Facing steep health insurance increases, Alaska's small businesses are making difficult decisions, including dropping health insurance and passing costs to customers, in an effort to stay afloat.
Meanwhile, the Affordable Care Act continues to roll out and its regulations and deadlines are being tweaked along the way, bringing uncertainty and confusion to many in the business community. While the ACA requires all insurance plans to have broader, more comprehensive coverage, the impact of the ACA on businesses remains unclear.
Health insurance costs have already begun to affect Club Paris co-owner Scott Selman, who said he will have to raise restaurant prices to cope with increased costs. Selman's family has owned the downtown Anchorage restaurant since the 1970s. Many of his employees have worked at the restaurant for years, in some cases decades. They're like family, he said.
Selman's roughly 24 employees are part of the union Local 878, which represents hospitality industries in Alaska and negotiates health-care contracts. "I'm pro-union, I'm pro-health care," he said. But the continual rise of health care costs has put him in a bind.
Selman said he pays $17,600 monthly in health insurance costs -- a roughly $5,000 per month increase from last year. Selman likened the "crippling" costs to issuing an additional payroll every month. "It's killing me," he said. "I just don't know how long we can keep absorbing these costs."
Selman isn't comfortable cutting his employees' paychecks to balance the books. "Consequently, the only real place we can make changes is in the price," he said. He now worries whether he'll price himself out of the market. "It's a fear, but we just try to do the best we can."
Like Selman, business owner Linda Peters also is struggling with rising health care costs. Peters owns ProComm Alaska, a small business specializing in two-way radio communications.
Peters provides health insurance for her 13 full-time employees. Peters said she is paying $956 per employee for health insurance every month. Two years ago, she paid $513.
She used to pay 25 percent of her employees' dependent premiums but stopped due to rising rates.
As a small business owner, she has the option of dropping her insurance plan and sending her employees to Healthcare.gov to find individual insurance. But her employees, being too highly paid, don't qualify for federal subsidies, and they would face steep rate increases, she said. "A lot of these people have been in my employ for 15 years. I feel like it would be really unfair to stop offering benefits. I just can't see myself doing that," Peters said.
She, too, has grappled with the idea of passing costs on to her customers. "The question is how much can the market bear," she said.
Alaska's rising health insurance costs
In Alaska, small businesses play a major role in the economy. In 2013, some 95 percent of Alaska's private employers employed no more than 50 workers, according to Alyssa Shanks, economist with the Alaska Department of Labor and Workforce Development. That doesn't include commercial fishermen, agricultural workers, self-employed or private household workers, she wrote. She also noted that although small businesses far out-number large businesses, nearly half of all Alaskans worked for firms with more than 100 employees in 2011, according to a study by the Department of Labor.
Businesses with fewer than 50 employees are not mandated by the Affordable Care Act to provide their employees' health insurance, but benefits packages play a large role in recruiting qualified employees, said David Kaufman, a benefit consultant for Alaska Employee Benefit Specialists.
These days, many small businesses are seeking Kaufman's help to find a group insurance plan that's both affordable and compliant with the ACA. "They want in out of the rain because they're not quite sure what's coming with the storm," he said.
Some are quick to blame the Affordable Care Act for increased health care costs. However, "we've always seen double-digit increases" in health insurance rates, even if you don't factor in the effects of the ACA, Kaufman said. Kaufman estimated changes due to the ACA account for 3 or 4 percent of the already double-digit increases.
The issue of rising health care costs is "multi-faceted," Kaufman said, and some issues are unique to Alaska.
Among numerous other factors, in Alaska there's a "pent-up demand" for specialty care, which pushes up costs due to lack of competition, he said. Alaska's high cost of living affects the health-care sector along with individual Alaskans.
Overall, he says he's been successful in finding affordable health care for small businesses, and he hasn't seen any businesses looking to drop their insurance plans.
Enroll Alaska, an insurance brokerage and division of Northrim Bank, has had a different experience. Chief operating officer Tyann Boling said that the division had been approached by roughly a dozen small businesses looking to drop their group health insurance plans.
Businesses are making their decision based on the new ACA regulations and increasing costs -- and also because the option of sending employees to the individual marketplace can in some cases offer Alaskans better health insurance at lower costs. For small businesses, insurance costs are "truly a burden," Boling said, and some are deciding that dropping insurance is better for them and their employees.
However, rate increases have "been going on for a long time," Boling said. Blaming the cost increases solely on the Affordable Care Act is "sort of a stretch."
Effects of the ACA: "A big question mark"
Meanwhile, Affordable Care Act regulations remain a moving target. Last week, the IRS clarified that businesses reimbursing their employees for individual insurance plans could be fined up to $100 per day per employee. Also last week, the Department of Health and Social Services announced states will be able to individually decide whether to delay a key feature on the small business insurance marketplace -- offering employees multiple small business insurance plans -- if they believe it will cause rates to rise in 2015.
Keeping track of the deadlines and changing regulations has "almost become impossible," Kaufman said.
A February report by the Centers for Medicare and Medicaid Services estimated that 65 percent of small firms were expected to see their premium rates increase due to certain ACA provisions. The remaining 35 percent were expected to see rates drop. Some small businesses are also eligible for tax incentives under the ACA.
The report also notes "considerable uncertainty" as to whether small employers will end their health care benefits and send employees to the individual insurance marketplace.
Just how much rates have changed on average is difficult to quantify, wrote Melanie Coon, spokesperson for Premera Blue Cross, Alaska's largest insurer. The Affordable Care Act required plans have a standard level of benefits -- including pediatric vision, pediatric dental, and additional mental health benefits -- and businesses had to adjust their plans individually. "Adding benefits obviously adds cost, but each group had their own custom package of benefits so it's hard to say that every small business was impacted to the same degree," Coon wrote.
Rachel Petro, president and CEO of the Alaska Chamber, said that the unknowns are affecting all of the organization's 700 business members. "Anytime we have unpredictability it does not allow for planning and investment to grow the economy and grow our businesses," Petro said.
The chamber hasn't taken an official position on the ACA, but "we do of course have conversations about it," Petro said, and members are concerned. The chamber, itself a small business, has also struggled with the "very complex and unpredictable" regulations, Petro said.
Contact Laurel Andrews at firstname.lastname@example.org
By LAUREL ANDREWS