Cross and Blue Shield of Illinois, the state's dominant health insurer, confirms strong interest in small-group plans, said Brian Cheney, vice president of small business.
The increasing cost of health care has been the top concern for small employers for many years, according to the National Federation of Independent Business. The association challenged the constitutionality of the Affordable Care Act, President Obama's signature health care law, because small business owners were concerned about the potential costs and burdens of the policy.
When the law rolled out in 2013, some contemplated dropping their health plans. Starting this year, employers with more than 50 full-time employees are required to offer health benefits that comply with the law or face a penalty.
Small businesses under that threshold don't have an employer mandate, but many provide insurance because they want to take care of their workers. Some that don't offer coverage provide other health benefits. The NFIB says 14 percent of its members do not provide insurance but reimburse medical costs or the cost of private insurance.
OML Worldwide provided insurance for many years, Schahczinski said. As its workforce got older -- and in some cases sicker -- the cost of coverage went up. Some of his younger employees dropped out of the health plan because of rate increases.
"When you have a small group, participation needs to be about 75 percent," Schahczinski said. "As you lose young people in your group, it's not sustainable."
When OML Worldwide stopped providing insurance, the company still encouraged employees to buy their own coverage by providing financial aid, Schahczinski said.
He said he was happy when the Illinois insurance exchange created by the Affordable Care Act debuted in 2013 because it offered some affordable individual insurance policies for him and his workers. Insurance companies also could no longer deny coverage to individuals for medical reasons. The only factors that can be used to set rates are age, family size, geography and tobacco use.
But the third year of open enrollment under Obamacare has brought some unwelcome changes for Illinois consumers. The average lowest-cost Silver plan rose 16 percent from 2015 to 2016, compared with 4 percent from 2014 to 2015, according to Avalere Health, a consulting firm. Health plans sold in Illinois on the exchange on Healthcare.gov are arrayed in bronze, silver and gold categories.
Insurance companies with decades of experience said they had underestimated the needs of consumers, some of whom were previously uninsured. New customers under the Affordable Care Act often turned out to be sicker than insurers expected.
Blue Cross raised premiums an average of 17.8 percent, but some customers saw much higher rate increases. Those hikes haven't upset some as much as Blue Cross' decision to eliminate its popular PPO plan, which is widely accepted by doctors and hospitals across the state, from the individual market.
The company has said that the PPO plan was no longer sustainable in the individual marketplace at current premiums because the claims were too high. If the costs of one plan are high, it raises the premiums for all of the company's individual plans, Blue Cross said.
The company, though, continues to offer the PPO plan in the small-group market, which is a separate risk pool than the individual market. The PPO plan remains viable in the small-group market, Cheney said.
"That (small-group) market has been around a lot longer and it's been more stable," Cheney said. "We haven't seen the negative impacts to the risks inside the PPO in the small-group (market) as we have in the individual market."
The Blue Cross PPO was a very popular option for small-business owners, said Ben May, director of group health insurance sales at Hallberg Commercial in Oak Brook, OML Worldwide's broker.
To keep the Blue Cross policy, owners are going back to the small-group market. The steep premium increases on the individual market also have made small-group rates look more affordable, May said. Small-group rates have gone up 9 to 10 percent, he said.
The group market also offers tax benefits to small employers and their workers. They can pay for premiums with pretax dollars in most cases, May said.
When OML Worldwide gave employees money to buy individual insurance policies, those payments were treated like income by the Internal Revenue Service and taxed accordingly.
The requirements to form a group are not complicated, brokers said. "You just need two people to form a group," said Rich Fahn of Excell Benefit Group in Northbrook.
In some cases, insurers are not requiring a minimum level of employee participation or employer financial contribution, brokers said.
Fahn helped TreeTop Wealth Management, a 5-year-old financial advisory firm in Northfield, form a group for the first time. David Pedley is one of three partners at the firm. There are no other employees. The last two years he bought the Blue Cross PPO plan on the exchange, which won't be available next year.
Fahn set up a plan that offered a PPO and an HMO. Pedley, 40, said he chose the HMO because it had a lower premium than the PPO. He is married with a 5-year-old child.
His new premium will be $918 a month, up 38 percent from the $665 he is paying this year. When he was shopping on Healthcare.gov, the 2016 premium for a PPO plan similar to the one he has now was $1,400 a month, said Pedley, who is not eligible for federal subsidies that help lower premiums.
"I could do the same HMO plan on the individual market, but it was a better price on the group side," Pedley said. "One of my partners also is happy that he was able to keep the PPO plan that wasn't available on the exchange."
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