Sonoma County small businesses win extra year to comply with health reform

In January, Gerard Giudice and his business partner, Bill Pettibone, were faced with a difficult choice: Pay an additional $750 each month to add mandatory new benefits to their company’s health insurance plan, or drop their small group policy and send employees to purchase insurance on the individual market.

The owners of Sally Tomatoes, a restaurant and catering company on the outskirts of Rohnert Park, confronted a situation that thousands of small businesses throughout Sonoma County were forced to navigate - how to adopt health insurance policies that provide minimum levels of care defined in the Affordable Care Act, which fully launched Jan. 1.

“It would have been too expensive, so we dissolved our company plan and we each got individual plans,” Giudice said. “What were we going to do, lay that person off?”

Last week, Gov. Jerry Brown signed a bill extending requirements to comply with the federal health law for an additional year, giving more time to small business owners who, like Giudice, had expiring health insurance plans that did not meet federal standards. Now, employers with 49 or fewer employees have until the end of this year to make that difficult decision. Area business groups and insurance agents applauded the legislation, pointing out that the additional year will provide business owners much-needed time to understand health reform and buy the right insurance plan.

There is little consensus about whether the Affordable Care Act has led to skyrocketing premiums and steep hikes in out-of-pocket health care costs. Volatility in the insurance market is commonplace, even prior to the passage of the health care law. But here, in Sonoma County, business leaders and advocacy groups said they’ve seen price increases.

“In talking to some of my members, I’m not surprised to hear that their rates are going through the roof,” said Jonathan Coe, president of the Santa Rosa Chamber of Commerce. “Businesses are getting renewal notices and freaking out, but the fact that now they’ll get more time gives businesses time to reflect and choose the right plan.”

Senate Bill 1446, authored by state Sen. Mark DeSaulnier, D-Concord, goes into effect immediately and gives small employers additional time to consider offering new health insurance plans that meet all provisions of the Affordable Care Act, or extending their current plans one more year. Eventually all plans must provide minimum levels of coverage in 10 categories, including mental health treatment, birth control and primary care. Under DeSaulnier’s bill, California companies can renew their existing plans any time this year, but would need to find coverage that complies with the federal standards by Dec. 31, 2015.

“As a former small business owner and strong supporter of Obamacare,” DeSaulnier said in statement, the legislation will “help small businesses adapt to new components of health care reform.”

While Giudice and other small business owners who dropped their old plans to comply with the health law are too late to take advantage of the extension because they’ve already moved into new insurance policies, hundreds more companies in Sonoma County are expected to opt for the additional year, local insurance agents and business owners said last week.

Small businesses like Sally Tomatoes comprise the lion’s share of companies in Sonoma County - a staggering 97 percent of the county’s more than 16,600 businesses have 49 or fewer employees, according to the most recent data available. More than half of the workers in Sonoma County are employed at such companies, according to the state Economic Development Department, an agency that tracks California’s labor market.

“Small businesses are the lifeblood of our local economy,” said Ben Stone, executive director of the Sonoma County Economic Development Board. “They represent the entrepreneurial spirit, zest for living, and innovative drive that makes Sonoma County flourish.”

Insurance analysts said the law passed this week granting the one-year delay could mean the difference between opting for a new group health insurance policy or pushing employees to the individual market.

“This will delay the pain of complying with the Affordable Care Act and allow us to keep our plans for one more year,” said Terry de Decker, vice president for employee benefits at Vantreo Insurance Brokerage, based in Santa Rosa. “This has been four years of delays and changes, so this will give us time to make sense of the changes.”

Health insurance brokers, or agents who sell insurance plans to companies, have come to varying conclusions about whether the federal health law has resulted in rising insurance rates. The problem is health insurance rates vary based on a litany of variables - from age, to family size, to geography.

But de Decker said she’s noticed surges in both premiums and out-of-pocket costs.

“From an employer’s point of view, they’re likely picking up some kind of increase,” de Decker said. “What I’ve found is the premium rates for the Affordable Care Act-compliant plans are roughly the same, but the out-of-pocket costs are significantly higher.”

