Self-employed owners concerned about increased business costs from new law

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Dayton Daily News reporters Randy Tucker and Mary McCarty are taking a closer look at how the Affordable Care Act affects you. Our series answers frequently asked questions, as well as look at how the uninsured, self-employed, the health care industry and businesses are impacted by the changes.

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Oct. 6, Your Guide: The Affordable Care Act is a special section with everything you need to know about the changes and how they will affect you.

Online: View our interactive page to calculate your health insurance premiums, read the latest developments and get other facts at MyDaytonDailyNews.com

Ohio small business by the numbers:

$130 million

Annual revenue for Ohio self-employed in 2011

$13 million

Annual revenue for Ohio micro-businesses in 2010

742,500

Self-employed in Ohio in 2011

139,472

Micro businesses in Ohio (businesses with fewer than 10 employees) in 2010

50,039

Self-employed in Dayton metro area in 2011

80

Percentage of the self-employed Ohioans who are also self-insured

Source: National Association for the Self-Employed

Running a business can be expensive, leading many self-employed Ohioans to forgo health insurance or maintain limited coverage to keep expenses down.

Beginning next year, that will not be an option.

Under the Patient Protection and Affordable Care Act, most Americans who don’t have health insurance will be required to obtain coverage that meets minimum government standards or pay a fine.

New health insurance marketplaces opening in January are expected to provide subsidized coverage to help make health insurance more affordable for millions of Americans.

But many successful self-employed business operators will not qualify for tax credits to offset the cost of insurance because they bring in too much money.

The subsidies will be available only through the marketplaces to people earning under 400 percent of the federal poverty level: $45,960 for singles; $92,200 for a family of four.

With average annual income exceeding $62,000, most of the nearly 900,000 self-employed business owners and micro-businesses in Ohio will have to pay for insurance out of their own pockets, said Katie Vlietstra, a spokeswoman for the National Association for the Self-Employed.

“We have a lot of successful entrepreneurs in Ohio,” Vlietstra said. “Most of them will be faced with higher insurance costs next year, and most will not get a break from the government.”

Health care costs are typically the second-biggest expense for the self-employed outside of operating costs, she said, noting that health insurance is particularly expensive for the self-employed because they don’t benefit from the group rates offered to workers at most companies.

‘It’s just way too expensive’

Lisa Scott, who owns the Beaute Box day spa in downtown Dayton, said she would rather take her chances than fork the hundreds of dollars a year in premiums that she was quoted to buy health insurance in the individual market before the federal marketplaces were established.

“If I have to go to the doctor, I just pay out of pocket,” Scott said. “I’ve looked into insurance on my own, and it’s just way too expensive.”

Now she’s faced with a business decision she had not anticipated, whether to buy health insurance or face tax penalties ranging from $95 next year up to $695 by 2016.

“I’ll probably end up enrolling in a plan, because it would be more cost-effective for me to be proactive rather than pay a huge fine at the end of the year,” Scott said. “But that $80 or $100 a month I’d spend for insurance in the marketplace is still going to have a impact on my business. It’s going to affect the improvements I can make, the advertising I can do…I’ll just have to be even more creative and more frugal with the things I can do to grow my business.”

Not all small business owners go without insurance. In fact, more than 80 percent of the self-employed in Ohio are also self-insured, according to Vlietstra, who said some buy insurance for themselves and others have coverage through their spouses.

Some self-employed people may be able to keep their health plans if they have grandfathered status, which means costs have not changed significantly since the health care law was passed in March 2010, and the plans meet all the coverage requirements under the health care law, including maternity care and mental health and substance abuse services.

But only a limited number of health plans are expected to maintain grandfathered status next year. And moving into richer, more comprehensive plans will undoubtedly drive costs up for those who own their own businesses, Vlietstra said.

“The issue becomes the type of insurance the self-employed had and are now going to be required to have,” Vlietstra said. “It might be a greater, more robust health care product…but they (self-employed) are still going to spend more on health insurance.”

Will new law stifle businesses?

Kindy Ghussin, who opened Heartland Pharmacy in Kettering about a year ago, has a high-deductible, low-premium health plan for him and his family that he describes as a “just in case policy” that fits his needs because he, his wife and three children do not have many health problems.

Ghussin, 39, said he expects he will have to upgrade his coverage as a result of the health care law, and because of his income is unlikely to qualify for subsidized coverage in the marketplace. He said the health care law will simply cost him more money for benefits he probably won’t use.

“It’s like saying, ‘I’m thirsty,’ but instead of being able to buy a single bottle of water for $1, now I have to buy 50 bottles of water for $3,” Ghussin said. “One bottle will quench your thirst.”

The Congressional Budget Office estimates that by 2016, the least expensive options in the health insurance marketplaces will cost about $4,500-$5,000 per person, and $12,000-$12,500 per family, per year. There are high-deductible, low-premium catastrophic plans available in the marketplaces, but they are limited to individuals who are under age 30 and are not eligible for premium tax credits.

“You’re talking about costs that you cannot easily pass on to your customers,” Ghussin said. “This is a cost you’re going to have to absorb and take directly off your bottom line.”

Critics say the health insurance mandate is likely to stifle entrepreneurship, but some elements of the law could actually stimulate growth, according to a recent report from the Urban Institute, a non partisan Washington D.C.-based think-tank.

Ohio could add as many as 67,000 new entrepreneurs as a result of a provision of the law prohibits insurers from denying coverage to anyone because of pre-existing health conditions.

“Many individuals who may be working for firms today who would like to start their own business are locked in to where they are employed now as a consequence of needing health insurance,” said Linda Blumberg, senior fellow and lead researcher at the Urban Institute. “The ACA levels the playing field so they don’t have to worry about whether they can afford to give up their health insurance.”