Source: Wall Street Journal

Employer groups and insurers are pushing to keep businesses with 51 - 100 workers exempt from a provision of the federal health law that they say could significantly increase their costs.

For these midsize employers, the Affordable Care Act’s requirements for what health plans must cover—and how they are priced—are set to take effect on Jan. 1, 2016.

Already the law requires insurers to sell individual and “small group” plans to everyone at the same price, regardless of their health. Those rules, which kicked in Jan 1, 2014 for businesses with 50 or fewer workers, also set standards for what health-benefits packages must cover.

The new pricing rules were designed to help individuals whose prior illnesses made it costly for them to get insurance. But they have caused a spike in costs for some small businesses with healthy employees, and for young people, who previously got good rates because of their light medical needs.

Midsize businesses that already offer health coverage, such as precision sheet-metal fabricator Sound Manufacturing Inc., say they could be next in line for sharp price increases. One study conducted for the U.S. Chamber of Commerce by actuarial firm Oliver Wyman found that nearly two-thirds of workers in such firms would face premium increases of 18%.

Sound Manufacturing, based in Old Saybrook, Conn., offers insurance to its 54 employees. But Chief Executive Kelli-Marie Vallieres expects the company’s premiums to rise, because its relatively young and healthy workforce will no longer help it limit what it pays.

“The cost to my company of the Affordable Care Act is going to be $80,000 to $100,000,” Ms. Vallieres said, based on projections she mapped out after consulting her insurance broker. “That’s a really big hit for a company this size. We’re not at a point where we’re making a big profit,” she said of the 31-year-old business.

Sound Manufacturing and other midsize employers, which previously fell under federal rules for large companies that allowed them to negotiate their own deals with insurers, say they should be exempt from the new rules and shouldn’t be lumped in with smaller businesses. They have amassed a broad range of allies, including insurers and consumer groups not often in the same camp.

“Allowing states to keep the current definition of a small group will allow businesses to keep what they have and keep health-care benefits affordable and accessible for the millions of workers and their families who depend on them,” said Alissa Fox, senior vice president of the Office of Policy and Representation for the Blue Cross Blue Shield Association.

The campaign has met with some success. Roughly two dozen state insurance commissioners have announced that health plans within their borders can delay making the rule changes, though the delay doesn’t apply to new health plans.

But the companies and their supporters say broader action is needed, and have fired off a series of letters to the Department of Health and Human Services asking it to delay the rules nationwide for another two years.

In a letter to Senate Democrats who had raised the issue, Health and Human Services Secretary Sylvia Mathews Burwell said she “appreciated” their concerns “regarding market stability and access to coverage,” and would “continue looking into this matter.”

Paul Nachtwey, vice president of Todd Associates Inc., a Beachwood, Ohio, insurance broker, said that to cope with the requirement to offer the same prices to all, regardless of health status, some insurers might extend contracts with midsize firms beyond the standard 12-month term, pushing renewals deep into 2016. He said that might “build a time cushion” for insurers and employers to comply with the law’s requirements.

Sabrina Corlette, a former consumer advocate and senior research fellow at the Center on Health Insurance Reforms at the Georgetown University Health Policy Institute, said she supports delaying the change to find out more about its ripple effects. “This is something where we should really proceed with caution,” she said.

Employer representatives say they would like any delay to become permanent. “We want to at least delay this,” said Joel White, president of the Council for Affordable Health Coverage, an advocacy group. “Ideally, we’d like to see this market left alone,”

Meanwhile, Ms. Vallieres, Sound Manufacturing’s CEO, has hired temporary employees to do entry-level work. “I already have to spend a lot of money in the development and training of a young worker, so it makes it a tougher decision for me to invest in a young person” when insuring them also costs more, she said. “It’s punishing companies for hiring new, younger people,” she said of the higher premiums she expects to face.