Most news surrounding the implementation of the Patient Protection and Affordable Care Act (PPACA) pertains to the employer penalties for noncompliance with the large employers’ shared responsibility provision that begins with the 2014 plan year. However, how does PPACA apply if an employer has fewer than 50 full-time equivalent employees?
Smart Business spoke with Whitford about how smaller business owners need to be counting employees carefully and preparing for PPACA provisions.
How is employer size defined?
A large employer is defined as having 50 or more full-time equivalent employees during a testing period that can be from six to 12 months. Full time is defined by the government as 30 hours per week.
The term equivalent is used to account for those who work less than 30 hours per week. For example, if an employer has 30 full-time employees working 30 hours each week and three part-time employees working 20 hours each week, it has 32 full-time equivalent employees. The part-time hours per month are added, then divided by 130 to determine additional full-time equivalent employees.
There is some relief for seasonal workers.
How does PPACA apply to small employers?
The employer penalties are just one piece. All employers are subject to certain rules if providing a health insurance plan, such as:
- Waiting periods for eligibility cannot exceed 90 days, beginning in 2014.
- Continuing to cover dependents of employees until age 26, in most cases.
- Providing a Summary of Benefits and Coverage to each employee at specific events, such as open enrollment.
- Supplying 60-day notification for any plan changes, except at renewal.
What are some other considerations?
If a plan is not grandfathered — hasn’t changed since the law went into effect in 2010 — then it must continue to waive all cost sharing for preventive care services, which includes women’s preventive care for plans renewing on or after Aug. 1, 2012.
Employers also must offer employees information on the public insurance exchange whether providing health coverage or not. The law requires this notice be distributed each March; however, it has been delayed in 2013, pending Department of Labor guidance.
In 2014, all non-grandfathered small group plans will have limits on the deductibles charged in-network. The maximum deductible will be $2,000 per individual and $4,000 per family. There also will be out-of-pocket limits that apply to all non-grandfathered plans. These limits are the same as those for high deductible health plans, which this year is $6,250 for an individual and $12,500 for a family.
How will the pricing methodology change?
The biggest change for small employers will be the pricing methodology applied to group insurance plans. Insurance companies will be unable to use gender, industry, group size or medical history, and therefore are limited to family size, geography, tobacco use and age. The companies can charge the oldest ages no more than three times what they charge the youngest ages. Many insurance companies use a ratio of 7:1 or higher, so this should result in higher rates for younger, healthier groups and better rates for older, less healthy groups. In addition, there will be new taxes and fees passed through to the employer in 2014.
Where do small employers have flexibility?
A small employer, with fewer than 50 full-time employees, has more flexibility in determining how many hours an employee must work to be benefits-eligible. For example, a small employer can establish 37.5 hours as the minimum to be eligible for the company health plan, so employees regularly working less than 37.5 hours aren’t eligible. Those employees most likely are eligible for a subsidy to purchase coverage in the public insurance exchange. But, as a small employer not subject to the employer penalties, there are no financial consequences.
Because of the complexities, employers are encouraged to review their employee count and other pending health care reform legislation with a qualified advisor.
Chuck Whitford is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7257 or email@example.com.
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The Patient Protection and Affordable Care Act (PPACA) mandate for employers to provide employees health care or pay a penalty takes effect Jan. 1, 2014, and many businesses aren’t sure how to prepare.
“We regularly talk with people in various industries about what is important to them. For the past six months, every person from every industry has mentioned the employer mandate. There’s a lot of uncertainty,” says Joseph R. Popp, JD, LLM, tax supervisor at Rea & Associates.
Smart Business spoke with Popp about the employer mandate and steps business can take now to be ready for 2014.
What do employers need to do first?
The first step is to determine if you’re considered a large employer. The test is whether you have 50 full-time equivalent (FTE) employees; if not, the employer mandate does not apply to you. This will be easy to answer for many businesses. However, for some it will be difficult to calculate. Employers will have to add up their full-time workers, which are those who work 130 total hours a month or more, and all the part-time people. Part-time employees must be converted to FTEs by adding up the total hours they worked that month and dividing by 120. When that figure is added to your number of full-time workers, you have your monthly FTE count. Businesses with 40 to 60 FTEs may want to look at how they can stay or get under 50, and they may need to pull in various professionals to help them with that planning.
If they are deemed a large employer, what’s next?
Determine which employees may pose a risk for penalties based on your current situation if you were to make no changes. To do so, you need to look at a number of factors on a case-by-case basis.
