Alyssa Billings, business manager for Fife flooring contractor Sustainable Interiors, could only laugh when asked what her company’s 2015 insurance rate was going to be.
“Forty thousand dollars more than it was in 2014,” she said with a weary chuckle.
Unfortunately, she’s not joking; Sustainable’s 2015 premium of $6,755 a month is almost double last year’s monthly figure of $3,500. That’s a $39,060 difference for the company, which employs 20 workers and records roughly $10 million in annual revenue.
Billings has done the math; that figures to about an extra quarter of a million dollars worth of work – or an extra $10,000 in business per person, approximately – in addition to what Sustainable is already doing.
“It’s a huge increase and a huge impact, but we’re trying to break it down into bite-sized chunks so it doesn’t become overwhelming,” Billings said. “We don’t want to let this get us down or let this distract us from what we do well … We need to make more per person to cover it, and everybody’s aware of what that means.”
Sustainable Interiors isn’t the only one locally that is feeling the burn from skyrocketing premiums. According to Chris Free, co-principal of Tacoma benefits brokerage Rapport Benefits Group — and the agent who found the new rate for Sustainable — roughly two out of every 10 clients are seeing such astronomical hikes.
“That doesn’t seem like a big fraction (of clients), but the reality is, for those companies, that’s a very big jump (in insurance),” Free said. “For a small business, that could be pretty back-breaking.”
“And something you have to consider is that after all the negotiations and all the other options we looked at, that 50 percent hike may be the best deal going for those companies,” he added. “When you’re looking at 50 percent, usually, that meant that 60 percent and 70 percent hikes were also on the page somewhere. When I’ve gone out for quotes, I’ve gotten things that have come back between plus 58 percent, all the way up to 110 percent for comparable plans.
“We had one group this year, and this is a worst case example, but they went from a $1,000 deductible with no deductible for office visits and prescription drugs to a $3,800 deductible that applies to all services. That’s on top of the employer having to swallow roughly a 50 percent rate increase just to get that high deductible plan.
“I don’t want to make it seem like the sky is falling on everybody,” Free continued. “One renewal I was looking at today was plus 2.2 percent, which is a fantastic number … But for the people who are affected, like I said, it can be extremely painful.”
For those impacted companies, it’s not so much about the carrier they’re moving to, he explained, but about the program they’re moving from. Some of the ways to get to the most competitively priced options, he said, are simply being removed from the market.
“The Affordable Care Act requires some new laws about health underwriting,” said Free. “Trusts and associations, for one thing, were not able to continue to work the way that they were.
“The associations were operating as if they were a single large employer, with small companies joining them to take advantage of their very competitive insurance rates. They were able to do that across a broad range of industries – it was a very loose way to put together a large group health plan.
“If you had five employees, but you purchased through one of these models, you were treated as if you were part of a large group. And they could medically underwrite you as part of a large group, and if you were healthy, you could get really good rates because you’re part of a healthy large group.”
But with reform brought about by the ACA, each of those small companies now has to be underwritten as a separate group, therefore eliminating the benefit.
That’s essentially what happened to Sustainable Interiors: the trust that the company’s small crew of healthy employees was part of no longer exists.
“We don’t have trusts anymore as we’ve known them,” Billings explained. “I’m hopeful that they might return in the future, but for now, that simply is not an option.”
“It’s frustrating, to be honest, because we’ve been doing right by our employees for nearly a decade as a small business,” she said. “Now, with these new regulations, it’s increasing our costs and our employees’ costs. Our employees costs are more than doubling, which is just recently unfortunate for them.”
Those employee increases have been across the board due to the age-rated nature of insurance rates, Billings said. Some younger workers have seen nominal increases of under $50, while the others have seen their rates jump as high as an added $1,500 a month.
“Now, we have chosen to continue providing insurance even though we don’t really have to, because we can’t stand the idea of not providing that for our employees as long as we can. But it’s definitely discouraging.”
It’s worth noting, Free said, that there’s a rationale for the ACA’s abolition of the previous system.
“If you were to ask Insurance Commissioner Mike Kreidler how he viewed those association and trust plans, he would have told you that what they were doing was cherry-picking the market for the people who had low risk. Therefore, they were leaving the people who had high risk to go to direct carriers.
“The people who were going to direct carriers were the people who were not healthy enough to get those extra low rates, which meant they brought more claims to direct carriers. And direct carrier rates continued to increase because of it. So while these associations and trusts were able to give low rates to these handfuls of businesses that had healthy employees, they were actually taking money out of the claims pool that would have helped all the other businesses in the marketplace. While we had depressed rates for them, we had increased rates for everybody else, because we were pulling healthy people out of the risk pool — the idea being spreading risk across the risk pool is the way to normalize rates,” Free explained.
Still, that explanation is cold comfort for companies like Sustainable.
“It’s rough,” Billings said. “It’s the system. Capitalism is a wonderful thing, and when you start putting on extra parameters, you start to mess with what’s working for a lot of people.”