Small Employers Who Offer Health Care: Check Your Mailboxes

John Arensmeyer

Here’s a riddle for you. What did the small business owner do when she opened the letter from her health insurer?

If it’s Lynn Petrazzuolo we’re talking about, she did the happy dance. Because in that envelope was a $1428 rebate check from her health insurance carrier, who was reimbursing Lynn because it had failed to spend her premium dollars the way the new federal healthcare law requires.

Under the Medical Loss Ratio (MLR) provision of the Affordable Care Act, insurance companies must spend at least 80 percent of small groups’ premium expenses on patient care and quality improvement. That limits what they’re allowed to spend on administrative costs, marketing and profits to 20 percent of premium dollars. If carriers exceed that cap, they must reimburse their customers for the difference.

The deadline for insurers to send out rebates was Aug. 1, so small business owners should start looking for them. Insurance companies across the nation — including UnitedHealth, the most colossal of all U.S. insurance giants — owe Americans $1.1 billion, collectively, according to the Department of Health and Human Services. And based on an initial report by the Kaiser Family Foundation, 28 percent of small employers offering benefits in 42 states will see part of that money. Those aren’t bad odds.

For Lynn Petrazzuolo, who pays $73,000 annually for health insurance at her small business, the rebate was a welcome surprise. Lynn owns Avanti Corporation in Alexandria, Virginia, a 21-employee business providing earth protection services focused on tribal environmental regulations. Lynn pays 100 percent of employee premiums. But it was only recently that she was even able to start offering insurance.

During the first two years, coverage for Avanti employees was cost-prohibitive because two of their five full-timers had preexisting conditions that insurers wouldn’t cover at reasonable rates (a practice that will be banned in 2014 under the new law). In 2006, Lynn’s group was finally able to get their hands on an affordable plan after hiring new workers who happened to be healthier. But since then, rates have increased about 10 percent annually.

“Luckily, our increased revenues have offset the increased costs of our health insurance. If the company wasn’t doing as well as it is, I’d have to consider passing some of the cost to employees or raising the co-pay on the plan,” she said. “And the rebate of nearly $1500 that we got for our 2011 costs further offsets our expenses and makes me feel confident we can continue paying 100 percent of our employees’ premiums. It’s nice to know that insurance companies are being held accountable for keeping my insurance costs tied to actual healthcare expenses.”

And the MLR rule isn’t the only insurance-related provision of the Affordable Care Act that’s in the spotlight this week. Many women-owned businesses will also happy to know that as of Aug. 1, new or renewing health insurance plans must cover a host of preventive services for women at no out-of-pocket cost — such as annual well-woman exams, birth control and more.

Entrepreneurs likely support this measure, as Small Business Majority’s recent opinion polling found that nearly three-quarters of small business owners are in favor of the new law’s provision requiring that insurers charge women the same rates as men. And in fact, about the same percentage also support the MLR rule.

So, if you’re a hardworking small business owner who provides health insurance for your employees, or if you’re a female small business owner, you might want to read up on the benefits you could soon be receiving. This rebate map will show you if your insurer is issuing refunds in your state. Plus, HHS also has new information showing the percentage of premiums each insurer spent on patient care versus overhead in 2011, along with information on women’s preventive services kicking in.

As you can see, it’s a big week in healthcare reform for small business. And that’s something to be thankful for. Small businesses’ premium costs have spiraled so far out of control over the past decade that more and more of them are being robbed of their ability to afford coverage for deserving employees, or like Lynn, have to try repeatedly to even access it. It was time something was done to start bringing these entrepreneurs relief, and the Affordable Care Act is off to a pretty good start.