One factor is whether the coverage provided by the employer is considered affordable. If an employee’s income is between 133 and 400 percent of the federal poverty level based on family size, you have to provide him or her with affordable coverage. Affordability is based on a sliding scale that starts at 3 percent and goes to 9.5 percent of gross income. There are a number of safe harbors that the IRS has provided to calculate if your coverage is considered affordable to a particular employee.
There’s also the coverage test, which is not concerned with premiums but instead an employee’s actual out-of-pocket medical costs. The minimum standard is 60 percent of medical costs paid by the plan — the new bronze-metal tier plan. If you have a plan with a high deductible, this along with other plan features may disqualify it from being considered adequate coverage. The Department of Health and Human Services (HHS) has released a calculator that allows you to enter details of your plan and it will calculate its value in percentage terms. That will work for most plans. If it doesn’t, you’ll need to have an actuary calculate that value.
What are the penalties for not providing affordable or adequate coverage?
If you provide coverage to 95 percent of full-time workers, but it fails one of those tests for some employees, the penalty is $250 per month per full-time employee or $3,000 annually. If you don’t provide adequate coverage to 95 percent of full-time workers, the penalty is $166 per month per full-time employee, or $2,000 annually. On this $166 penalty, you’re not penalized for the first 30 employees each month.
Based on analysis we’ve done for companies, in most cases the least expensive option as an employer/employee group is for the employer to enhance health insurance payments to correct affordability and adequacy test failures. But that’s the most expensive option for employers.
Many employers will most likely make some plan changes so coverage is more affordable to the employee group as a whole, and then pay penalties on the outlying employees. In many cases, paying those annual penalty amounts for some employees will be cheaper than implementing a 100 percent compliance plan. Early planning will give businesses adequate time to build the best course of action.
Joseph R. Popp, JD, LLM, is a tax supervisor at Rea & Associates. Reach him at (614) 923-6577 or firstname.lastname@example.org.
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Employers are scrambling to figure out the impact of the Patient Protection and Affordable Care Act (PPACA) on their business and whether it makes sense to “pay or play” when it comes to providing health insurance coverage for employees.
“Pay or play regulations were released Dec. 28, so we’re all trying to digest this. Employers want to know what the rules mean for them,” says Dwight Seeley, vice president of Employee Benefit Programs at Sequent. “I have several meetings scheduled to review the math of the penalty phase with companies so they know where they stand.”
Smart Business spoke with Seeley about the pay or play provisions under PPACA and what employers need to do in preparation for the Jan. 1, 2014, start of health care exchanges.
How do companies prepare?
They need to determine answers to these questions:
- Do they have a general understanding of pay or play?
- Are they considered a large employer?
- Will any employees receive federally subsidized exchange coverage?
- Does the company plan offer minimum essential coverage?
- Does the plan provide minimum value?
- Is the plan affordable?
- What penalties could apply and what is the potential cost?
First off, pay or play applies to employers with at least 50 full-time or full-time equivalent (FTE) employees, so you have to determine if that applies to you. PPACA rules are different from those of the IRS. Under PPACA, a full-time equivalent is considered 120 hours per month, 30 hours per week. There’s a fairly detailed structure for measuring FTEs based on employees with variable hours, seasonal employees, etc. Companies that have variable schedule employees, part-timers or a lot of seasonal employees are going to be challenged to determine how many FTEs they have.
If you have 50 or more FTEs, what do you need to do to avoid penalties?
Businesses can avoid penalties by providing minimum essential coverage with a plan that offers at least minimum value and is affordable. No guidance has been given on minimal essential coverage but there’s a general idea of what it’s going to look like based on industry standards.
Once you’ve established that a plan provides minimal essential coverage, you then look at whether it meets the minimum value requirement and if it’s affordable. It’s considered poor if it pays less than 60 percent of total benefits under the plan. To be affordable, it has to cost less than 9.5 percent of an employee’s household income.
What are the potential penalties?
If you do not offer coverage and at least one full-time employee receives a federal subsidy, the tax is $2,000 per the number of full-time employees minus the first 30. An employee can get a subsidy if their income is between 100 to 400 percent of the federal poverty level — about $92,000 for a family of four.
If you offer coverage that’s considered unaffordable and at least one full-time employee receives a federal subsidy, the annual tax is the lesser of $3,000 per subsidized full-time employee or $2,000 for all full-time employees.
