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The 41 employees of Extreme Dodge in Jackson, Mich., are very familiar with trade-ins, but this year they’re learning about trade-offs as they come face to face with the new realities of health care. A few workers say they’re getting a great deal, but most have a severe case of sticker shock.
“I feel like I’ve been taken to the cleaners,” said Neal Campbell, a salesman.
The news was presented at the company’s annual benefits meeting earlier this month, when employees were told that the health insurance plan that the auto dealership had provided its workers was canceled because it doesn’t comply with the Affordable Care Act, better known as Obamacare.
Rather than officially sponsor a new policy, the company -- voted one of the 100 best car dealerships to work for in the country last year -- will instead provide its employees with $2,400 apiece to buy their own insurance, or to pocket and pay the new federal penalty if they elect to go without it.
That’s a little bit more than the company says it spent on health insurance this year. Dealership owner Wesley Lutz said his decision to go in a new direction was driven by the fact that health insurance is “incredibly expensive” and getting more so. He says he needs to be able to control his future costs.
“As a business owner, we have to be viable first and then provide services,” he said. Lutz is not required to provide health insurance to workers, but has done so for 35 years.
By not sponsoring a company plan, Lutz also enables workers to shop around and see if they do better buying insurance through the health insurance exchanges established by the new law, where some qualify for subsidies, or through buying a new group plan recommended by the company.
A handful of the Extreme Dodge workers came out winners -- mostly low-wage earners who qualify for subsidies and therefore pay very little for insurance.
The biggest winner is Brandon Chisholm, a detailer with two daughters, who will get health insurance for the first time, and will have to pay virtually nothing for it because he qualifies for a big government subsidy. That means he can bank the $200 a month the company is giving workers to replace the health insurance it previously provided.
Asked if he was excited at the prospect of getting nearly free coverage on top of the cash stipend, he replied, “Oh yeah! Anything that can help me and my family out, that’s what I’m going to do.”
Twenty-six of the dealership's workers had been covered this year under the old company plan. Twenty-one have now decided to go with the new group plan recommended by the company for next year, though they realize that they face sharply higher out-of-pocket costs next year.
Their deductibles will go from $1,125 this year to $3,000 next year, and maximum out-of-pocket costs jump from $2,250 to $6,350. And for families, those numbers double: to a $6,000 deductible and $12,700 out-of-pocket maximum.
“How is this helping the average American that’s working 40 to 50 hours per week?” -- salesman Terry Hardcastle.
Cathy Smith, who’d hoped she’d qualify for a subsidy and made just a little too much money, had tears in her eyes. "You don't make that much money to begin with,” she said, “and the prescriptions are going to kill me."
Insurance broker Michael Harp said small businesses, part of what’s known in the industry as the “small group market,” are used to seeing health insurance premiums climb about 10 percent a year, but it’s never before been this dramatic. For Extreme Dodge to have kept deductibles and out-of-pocket costs at last year’s levels, he said, would have cost the dealership almost 50 percent more than last year.
Harp says what is happening at this dealership is representative of the other small businesses he deals with. Businesses with 50 or fewer employees currently provide health insurance to about 17 million U.S. workers, according to the National Association of Insurance Commissioners.
He said the biggest surprise to him in how the law impacts small business clients is “how many people are losers versus winners. … There are some people who do come out ahead, but I would say the overwhelming majority, they’re paying much higher rates and they have lower benefits.”
Some small businesses have been able to extend their current policies and delay the deadline for complying with the new law until sometime next year.
The Obama administration disputes the notion that the ACA puts small businesses at a disadvantage or forces them to shed health insurance. It cites a program created by the law – the Small Business Health Options Program or SHOP -- that enables businesses with fewer than 50 full-time equivalent employees to shop for group health plans and notes that many small businesses can qualify for tax credits to help pay for employee premiums.
Beyond higher out-of-pocket costs, some workers at the dealership face higher premiums. Premiums vary because of age and family size. Some end up paying slightly less or about the same for premiums. But older workers with families pay significantly more.
Among the hardest hit is Campbell, a salesman with a wife and three young children, all of whom are active in athletics. The premium payments currently deducted weekly from his paycheck will increase $77, to a total of $221 per week.
“That’s a huge part of the budget,” he said. “We feel betrayed, lied to, and we're pissed off.”
Four younger workers opted not to sign up for any health insurance at all, according to a company official. Lutz, the dealership owner, said he believes that his company is maintaining its commitment to provide health care to its workers through the $2,400 stipend.
“I think everybody should have health care, so as a company, we’ve always provided (it),” he said. “Going forward, I still want to do that. It’s just the format’s different.”
Added General Manager Marc Trudell, “The important part is to take care of the people that need it the most, and by doing it this way, I think it's what we're able to accomplish.”
But Steve Williams, a service adviser with a daughter who’s active in sports, said the switch feels like the end of an era to him.
“The days of low deductibles and all that stuff are gone,” he said. “It’s not going to get any better. It ‘s just going to get worse.”