The entire health insurance industry is holding its breath right now, waiting for the Supreme Court to hand down its decision regarding the Patient Protection and Affordable Care Act.
But regardless of what happens, insurance brokers are urging companies to take steps now to ensure that they have the best insurance plans in place.
“We’re expecting most employers to maintain what they currently have,” says Danone Simpson, founder and CEO of Montage Insurance Solutions. “However, to be prepared, employers need to make sure they are offering a variety of insurance plans that can compete with a low-cost insurance plan in a health care exchange.”
Smart Business spoke with Simpson about how changes will impact business’s health insurance and how companies can work with their insurance carriers to prepare.
What critical steps do companies need to take in regard to their health insurance plans right now?
Employers with 50 employees or more, if they provide insurance, need to work with an insurance brokerage firm to make sure it offers a variety of plans, including a low-cost plan that can compete with health insurance exchanges. It’s a good idea to have two to four plans available.
States are currently putting together health insurance exchanges where employees can look for other plan options that may be lower in cost due to reduction in benefits. In addition, some of the the insurance carriers, are setting up exchanges. Our firm, Montage Insurance Solutions is setting up an exchange called SIMPLAN™ which will offer all the carrier's plans. If an employee finds an insurance plan on the exchange that he or she wants to purchase, the employee can purchase it on his or her own. So many individual plans however, may create problems because it could quickly become unmanageable for a company’s human resources department to assist employees properly. An HR department might already oversee one group plan — one set of plans with one carrier or two — but if employees buy individual insurance on their own, they will be going to the HR department, asking questions about very complicated and different plan designs from multiple carriers within the exchanges. Even if the reform bill is struck down, these exchanges likely will still exist in some form, as the legislation leaves the design up to individual states.
In addition to placing more strain on HR, under current laws, if an employer of 50 or more employees doesn’t offer what is considered affordable health insurance — 60 percent of covered expenses for a typical population, or employees paying less than 9.5 percent of family income coverage — businesses pay a penalty of $3,000 annually for each employee, with a maximum of $2,000 times the number of full-time employees minus 30. That means that a company with 100 employees would pay no more than $140,000 per year in penalties. The penalty also increases each year with growth of insurance premiums.
However, penalties do not apply to small employers. And if an employer has 25 or fewer employees and an average wage of up to $50,000, the company may even be eligible for a health insurance tax credit.
Will employers’ insurance be affected regardless of the Supreme Court decision?
That’s the part no one knows. The entire insurance industry is in limbo waiting to find out if laws that have already been passed, such as preventive care at no cost, will stay in place. If laws already in place are struck down, each individual insurance carrier will be handling it differently.
For example, the mandate of having young people ages 26 and younger on their parents’ plans will likely be kept by many insurance carriers, as it is a healthy demographic that has been profitable. On the other hand, carriers might not want to keep covering children up to age 18 with pre-existing conditions. If it is no longer law, it might not look good for insurance carriers to make that move, but it will cut costs.
Right now, most health insurance renewals with health insurance carriers will only have single digit increases this year (2012), compared to increases of 11 to 20 percent in 2010 and 2011. One exception might be increases of as much as 40 percent if a company with 50 employees or more has a lot of claims, as carriers want to move them off of their books.
One way to ensure that nothing changes with a business’s insurance plan is through grandfather status, in which a company has kept the same plan it had since 2010. However, carriers are charging more for those with such a status, as it is more costly for them to keep two platforms of insurance plans.
How can a company keep track of its health insurance carriers’ updates and changes?
Every carrier's legal department is reading and handling reform differently. However, it is easier for employers with group plans; not much will change for them as long as they offer at least one plan that is similar to those within health care exchanges.
Make sure you are working with a broker that educates your HR department, and consider education through seminars and informing employees of your benefits through annual enrollment meetings, an annual health-fair and wellness events. Our firm also updates constantly through social media, using powerpoints and whitepapers.. This is a national issue that impacts all employers, but there are also separate state nuisances. For example in California, Gov. Jerry Brown says he plans on keeping the California health insurance exchange in place, no matter what the Federal government decides.
Danone Simpson is the founder and CEO at Montage Insurance Solutions. Reach her at (818) 676-0044 or email@example.com.
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