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The Affordable Care Act: Will it Prompt Maine Businesses to Drop Coverage?
12/14/2012   Reported By: A.J. Higgins

A conservative advocacy organization in Maine says employers in the state might simply stop offering health insurance rather than pay the higher costs to insure more workers under the Affordable Care Act. Using a Maine blueberry farm as a case study, the Maine Heritage Policy Center concludes it would be cheaper for the employer to pay a penalty under the new federal law than to provide additional required health insurance. Supporters of the act don't disagree with the center's findings, but they also say companies will have other coverage options. A.J. Higgins reports.

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Joel Allumbaugh is the health care guru at the conservative think tank known as the Maine Heritage Policy Center, but he is also a licensed life and health insurance consultant. He says when his clients ask him how their businesses should prepare to adapt to the new health insurance mandates under the Affordable Care Act that takes effect in 2014, the answer for some is to simply drop coverage and pay the penalty.

"It's been counter-intuitive, but interesting, how often I have been finding that it seems that the real advantage financially or maybe another way of saying it is the least impactful financially is actually to drop coverage altogether," Allumbaugh says.

Allumbaugh says he used financial information from a blueberry farming operation in an analysis that shows how some businesses will see a dramatic annual increase in insurance costs.

The blueberry farm currently pays about $90,000 a year to provide health insurance for its full-time employees. Under the ACA, the farm could pay three times that much - more than $274,000 - to cover both full-time and seasonal part-time employees. But if the farm chose to drop health coverage all together, Allumbaugh says it would pay a penalty of about $76,000.

"There are pluses and minuses to an employer taking that route of paying the penalty and not offering coverage," says Mitchell Stein, policy analyst for Consumers For Affordable Health Care, a progressive Maine health care advocacy group.

Stein says that Allumbaugh may be right in predicting a percentage of Maine businesses may elect to drop their insurance coverage and pay the penalty rather than absorb additional health care costs. But he faults the study for failing to consider other available health care options under the ACA. And Stein says Allumbaugh also fails to recognize that health care offered by employers is part of a benefit package

"This is part of your benefits, this isn't something the employer does out of the goodness of his heart. It's part of your compensation package and if they're not paying that money towards your health insurance, they should be paying it in salary," Stein says.

But Allumbaugh says many Maine companies just don't have the extra cash to offer these kinds of benefits. "Most of these companies don't have those types of margins," Allumbaugh says. "These added costs represent significant portions of their post after tax profits -- if not all of them in some cases."

But Stein points out that many Maine companies with 50 or fewer employees are not required to provide insurance under the Affordable Care Act.


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