Now, insurance brokers are scrambling to figure out how the law will change rates. Take one of de Decker’s comparisons, for instance. On some old plans offered by Kaiser Permanente in Sonoma County, out-of-pocket maximum annual costs - or the most a consumer would be required to pay each year for co-pays, deductible, or prescription drugs - were $3,500. After adding new benefits to comply with federal health reform, the out-of-pocket cost nearly doubled, to a maximum of $6,350 per year.

“That makes a huge difference,” she said.

Victor McKnight, an insurance broker for Epic Insurance Brokers based in Petaluma, has found similar fluctuations in rate structure information he’s providing to his clients.

“We’ve been seeing big increases, depending on the plan and the carrier,” McKnight said. “With Kaiser, we noticed out-of-pocket maximums going up quite a bit, while we noticed that with Blue Shield prices going up more on the premiums.”

While costs and benefits vary widely between insurance carrier and plan, with little transparency about rising costs, one thing is clear, McKnight said: The more time, the better.

“The one-year fix delays the pain for one more year, and that’s good for those who have been hit hard by more costly plans,” he said. “If I’m an employee working paycheck to paycheck, and I see my out-of-pocket maximum go to $6,360, well that might as well be $500,000.”

McKnight and other brokers last week started to inform their clients about changes underway.

“We’ve been tracking this bill for six weeks now, so I’ve been alerting clients that now they can keep their plan if they want, and that’s good news,” he said.

Major health insurance companies in Sonoma County, including Kaiser, Blue Shield of California, Anthem Blue Cross and Health Net, confirmed this week that they plan to offer one-year extensions on health plans that at present, may not meet basic minimum requirements of the Affordable Care Act. Those insurers are required by the state to send letters to their customers notifying them of changes in the law.

The extension signed into law last week, allowing employers to take an additional year to purchase plans that fully comply with the health law’s mandate to meet 10 basic minimum requirements, comes months after the federal government gave states leeway on health reforms.

The Obama administration announced in March that states could take up to three years to adopt plans in full compliance with the Affordable Care Act. California stopped short of the three years, instead granting one year.

Now, beginning Jan. 1, 2016 all health plans must cover a package of health services. They include ambulatory services, emergency room care, hospitalizations, maternity and newborn care, mental health and substance abuse disorder services, prescription drugs, rehabilitative services like physical therapy and what’s called “habilitative” services - for example, day care. Plans eventually will be required to cover laboratory services, preventative care and chronic disease management, and pediatric care.

While some businesses groups said the new law will benefit small business, some health advocacy groups said the extension just creates more confusion. “There has been a considerable amount of disinformation that’s frightened a lot of small businesses,” said Beth Capell, a policy analyst for Health Access California, a nonprofit health policy firm that lobbies in Sacramento. “We’re sad there has been so much confusion, but the good thing about SB 1446 is it will help provide more information to small employers about the benefits of the Affordable Care Act.”

People involved in negotiating amendments for the bill, first introduced in February, described the delay as a process injected with politics. Insurance Commissioner Dave Jones, who sponsored it, said however, the legislation was a response to calls from business groups asking for more time.

“Small businesses contacted our office seeking options to renew their policies,” said Janice Rocco, the deputy insurance commissioner for the state’s Department of Insurance.

Micah Weinberg, a senior policy adviser with the Bay Area Council, an employer organization, said the original proposal would have allowed for a three-year extension instead of one.

“We decided to split the difference on the timeframe, because on the one hand it makes sense to do what we can to help small businesses in the immediate term,” Weinberg said. “But on the other hand, we’re moving to undo a set of rules for health insurance and there’s a point at which it becomes unfair for some businesses to play by one set of rules and other businesses to play by another.”

Other lobbyists agreed, noting that the legislation - six months and three amendments later - was a compromise.

“We originally opposed the bill when it was first introduced because we were concerned it would create an imbalance in the market - where some employers were buying plans that complied with the Affordable Care Act and others didn’t,” said David Chase, a lobbyist with Small Business Majority, a business advocacy group. “We wanted everyone to play by the same set of rules, but we worked with the author’s office to shorten the delay from three years to one.”

You can reach Staff Writer Angela Hart at 526-8503 or angela.hart@pressdemocrat.com. On Twitter @ahartreports.