How Will Existing Small Business Exchanges Affect Healthcare Costs?

While the entire country will not go forward with the Obama administration's original plans to run health insurance exchanges specifically for small businesses next year, that change will not go into effect in every state. Instead, those that are planning to run their own exchanges will be able to operate them, and many owners may not like what these small business insurance marketplaces present them for prices.

In the state of New York, famously one of the small number of states across the country which is set to operate its own exchanges without the help of the federal government, the health insurance markets will likely be somewhat mixed, according to a report from the Albany Business Review. While many state residents may be able to enjoy prices down as much as 50 percent from those projected just last year, thanks to improvements in the insurance exchange for individuals, the small business sector is not guaranteed to be quite so lucky.

While it's a little more difficult to make comparisons now with those seen a year ago, in general it's believed that small businesses may see the rates on their own health insurance exchanges rise, the report said. In some cases, these increases may even be of percentages in the double digits.

"Obviously the small group market won't get the same [price] benefit as the individual market," Eric Diamond, director of small group benefits for Syracuse-based Marshall and Sterling Upstate Inc., told the newspaper. "It is actually seeing an increase. It's not great."

The reason for this, in general, is that the kinds of insurance plans sold on the exchanges cannot be different from those sold on it (i.e. no variations in quality are allowed), and as such they will also have to bear the same prices, the report said. That means small group insurance policies will likely carry higher price tags than they did in the past.

Further, these products will be grouped into four price categories, with bronze being the lowest-cost plans on the market, and platinum carrying the largest price tags, the report said. Matthew Clarke, the vice president of sales for Bouchey and Clarke Benefits Inc., noted that standard HMOs in the platinum tier would likely cost about 13 percent more next year than they do at present, but that this was more or less in line with increases owners could expect regardless of where they found the coverage; even without the exchanges going into effect, it would be likely that prices would have increased between 10 and 12 percent simply due to ongoing changes within the health insurance industry.

Where does that leave owners?
The news that prices would have gone up considerably anyway – albeit perhaps not as much as without the exchanges – likely doesn't help many small business owners sleep any better at night. Higher prices for small business insurance policies is always going to be difficult for entrepreneurs to deal with, and as such it might be vital at this time to start looking into ways to reduce health insurance costs as much as possible going forward, particularly within states that are operating their own exchanges.

Of course, it could also be helpful to look into more affordable insurance options for other types of policies at the same time, because even if their health insurance costs may rise, owners may be able to find better deals on general liability insurance, or policies that provide workers' compensation insurance. Reducing costs on any type of coverage may be a boon to many companies' bottom lines, which might help to put them in a better position going forward.