Employees may rebel against Obamacare

As I wrote in the latest edition of IBJ, the Obamacare exchanges have proved quite attractive to insurers and customers alike. Now five new insurers will offer plans on the Obamacare Marketplace in Indiana for 2015 and, collectively, they expect enrollment to grow by 60 percent or more.

But that’s modest compared to what could happen if small employers decide, en masse, to end their group health plans and instead help their employees buy through the Obamacare exchanges.

Tony Nefouse, a health insurance broker at Indianapolis-based Nefouse & Associates, thinks exchange enrollment could reach 400,000 as early as this year.

“I think we could see another 300,000 this year,” said Nefouse, which would join the 110,000 Hoosiers that bought on the exchange for 2014. “You’re going to have a lot of small businesses, what we call micro businesses, with 10 or fewer employees, especially those with lower wages, they’re going to drop their group health plan.”

Matt Kleymeyer, a benefits consultant at the Indianapolis office of Bernard Health, also thinks enrollment will spike as small employers end their group health plans. Although, he noted, that might not happen until 2016—when the Obama administration will finally require employers with 50 or fewer workers to end their pre-Obamacare health plans.

Among the factors increasing exchange enrollment is Obamacare’s individual mandate, which taxes individuals for not having health insurance. That tax will rise from $95 per adult this year to $395 next year and $695 the year after that.

But the big factor will be the phase-in of Obamacare’s community rating rules. Those rules say all small employers and individuals buying from a given insurer will be charged whatever it takes to cover their bills—BUT the oldest person can’t be charged any more than three times as much for coverage as the youngest member.

That helps companies that have lots of older workers—because before Obamacare, health plans charged older members about five or six times more money than the youngest members. But those rules will hurt companies with younger workers.

For employers with younger-than-average workers, avoiding those rules could help them dodge premium hikes, which insurers have estimated could be as high as 50 percent to 100 percent

“When we’ll see the greatest growth in membership is when the Band-Aid’s ripped, with small group community rating,” Kleymeyer said. “I think the pain will be too great, at that point, for a lot of groups.”

What Nefouse and Kleymeyer are seeing jibes with a prediction made earlier this year by the Congressional Budget Office, which suggested exchange enrollment in Indiana will reach about 500,000 by 2018 but then hold steady at that level.

But some expect it to go much higher than that. New York-based market research firm S&P Capital IQ predicts the benefits to companies’ bottom lines of off-loading health benefits would be so great that, by 2020, 90 percent of all employees will be buying health insurance via the Obamacare exchanges.

If that proved true in Indiana, it would mean at least 3 million Hoosiers would obtain coverage via the exchanges, if only group employer plans are included. If self-employed coverage is also counted, that number could run as high as 4.5 million, according to data from the U.S. Census Bureau.

I think there’s a lot of good evidence for those predictions.

But a big if in all those predictions is whether workers perceive the Obamacare exchanges positively or not. And a new poll released by Morning Consult suggests that workers are, by and large, worried about ending up in the exchanges.

That poll, conducted online in June with 1,250 “likely voters,” found that 40 percent of them are very or extremely concerned their employers will send them to the Obamacare exchanges. Another 23 percent are somewhat concerned.

They worry that the quality of their health insurance coverage would be worse in the Obamacare exchanges. I wonder if that has to do with the narrow networks, which have reduced consumers' choice of doctors in the Indianapolis area by as much as 45 percent. But, unfortunately, the poll doesn't explore that issue in detail.

Whatever the reason, 51 percent said a shift to the exchanges would have a very or somewhat negative effect on their coverage. Only 16 percent said it would have a very or somewhat positive effect on their coverage. The rest said it would have no impact.

Those concerns could translate into concrete action. If their employers sent them to the Obamacare exchanges, 29 percent of those polled said they would look for another job either very or extremely seriously. Another 23 percent said they would search for another job somewhat seriously. The other 48 percent said they would be unlikely to search for another job.

The poll has a margin of error of plus or minus 3 percentage points, so it’s possible that a slight majority of respondents would not search for another job.

The concerns reflected in the poll may not be grounded in fact. I have found that the Obamacare tax credits, if they remain as generous as they are now, will be a pretty good deal for the majority of workers—though probably not a good deal for higher-income households.

But the concerns about the Obamacare exchanges could cause employers to reject the math of Obamacare and instead follow the mood of their employees. It will be interesting to see how these cross currents play out in the next couple years.