Small Business and Obamacare – A Report From the Field

After a pretty rocky start, Obamacare is starting have some success. First-year enrollments came in above projections, and people are paying their premiums; the number of uninsured appears to have declined; states that expanded Medicaid are faring well; and new insurance companies are joining exchanges.

Those are the top-line – or macro – indications, when it comes to the Affordable Care Act. But how are companies, and their employees, actually doing, now that the new legislation is taking hold? What’s happening on the ground?

To begin to assess this, I decided to check in with a handful of small-sized companies, organizations and firms and ask about Obamacare’s impact. I found the responses interesting and fairly surprising. And they tell us a good deal about where health care is heading in our country over the next few years.

There are six basic findings from my informal inquiry:

First, despite Obamacare, health care costs continue to rise, and they are still a major concern for small companies.

An HR executive at a small law firm mentioned the “sticker shock” that sends ripples of budgetary pain through the conference room every time benefits are discussed. A private insurance broker in the emerging technology sector noted that her clients are distressed by the taxes and fees associated with Obamacare. A non-profit organization was stunned by a recent 26 percent jump in health premiums, even though it was able to negotiate the increase down to 18 percent. And an executive at a small technology company said that health care costs were “spiraling out of control,” and represented “a very serious and ongoing challenge.”

Second, many small technology companies are locked in a battle for the best and brightest employees, and providing generous health care benefits is a critical and necessary recruiting tool. As a result, Obamacare isn’t a real option for much of this fast-growth sector.

One HR director at a software company was pretty direct about the strategic importance of health benefit packages: “If you want the engineering talent to come to you, and stay with you, your coverage has to be great. And that means paying short-term disability, as well as 100 percent of employee and dependent care, among other things. If you’re not offering expansive coverage, it’s a real human capital issue in our business.”

Another executive at a technology start-up echoed this. “You’re in a box with health care benefits,” he said. “And to get the Stanford engineering graduate, you’re going to compete like crazy with 10 other companies just like yours, so, in the end, you probably don’t have that much control over your health costs.”

Third, some technology start-ups may see their ability to negotiate better health benefit costs diminish in the near-term future, even with Obamacare in the mix.

According to the insurance broker, technology companies with less than 50 employees will have decreased pricing power when negotiating their health costs if they’re not part of an association or larger group. The Affordable Care Act notwithstanding, “the bargaining choices for these emerging growth companies are shrinking in terms of health benefits,” said the broker, “and the pressures are definitely increasing.”

Fourth, employees at small businesses outside the technology sector are benefiting from Obamacare’s Medicaid expansion.

Under the Affordable Care Act, employers with 50 or more full-time workers have until 2015 to either provide their workers with health insurance or face a penalty. But there are no penalties if employees sign up for expanded Medicaid where it’s available.

About one third of the low-wage employees at a family restaurant, for example, were able to get better and cheaper health insurance through expanded Medicaid. The restaurant’s owners and employees were assisted by BeneStream (http://www.benestream.com), which uses a combination of technology and a multilingual call center to guide workers through the Medicaid enrollment process and then report back to employers whether an employee has enrolled in the government program.

Fifth, employees at some small organizations may not be fully educated about Obamacare.

One not-for-profit pays 100 percent of employee health care premiums if the employee works 40 hours a week. The premium contribution is pro-rated for those who work 20-39 hours. But only 60 percent of the employees at the organization are eligible for health insurance. That’s why the HR director at the non-profit said she’s “worried about people falling through the cracks.” And, she added, “I wish I had more time to educate them about Obamacare, because I don’t think they know very much about the new law, and how to take advantage of what it offers.”

Sixth, employee attitudes about health care benefits are changing at small companies, organizations and firms in the era of Obamacare.

At the law firm, for instance, people are starting to realize how expensive health care benefits have become. And, said the firm’s HR leader, “they’re telling me how lucky they are not to be in Obamacare. I don’t think anybody is taking our coverage for granted anymore. There’s actually some gratitude, and the complaints about our benefits package have generally stopped.”

But at a non-profit that has traditionally refrained from passing on increased health care costs to employees, the organization is now asking team members to share the added expense – and not every employee is happy about this. “Some folks have been spoiled and they may feel a little bit entitled,” explained an executive at the not-for-profit.

So, the take-away from this field report on how Obamacare is affecting small businesses and their employees is decidedly mixed. There’s a wide range of emotions at play here – anxiety, determination, appreciation, confusion and displeasure, to name just a few. Yet this may be a perfectly natural reaction to the broad – and sometimes uncomfortable – transformation that health care reform in America is driving.

I would love to hear your comments on my findings from my admittedly limited set of company feedback. How are you finding employee attitudes? Has your company considered Medicaid? Are you doing anyting to educate your employees about their options under Obamacare? I look forward to hearing from you.