Health Insurance Rates

By Stacy Cowley
October 19, 2015

JACKSONVILLE, N.C. — When Billy Sewell began offering health insurance this year to 600 service workers at the Golden Corral restaurants that he owns, he wondered nervously how many would buy it. Adding hundreds of employees to his plan would cost him more than $1 million — a hit he wasn’t sure his low-margin business could afford.

His actual costs, though, turned out to be far smaller than he had feared. So far, only two people have signed up.

“We offered, and they didn’t take it,” he said.

Evidence is growing that his experience is not unusual. The Affordable Care Act’s employer mandate, which requires employers with more than 50 full-time workers to offer most of their employees insurance or face financial penalties, was one of the law’s most controversial provisions. Business owners and industry groups fiercely protested the change, and some companies cut workers’ hours to reduce the number of employees who would be eligible.

But 10 months after the first phase of the mandate took effect, covering companies with 100 or more workers, many business owners say they are finding very few employees willing to buy the health insurance that they are now compelled to offer. The trend is especially pronounced among smaller and midsize businesses in fields filled with low-wage hourly workers, like restaurants, retailing and hospitality. (Companies with 50 to 99 workers are not required to comply with the mandate until next year.)

“Based on what we’ve seen in the marketplace, we’re advising some of our clients to expect single-digit take rates,” said Michael A. Bodack, an insurance broker in Harrison, N.Y. “One to 2 percent isn’t unusual.”

Nationwide, the Affordable Care Act has significantly reduced the number of Americans without health insurance. Around 10.7 percent of the country’s under-65 population was uninsured in the first three months of this year, down from 17.5 percent five years earlier, according to the National Health Interview Survey, a long-running federal study. Some 14 million previously uninsured adults have gained coverage in the last two years, the Obama administration estimates.

Most of those gains, though, have come from a vast expansion of Medicaid and from the subsidies that help lower-income people buy insurance through federal and state exchanges. Workers who are offered affordable individual coverage through their employers — a group that the employer mandate was intended to expand — are not eligible for government-subsidized insurance through the exchanges, even if their income would otherwise have qualified them.

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