Should some employers drop health care coverage and pay the penalties?
Studies corroborate the fact that a lot of employers feel they still need to offer health insurance as a differentiator and as a recruitment and retention strategy. What they want is to get the numbers straight in order to make an informed decision. That means going through the penalty scenarios and working out the math. Any penalties will not be deductible or tax favored, whereas the health insurance you’re providing is tax favored, so you have to calculate the impact from pre-tax and post-tax perspectives.
One other challenge that’s not being talked about is the cost companies are going to incur to implement the administrative changes required by the law. They’re going to have to put in new processes to allow easy access to data the way it is defined by the PPACA, such as an ongoing way to monitor the number of FTEs.
The published regulations contain many detailed examples so there has been an attempt to provide direction. Still, the sheer volume and complexity make it a lot to absorb.
Dwight Seeley is a vice president, Employee Benefit Programs, at Sequent. Reach him at (614) 839-4059 or email@example.com.
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The new year means we are closer to the 2014 changes under the Patient Protection and Affordable Care Act (PPACA), the health care reform bill.
While we’re approaching the implementation of major changes to the way care is delivered in this country, some provisions are pending guidance and structure, so many employers are in a holding pattern until things are clearer.
“The best thing an employer can do is become familiar with upcoming changes and talk to their insurer and financial planners now,” says Marty Hauser, CEO of SummaCare, Inc. “Though they might not have all the answers to your questions, it’s a good time to begin the conversation.”
Smart Business spoke to Hauser about what provisions have gone into effect and what we can look forward to this year and into 2014.
What provisions exist now?
In 2010, early provisions included coverage of children with pre-existing conditions; coverage of dependents up to age 26 and 28 under federal and Ohio law, respectively; elimination of lifetime limits of coverage; regulation of annual limits of coverage; prohibiting rescinding of coverage; and 100 percent coverage of certain preventive services.
In 2011, more provisions were implemented, including extending 100 percent coverage of certain preventive services to Medicare members; medical loss ratio requirements; and changes to Federal Savings Accounts (FSAs).
Last year, women’s preventive health services were added to services covered at 100 percent, when received in-network, and insurers were required to distribute Summary of Benefits and Coverage (SBC) documents to potential enrollees upon application and renewal. Employers were also required to include aggregate costs of employer-sponsored health coverage for the 2012 tax year on W-2 documents provided to employees earlier this year.
This year, employers will be required to notify employees of the availability of state exchanges, now referred to as ‘marketplaces.’ There is also a $2,500 cap on FSA contributions.
What provisions are next?
In 2014, one provision impacting consumers will be guaranteed issue of health insurance policies. Guaranteed issue will provide access to affordable coverage to hundreds of thousands of individuals who may have previously been denied coverage because of pre-existing conditions.
Another provision impacting consumers is the implementation of state, federal and partnership marketplaces. A marketplace, in essence, is a state-based transparent and competitive insurance shopping and buying website administered by a governmental agency or nonprofit organization, where individuals and small businesses with up to 99 employees can buy health insurance plans. On Jan. 1, 2014, marketplaces will open to individuals and small employers, and some consumers will qualify for a subsidy from the federal government, helping to offset the cost of coverage purchased through the marketplace.
Additionally, on June 28, 2012, the U.S. Supreme Court ruled the individual mandate constitutional. It’s considered a tax that will be reported and paid when filing income taxes. The individual mandate takes effect Jan. 1, 2014, meaning all persons will be required to have health insurance or pay a tax penalty.
At the same time, the employer mandate also goes into effect, meaning employers who employed an average of at least 50 full-time employees, with full-time equaling an average of 30 hours per week, are required to offer employees and their dependents an employer-sponsored plan or the employer pays a penalty. Penalties don’t apply to employers with fewer than 50 full-time equivalent employees and there is no penalty if affordable coverage is offered. Employers with 25 or fewer employees may be eligible for a health insurance tax credit if they offer insurance, but the credit is only available on the marketplace in 2014.
Lastly, in 2014 employers will be allowed to offer wellness incentives of up to 30 percent of the cost of coverage.
What can be done to prepare for 2014?
Talk to your health insurer and financial adviser to find the best health insurance option for your employees next year.
Marty Hauser is the CEO of SummaCare, Inc. Reach him at firstname.lastname@example.org.
Website: To learn more about health care reform, visit www.summacare.com/healthcarereform.
