Sticker Shock? A Solution for Small Business Health Insurance Rate Hikes

At renewal time this year, many small businesses will face sticker shock at the new rate hikes for group health insurance in 2015. Many small businesses are seeking cost-mitigation strategies to deal with the premium increases this year. A popular solution among small and medium-sized businesses is switching employees to individual health insurance and reimbursing them for their premiums.

The Rising Cost of Group Health Insurance

The costs are becoming unsustainable for small businesses and their employees. Small business health insurance costs have nearly doubled since 2009, with 91 percent of small businesses reporting increases in their health plan at their most recent health insurance renewal.

Costs continued to rise in 2014. In fact, the Kaiser Family Foundation’s annual Employer Health Insurance Survey (2014) revealed that the cost of group health insurance for family coverage has risen 26 percent in the last five years and 69 percent in the last ten years. Family_Coverage_Employee_Contribution

Chart: Kaiser Family Foundation
The Kaiser survey also revealed that small businesses are less likely to offer health benefits to their employees. Among the small businesses who reported not offering benefits in 2014, cost was the primary reason.

It looks like these rate hikes will continue in 2015. According to the preliminary survey results from Mercer’s National Survey of Employer-Sponsored Health Plans, group health insurance rates will rise by an average of 3.9 percent in 2015– and that’s if the businesses make significant changes to their existing plans.


According to the survey, the projected increase actually reflects cost-mitigating actions the businesses will take. If the businesses make no changes to their existing plans, projected costs would rise 5.9 percent on average.Projected_Healthcare_cost_increase

Chart: Mercer

The Solution for Sticker Shock

Small businesses can mitigate their group health insurance costs with a simple solution: not renewing their group health insurance plan; however, dropping health benefits altogether is not a feasible option for many small businesses or their employees. Many small businesses are considering adopting a premium reimbursement plan to offer health benefits to recruit and retain top talent.

By setting up a premium reimbursement plan, small businesses reimburse employees tax-free for individual health insurance policies. Businesses fix their costs on a monthly basis, and employees can choose a health insurance policy that best meets their health and financial needs.

Additionally, individual health insurance costs up to 60 percent less than group health insurance, making premium reimbursement is an effective solution for businesses who wish to cut down on healthcare costs for their employees.

To set this up, the business first needs to decide how much they will contribute toward employees’ health insurance expenses. This allowance, or “defined contribution,” can be the same for all employees, or it can differ depending upon employee class and/or family status.

To remain in compliance with regulations regarding these reimbursements, businesses should use reimbursement software to help make administration of the plan easy

With the cost of group health insurance renewals on the rise, businesses are facing enormous cost challenges and are seeking cost-effective alternatives to group health insurance. The emerging solution is premium reimbursement for individual health insurance.

Booted from Obamacare: 115K could lose coverage

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Up to 115,000 people stand to lose Obamacare health insurance coverage by Sept. 30, and another 336,000 people are at risk of losing federal subsidies to pay for that coverage, officials revealed Monday.

The 115,000 people failed to show valid proof of citizenship or legal residency for the insurance plans they bought through, a top federal official revealed Monday.

But the Obama administration also said those people with questionable eligibility will be able to keep their coverage if they continue paying their premiums, provide documentation showing their legal status in the U.S., and sign up again in their health plans during a special enrollment period.

If they don’t, “at the end of September, they’ll be terminated,” said Andy Slavitt, principal deputy administrator of the Centers for Medicare and Medicaid Services. Many of those people also will face demands from the Internal Revenue Service that they repay federal subsidies they received this year to help them pay for their health insurance plans.

The administration also said it was warning another 336,000 people they need to provide proof of income by Sept. 30, or risk losing those federal subsidies that reduce-often greatly-what they personally pay in monthly insurance premiums.

Without documentation, as of Nov. 1, the subsidies will be changed to reflect the income data that the federal government has about thACA Marketplacee households in question, Slavitt said. CMS was sending reminder letters to those people Monday.

Those people comprise 279,000 households whose enrollment information, when they applied for Obamacare via, contained claims about income that did not match other data the federal government has about them. is the insurance marketplace that sells insurance in the 36 states not running their own health exchange.

Under the Affordable Care Act, only U.S. citizens or legal residents are eligible for enrollment in insurance plans sold through the health exchanges.

The amount of money people receive in subsidies, or premium assistance, depends on their income levels; as a rule, people who earn less get more in subsidies.

More than 8 million people enrolled in Obamacare plans by mid-April, the end of open enrollment for 2014. The vast majority, around 86 percent, received some kind of subsidy, because their household income was between about one to four times the federal poverty level, or about $46,000 to $92,400, for a family of four.

About 5.4 million of the nationwide enrollment came via

As of May 30, there were so-called data-matching issues for 966,000 individuals who claimed they were legal residents of the U.S. There were also data-matching problems related to another 1.2 million households whose members were enrolled through

Since then, 851,000 individuals have submitted documentation that they are citizens or legal residents, according to the Centers for Medicare and Medicaid Services. Slavitt said those cases are either “resolved or in the process of being resolved.”

