Businesses have been playing the health care reform waiting game, complying when necessary but otherwise holding off on planning for future regulations with the hope that there will be another postponement. In the interim, insurance companies are allowing employers that like their current benefits program to extend it. But that will not last.
“Small-group employers with fewer than 50 employees are really going to struggle when the grandfathering period ends,” says Ross W. Farro, a principal at Benefits Resource Group.
Companies need to plan for the future, he says, especially those with rich benefits — plans with very minimal out of pocket exposure for employees. Those plans aren’t available under the Affordable Care Act (ACA) for small businesses. There is already evidence that businesses are being forced into public platinum, gold, silver and bronze plans and aren’t able to match up their benefits with those they’ve had in the past.
Smart Business spoke with Farro to find out what’s ahead in health care reform that businesses should prepare for.
What is around the corner for businesses in the context of health care reform?
For small businesses, rollout of further ACA regulations has been postponed until the 2016 plan year.
For those companies with more than 100 full-time employees, the ACA goes into effect for the 2015 plan year. That includes provisions for the affordability of coverage, minimal essential benefits, the pay or play tax, and the standard for full-time equivalent employees.
Some employers have considered dropping their health care insurance to reduce costs. They’re weighing paying the $2,000 per employee penalty for not offering coverage against what they pay for health insurance. Those companies should know that the IRS recently issued words of warning to businesses suggesting there could be stiffer penalties beyond the pay or play tax that could make dropping coverage more painful.
How are businesses adapting?
Premiums are increasing for all businesses because of the volatility in the market caused by the taxes and fees associated with the ACA. One way to mitigate the effects of this volatility is by using the private exchange model, which is created by consultants in conjunction with insurance companies to provide a host of coverage options. This, combined with a defined contribution plan, allows employers to set their cost while giving employees more choices for health care coverage, essentially allowing them to shop the market while helping employers maintain a consistent budget. A private exchange model would keep a company in compliance with ACA regulations while allowing employees to build a plan that best fits their needs.
How has the self-funding option changed in response to ACA?
Self-funding had previously been reserved for larger groups. Today, however, smaller groups can take advantage of these programs through level funding, which is a stepping stone to self-funding. Employers that take this approach won’t need to pay the market share fee, which is 2 to 3 percent of their monthly premium today and will increase to 5 percent by next year. It offers a way to get around the mandated fees from the government. Some carriers allow as few as 25-employee groups into this new self-funding model, whereas previously it required groups of 150 to 200.
Employers using level funding won’t be required to go into community rating plans or public plans; they’re able to keep their plans in place. Further, level funding offers protections to insulate employers from very large claim, which prevents them from going into the red trying to deal with it.
What can companies do to comply?
Today’s business owners need to have a benefits adviser who is very knowledgeable regarding health insurance funding options in the era of the ACA. Health care insurance and ACA compliance is going to have a huge impact on businesses’ costs and their ability to dictate their plan types. It’s constantly evolving, so if businesses aren’t working at the forefront of these issues they’re liable to miss something big. They need a consultant who leads instead of reacts to get their client the necessary information to make the best decisions.
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