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As accountable care programs are implemented, health care providers are going through significant financial, clinical, operational and strategic transformation. This has profound effects not only on health care providers, but also on those touched by health care delivery.
Payment transformation, re-admission penalties and demographic shifts are creating a perfect storm where health care providers have to be very skilled, says Ron Calhoun, managing director, national health care practice leader, at Aon Risk Solutions.
“Providers are going to have to get it right,” he says. “They’ve got to be clinically integrated, and a majority of them are not.”
Smart Business spoke with Calhoun about the risks health care providers are facing in this new environment.
What are the impacts of payment transformation and re-admission initiatives?
Numerous payment reform programs are moving providers toward payment for value and outcomes, as opposed to volume or service. The Patient Protection and Affordable Care Act has increased emphasis on Medicare/Medicaid outcomes, which has in turn led to more commercial sector payment transformation. The fundamental question is how are health care providers going to clinically manage a population in a non-clinical environment with all of the quality measures by which they’re assessed?
In 2012, Medicare’s Hospital Re-admission Reduction Program started penalizing hospitals for re-admission of certain acute myocardial infarction (heart attack), heart failure and pneumonia patients. Reimbursement penalties are expected to be $280 million in year one, and to increase as penalties go up and the program expands.
With financial risks tied to reducing re-admissions, there is de-emphasis on acute care — short-term medical treatment — and emphasis on post-acute care. This puts more demand on non-physician clinicians like registered nurses. Hospitals also are managing discharged patients to reduce exposure by either pushing a patient into a post-acute setting earlier or managing that patient more aggressively. However, this has direct and vicarious liability implications.
How are demographic changes creating risk?
As Medicare and Medicaid grow, payment transformation models will proliferate, placing more emphasis on outcomes and value. Roughly 44.3 million Americans are on Medicaid, which will increase by 10 to 20 million, depending on how many state Medicaid programs expand. Michigan Gov. Rick Snyder included an expansion of about 320,000 residents in his budget proposal. Also, 60 percent of the 169 million with employer-sponsored health care are ages 40 to 65, so the Medicare population will double to 88.6 million by 2035.
The Centers for Medicare and Medicaid Services is bundling reimbursements with outcomes, which shifts liability to the provider. Health care providers need to adhere to established clinical protocols, narrow physician practice pattern variation, be highly communicative between specialties and with patient hand-offs, and have sophisticated clinical decision support capabilities within electronic medical record platforms. The tighter the clinical integration, the more confident the health care provider will be in participating in bundled or value-based reimbursement.
Why are family caregivers so important?
About 45 million Americans are unpaid, informal caregivers for those with dementia and/or the top 15 chronic conditions. In the next three to five years, care will systematically go into the home, increasing the demands on home health. Health care providers must connect to caregivers to drive outcomes, such as decreasing re-admissions or increasing medication compliance.
What’s the impact for consumers?
As health care providers move toward value-based or bundled reimbursement, health care networks may become narrower and include only the highly effective providers in a given geography. Consumers with higher deductible, more consumer-driven plans will demand that all providers demonstrate an ability to comply with quality measures. Group health plan providers are certainly going to demand quality, as well. Population management will only become more critical. Consumers and employers will want relevant medical data pushed beyond the hospital’s four walls and into their hands.
Ron Calhoun is a managing director, national health care practice leader, at Aon Risk Solutions. Reach him at (704) 343-4128 or email@example.com.
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The financial impact of the Patient Protection and Affordable Care Act (PPACA) may seem to be its most challenging aspect. Mitigating that impact may seem like the most practical solution. However, Ron Present, health care industry group leader at Brown Smith Wallace, says, “There are a lot of strategic implications to what you do and how you do it. Management should avoid just calculating the math and saying, ‘This saves us money so it’s what we’re doing.’”
To that point, Bill Goddard, principal, insurance consulting at Brown Smith Wallace, says, “You should consider many potential solutions before making a decision that could drastically diminish your ability to retain and acquire talent, and keep your workforce engaged.”
Smart Business spoke with Present and Goddard about dealing with health care insurance after the PPACA from a cost and strategic perspective.
How has the PPACA affected private insurance?
Starting Jan. 1, 2014, employers with 50 or more full time or full-time equivalent employees, considered large employers, must offer health insurance that fits certain affordability and coverage criteria or face a penalty. This could have an immediate impact on an employer’s cost to provide health insurance because a group of employees that had not had insurance may enroll in the plan and because of pre-existing conditions or high use of care, will cost the employer a significant amount of money.