Read More D-Day for Obamacare eligibility questions

Another 897,000 households have submitted proof of income qualifying them for subsidies. As of Sunday, about 467,000 households with income data-matching issues have been closed, and another 430,000 or so are in the process of being resolved, CMS said.

The remainder not only face the prospect of losing their subsidies after Nov. 1, but also may be forced to repay the difference between what they were eligible for in terms of subsidies, and what they actually received.

Slavitt said that problems with matching data submitted by enrollees applying for insurance will happen again in future Obamacare enrollment cycles, including the second one, which is due to begin Nov. 15.

“This year isn’t a one-time event,” Slavitt said. “Circumstances in peoples’ lives will always change.”

Monday’s announcement by CMS only related to enrollees in states served by

There are an unknown number enrollees in other states who have similar questions about their eligibility.

The 14 states and the District of Columbia that are running their own Obamacare exchanges are handling eligibility questions about their own enrollees in a a variety of ways, and with different deadlines.

CNBC reached out to all of those exchanges, and received answers from eight about their policies on eligibility documentation issues.

Kentucky’s health-care exchange, known as kynect, gave slightly more than 1,700 people until last Wednesday to provide evidence of citizenship or legal immigration status.

Read More What?! Bank insured men’s families, but not women’s

California, which has by far the most enrollees of any single state-run exchange, has set Sept. 30 as a deadline for the approximately 148,000 people who were sent notifications asking them to submit evidence of insurance eligibility or lose coverage.

In Massachusetts, if the exchange has questions about someone’s status, enrollees will be sent a notice and will have 90 days to respond.

Rhode Island’s exchange had a deadline of Monday for slightly more than 900 enrollees to verify their eligiblity.

The New York State of Health marketplace “has not issued a notice like the one issued by the federal marketplace,” according to a spokeswoman.

“During the application process, NYSOH notifies any consumer who is unable to verify their immigration status that they must upload, mail or fax proof of citizenship/immigration status to the customer support center within 90 days,” the spokeswoman said. “NYSOH is currently in the process of reviewing accounts and has not terminated anyone’s coverage for lack of compliance with this requirement.

Washington state’s exchange has a similar policy.

“Here in Washington we do not have a hard deadline for customers to submit documents to verify citizenship or lawful presence,” a spokeswoman said. “But we do require people to submit the necessary documents to Washington Healthplanfinder within 90 days of applying for coverage. It’s extremely important for customers to provide these documents within 90 days so their coverage isn’t terminated.”

A spokeswoman for Minnesota’s health insurance exchange, known as MNSure, said that marketplace likewise has not set a hard deadline yet.

Read More The good (and bad) news about employer health plans

“MNsure is currently working to finalize the number of consumers who need completed verifications,” the spokeswoman said. “Once this universe is identified, we will determine appropriate next steps. A significant number of consumers who may have one of these issues have not received notices yet. It is our intention to address verification issues before open enrollment begins in November.”

Hawaii’s health-care exchange is still working to determine how many enrollees have questionable documentation for eligibility, and as a result has set a much later deadline for enrollees to submit necessary documents.

Tom Matsuda, interim executive director of the Hawaii Health Connector, said “Enrollees in the Hawai’i Health Connector whose immigration or citizenship status is not verified will have until Dec. 31, 2014 to submit documentation.”

By CNBC’s Dan Mangan

What is the Affordable Care Act(ACA)?

The Affordable Care Act puts consumers back in charge of their health
care. Under the law, a new “Patient’s Bill of Rights” gives the
American people the stability and flexibility they need to make
informed choices about their health.

View Key Features of the Affordable Care Act or read a year-by-year
overview of features.


  • Ends Pre-Existing Condition Exclusions for Children: Health plans
    can no longer limit or deny benefits to children under 19 due to a
    pre-existing condition.
  • Keeps Young Adults Covered: If you are under 26, you may be
    eligible to be covered under your parent’s health plan.
  • Ends Arbitrary Withdrawals of Insurance Coverage: Insurers can no
    longer cancel your coverage just because you made an honest mistake.
  • Guarantees Your Right to Appeal: You now have the right to ask
    that your plan reconsider its denial of payment.


  • Ends Lifetime Limits on Coverage: Lifetime limits on most
    benefits are banned for all new health insurance plans.
  • Reviews Premium Increases: Insurance companies must now publicly
    justify any unreasonable rate hikes.
  • Helps You Get the Most from Your Premium Dollars: Your premium
    dollars must be spent primarily on health care – not administrative


  • Covers Preventive Care at No Cost to You: You may be eligible for
    recommended preventive health services. No copayment.
  • Protects Your Choice of Doctors: Choose the primary care doctor
    you want from your plan’s network.
  • Removes Insurance Company Barriers to Emergency Services: You can
    seek emergency care at a hospital outside of your health plan’s network.