Owners of a small local business in California are facing an 85 percent cost increase for their group health insurance as a result of the Affordable Care Act, according to the Santa Cruz Sentinel.
The company, Sockshop & Shoe Co., has been in business since 1988 and has 25 full-time employees. Owners Eric and Ellen Gil, both of whom originally supported the Affordable Care Act, said that the rate increase is forcing them to search for cheaper options.
The Santa Cruz Sentinel reports:
"When you’re doubling the cost, it’s threatening," said Eric Gil, co-owner with his wife Ellen of the longtime downtown business.
Ellen, with 2016 quotes from the insurance agent in hand, said, "One choice is the nuclear option — don’t offer insurance."
This is not what they expected from the Affordable Care Act. They thought rates could go up 10 to 12 percent, hoping as more people got health coverage, costs would come down, but that’s not happening.
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With fewer than 50 full-time equivalent employees, they are considered a small employer and aren’t required to offer health insurance but they have been offering it to full-timers.
They pay 70 percent of the cost and employees pay 30 percent.
Small employers had the option of "grandmothering," keeping their plan rather than switching right away to a new policy conforming with the Affordable Care Act.
"It saved us a fortune for two years," said Ellen.
Some 35 states are allowing renewal of grandmothered plans but the board of Covered California, which runs the state health insurance exchange,declined to do so, saying there would be no consumer benefit.
With Sockshop’s plan expiring Dec. 1, the Gils have to switch.
According to the Los Angeles Times, 70 percent of small businesses in California offering employee health insurance will be switching because their plans will no longer be available.
Eric and Ellen themselves will also be impacted by the rate increase: the cost for their family plan will skyrocket from $13,788 to $23,714 a year. "We felt a little sick," Eric Gil told the Santa Cruz Sentinel. "Do we raise prices? Eliminate insurance? Suck it up?"
Numerous local businesses in Santa Cruz County are facing a similar rate increase. Zachary Davis, the co-owner of The Penny Ice Creamy, The Picnic Basket, and Assembly told the Sentinel that he, too, is struggling to find a new plan.
"To keep our current plan, something most like our current plan, we’re looking at a 78 percent cost increase," said Davis, who with human resources manager Candace Elliott has spent 100 hours studying the options.
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Davis found the least expensive choice — costing 24 percent more — was a plan with a $6,000 deductible, meaning employees would pay $6,000 out of pocket plus premiums.
He called the network of doctors "terrible," with few primary care physicians and none from the Palo Alto Medical Foundation, a big group in the county popular with local residents.
At $6,000, it would cost employees less to go without health insurance and pay a penalty, he observed.
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Davis said he wishes he could give employees money, say, $400 a month, that they could use to buy health insurance on the Covered California state exchange.
"There’s a way for them to get better coverage for the same amount of money," he said.
But that would result in a penalty of $100 per day per employee, adding up to $36,500 per year per employee, according to the IRS.
Another approach would be to stop offering health insurance and carefully manage staffing, which expands to 150 employees mostly part-time at peak times.
The penalty for not offering adequate insurance is $2,000 for each full-time employee; the fine does not kick in until after 30 full-time employees.
Despite the numerous roadblocks standing in his way, Davis said he was determined to find a reasonable health care option for his employees.
"We want our employees to have health care," he told the Sentinel. "We’re committed to offering it, figuring out what plans we can get without putting us out of business."