Also, the health care law changes the status of some who had been considered part timers for insurance purposes to full-time employees. In some industries, many employees have not historically taken health insurance, sometimes as much as 66 percent of a company’s workforce. These employees will need to be offered coverage, potentially tripling costs.
How might that impact employers?
Companies are calculating their potential risk to cost. However, that’s only one aspect. The other is the strategic impact.
Some companies have considered limiting their variable hour, or part time, employees, to less than 30 hours per week to reduce the number of employees considered full time. To maintain an adequate workforce, such changes can require hiring additional employees, or changing existing employees’ workloads and job descriptions to keep up production and prepare for 2014.
Should employers not provide coverage?
Let’s say a large employer decides not to offer health insurance and instead pay the $2,000 per employee (minus 30) penalty, which may seem cheaper. However, the law requires individuals to have insurance regardless of employer coverage, so employees may leave for a competitor that provides it. Those who stay out of necessity may always be looking for another employer that provides coverage, lessening their productivity and loyalty while raising turnover, which is a significant expense.
Counsel employees. Let them know that they can refuse insurance coverage from the employer and either purchase insurance through a public exchange/marketplace or instead pay an annual penalty. Employees may prefer to pay the penalty instead of paying far more each month for coverage.
How can employers that provide insurance cope with rising premiums?
Large employers offering health insurance to a population of purely full-time employees can potentially control premium costs by forming a captive insurance company. This is an insurance company that non-insurance companies with 50 or more full-time employees can start. It is generally owned by the company that forms it and insures a limited population, typically just its own employees.
Another potential solution is to form a private exchange, which may be complementary to forming a captive insurance company, in that the entity forming it creates its own marketplace, which means it may qualify as providing insurance with a defined contribution that may help control costs.
Bill Goddard is a principal, insurance consulting, at Brown Smith Wallace. Reach him at (314) 983-1253 or firstname.lastname@example.org.
Ron Present is a health care industry group leader at Brown Smith Wallace. Reach him at (314) 406-5105 or email@example.com.
WEBSITE: For more on this topic, visit http://bswllc.com/industries/health-care.
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Young adults ages 19 through 29 are the largest growing age group in the U.S. at risk for being uninsured. Officials estimate this age group accounts for approximately 13 million of the 47 million Americans living without health insurance.
“As young adults transition into the job market, they often have entry-level jobs, part-time jobs, or jobs in small businesses and other employment that typically come without employer-sponsored health insurance,” says Keith Kartman, client advisor at JRG Advisors, the management arm of ChamberChoice.
The Dependent Insurance Coverage provision in the Patient Protection and Affordable Care Act (PPACA) was designed to address the millions of young adults currently uninsured.
Smart Business spoke with Kartman about how dependent coverage laws work.
What are the dependent coverage laws?
The PPACA requires private insurers that offer dependent coverage to children to allow young adults up to the age of 26 to remain on their parent’s insurance plan.
A number of states also require insured health plans to cover dependents past age 26. Every group health plan purchased by employers from commercial health insurers and health maintenance organizations must comply with Pennsylvania’s dependent coverage laws. However, self-funded plans subject to the Employee Retirement Income Security Act are exempt from this dependent coverage law. Pennsylvania’s dependent coverage only applies to medical. This excludes dental and vision only, hospital indemnity, accident or specified disease only, Medicare supplement, long-term care and individual health insurance policies.
Who qualifies for this dependent coverage?
Regulations specify a young adult can qualify for this coverage if he or she is no longer living with a parent, is not a dependent on a parent’s tax return or is no longer a student. Both married and unmarried young adults can qualify, although that coverage does not extend to a young adult’s spouse or children.
The law also states that young adults can only qualify for dependent coverage through group health plans in place prior to March 23, 2010, if they are not eligible for another employer-sponsored insurance plan. In other cases, a young adult can choose to remain insured through a parent’s dependent coverage, even if the young adult is eligible for other employer-sponsored coverage.
What do employers need to know?
The Department of Health and Human Services has stated that young adults gaining dependent coverage under the PPACA can’t be charged more for coverage than similar individuals who didn’t lose coverage due to the end of their dependent status. Also, young adults newly qualifying as dependents under the law must be offered the same benefit package as similar individuals who were already covered as dependents.
What are the tax implications?
Treasury Department-issued guidance on the tax benefits states that employer-provided health coverage for an employee’s child is excluded from the employee’s income through the end of the taxable year in which the dependent turns 26. The benefit applies regardless of whether the plan’s coverage is required or voluntarily.
Key elements include:
- The tax benefit continues beyond extended coverage requirement. Some employers may decide to continue coverage beyond the 26th birthday. In that case, if an adult child turns 26 in April but stays on the plan through Dec. 31 — the end of most people’s taxable year — all health benefits that year are excluded for income tax purposes.
- Broad eligibility. This tax benefit applies to various workplace and retiree health plans, as well as self-employed individuals qualifying for the self-employed health insurance deduction on federal income tax returns.
- Health premium shares for both employer and employee are excluded from income. In addition to excluding any employer contribution toward qualifying adult child coverage from income, employees can receive the same benefit by contributing toward the cost of coverage through a cafeteria plan. The IRS states that a cafeteria plan allows employees to choose from two or more benefits consisting of cash or qualified benefit plans.
Keith Kartman is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7010 or firstname.lastname@example.org.
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To avoid elements of the Patient Protection and Affordable Care Act (PPACA) adversely affecting fully insured health plans, growing numbers of employers — especially smaller ones — are self-funding their plans.
“The problem is that everybody has been in a wait-and-see mode for two years, but now we’re starting to see the impact,” says Mark Haegele, director, sales and account management, at HealthLink. “I expect a lot of fully insured employers to make a change this year, mid-year. There are just so many compelling reasons to entertain it because self-funding policies still protect small employers and allow them to avoid many forthcoming taxes and rules.”
Smart Business spoke with Haegele about why the PPACA has prompted more employers to explore self-funding or partial self-funding.
How does medical loss ratio (MLR) reporting drive employers to self-funding?
MLR reporting requires insurance companies to spend 80 or 85 percent — depending on their size — of premiums received on health care claims. Plan administration, such as overhead, payroll, sales efforts, network contracting, etc., comes from the remaining 15 to 20 percent.
MLR gives insurance companies an incentive to squeeze administrative services to make more profit. Some insurance companies have changed staffing and service models. One company had service people out to help with claim issues and problems for different segments — health insurance groups with two to 40 members, and 40 to 100 members. They recently bundled the segments into one, cutting staff and decreasing field service.
What will community rating rules do to health care costs?
Effective Jan. 1, 2014, insurers must comply with community rating factors based on geography, age, family composition and tobacco use. This means all fully insured small employers in an area or industry will pay the same for premiums. The idea is to get everybody to an affordable and stable price point, but many fully insured groups will be hit with big increases.
Here’s an example: in Missouri and Illinois, groups of fewer than 50 employees will be underwritten based on community rating rather than the specific group’s risk. A small, healthy employee group in Chicago can expect a 173 percent increase in 2014, according to the American Action Forum Survey of Insurance Companies. At the same time, a small Chicago group with older, less healthy members could have its premium decrease by 21 percent.
Under self-funding, healthy small groups are able to maintain rate stability based on the health of their own population.
How will the insurance tax affect health premiums for fully insured employers?
Starting in 2014, insurance carriers will be assessed a tax, projected to be $8 billion to $12 billion. The federal government will use this money to subsidize poor uninsured. However, insurance is a cost-plus business, so carriers will pass this on to employers. It’s still unclear how much the fully insured’s premium will increase as the tax is shared across the industry; it depends on your insurance company’s market share.
How will minimum essential benefits make self-funding more attractive?
Fully-insured plans sold in the small group market — fewer than 50 employees for Missouri and Illinois — will be required to limit annual deductibles to $2,000 for single coverage and $4,000 for family coverage, as of Jan. 1, 2014. This places upward pressure on premiums. If your current deductible is greater than $2,000, in order to decrease it premiums will go up because the insurance company faces more risk.
Also, for the past five years, many small employers’ deductibles have increased, which keeps premiums down, but employers haven’t passed it on. For example, because most members don’t use their deductibles, the employer could give employees a $1,000 deductible and use self-funding to cover the gap for the remaining $4,000 when the insurance company requires a $5,000 deductible to keep premium increases low.
Small employers could consider a self-funded platform in order to maintain their current deductible and keep rates stabilized.
Mark Haegele is a director, sales and account management, at HealthLink. Reach him at (314) 753-2100 or email@example.com.
VIDEO: Watch our videos, “Saving Money Through Self-Funding Parts 1 & 2.”
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