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Is this the way to do health insurance? Stay tuned.
By Marc Hequet
Kevin Yonce has gone to a lot of work trying to figure it out. He may still be uncertain—and you may know the feeling. The chief executive at TCT&A Industries, an awning maker and tent renter in Urbana, Ill. (and the immediate past chairman of the IFAI board of directors), has fewer than 50 employees. So under the new Affordable Care Act (ACA), maybe just sending out information about coverage to workers by Oct. 1 has sufficed, for the time being.
Did it? Yonce thinks so, but he’s not entirely sure. “We don’t really have a clear understanding of anything,” he says. He’s counting on his bookkeeper, who attended an IFAI Expo seminar on the subject in October, to provide more guidance. Yonce has checked with his accounting firm and local chamber of commerce and “still nobody can give us any firm answers because nobody knows anything yet,” says Yonce. “It’s pretty frustrating.”
It’s a new world of health care coverage under the Affordable Care Act. Will you be required to provide coverage for employees? Will your carrier cancel your existing plan? Should you cut people’s hours to avoid the requirements? Should you hire anybody?
More deadlines loom: By Jan. 1, 2014, employers sponsoring self-insured plans must submit reports to the IRS detailing information for each covered individual. By Feb. 14, individuals must have coverage or face tax penalties.
Can you find a plan for your employees on one of the health care exchanges? The federal exchange, covering 36 states, met with significant trouble at its launch. State exchanges have done better. Yet even in Minnesota, where the MNsure state-sponsored exchange has functioned reasonably well, people in rural areas are finding few choices—and paying up to twice as much as residents of the urban areas of Minneapolis and St. Paul, reports the Minneapolis StarTribune.
Trial and error
The ACA experiment is well along, and whether you like it or not, you’re one of the test subjects. The law, signed by President Obama in 2010 and dubbed “Obamacare” by critics, has the best of intentions: coverage for everybody, coverage for pre-existing conditions, coverage provided for families’ adult children up to age 26.
But implementation has turned into a quagmire. The national health care coverage exchange (www.healthcare.gov) has been slow to function. Insurance carriers, not knowing but anticipating higher costs under the new law, have been canceling existing policies and substituting new policies—at significantly higher costs to those paying the premiums—that meet ACA requirements. Legislation is now afloat in Congress that may require carriers to extend existing coverage.
Who knows what happens next? As an employer, what are you supposed to do? You might find some clarity at the Small Business Administration (SBA) website (www.sba.gov), which offers some guidance to employers:
- With fewer than 25 employees, you may qualify for the Small Business Health Care Tax Credit, which targets firms providing health care coverage for low- and moderate-income workers. If your annual salary to workers is less than $50,000, you may qualify for a credit of up to 35 percent to offset insurance costs. In 2014, this tax credit goes up to 50 percent and is available to qualified small employers participating in the Small Business Health Options Program (SHOP). Ideally, the program means lower costs because it lets small businesses pool risks.
- SHOP will also be available for businesses with up to 50 employees. The government notes that small businesses now pay an average of 18 percent more for health care coverage than do larger businesses. SHOP is designed to let small businesses pool risks and pay lower rates. A hotline for companies with 50 or fewer workers is available at 800 706 7893, Monday through Friday, 9 a.m. to 5 p.m. (EST).
- Beginning in 2015, employers with 50 or more full-time or full-time-equivalent employees that don’t offer affordable health insurance to full-time employees and dependents may be required to pay an assessment. A full-time employee is one who is employed an average of at least 30 hours per week. The assessment, known as Employer Shared Responsibility Payment, will offset part of the cost of the marketplace premium tax credits.
Play or pay
You might also find some guidance on the website of Digital Insurance Inc. (www.
digitalinsurance.com), an employee-benefits broker based in Atlanta, Ga. IFAI has partnered with the company to offer health care insurance options to members—a private health care exchange.
Wayne Mertel has encountered his share of vexation from clients trying to run the maze. “The consistent response is confusion,” says Mertel, vice president of integrated solutions with Digital Insurance. “There’s a lot of continued questions about what it all means and how it impacts business.” Even so, Mertel thinks his clients “have a very high-level understanding regarding where they fit in the employee-numbers grid and what they must do about it.”
The confusion, he says, is in “play or pay.” Those with more than 50 employees must decide whether to provide coverage for all eligible employees or pay the penalty provided for in the law. The interesting thing is that, case by case, the penalty may be less than the cost of the insurance premiums. You’ve got to do the math, company by company.
But that’s not all that should be considered. Suppose you work out the numbers and find that it’s cheaper to pay a penalty than to provide coverage. What about the less tangible benefits of offering health care benefits? That, Mertel notes, can be a valuable recruiting and retention tool—finding and keeping good workers. Offering a good benefits package, though it may cost more than paying the penalty, can help to attract and keep good people. It’s an increasingly important topic in the specialty fabrics industry.
So goes the new math among small employers. Anita Baker says her clients are “puzzled as to why they‘re ending up paying higher premiums, paying fees, paying penalties.” Baker, based in Phoenix, Ariz., as managing principal for employee-benefit plans with Clifton-Larson-Allen LLP, adds, “There are a lot of great things about health reform—but a lot of those great things relate to individuals.”
Some hold out hope that it may turn out to be simpler than anticipated. Those with fewer than 50 workers “don’t really have significant worries,” says Clifton-Larsen-Allen principal Virginia Harn, a consultant in Minneapolis, Minn. At least the Small Business Health Care Tax Credit may be of use to firms with fewer than 25 employees, cutting costs for small firms that do provide coverage for employees.
“For small employers, really the only thing that changes is that you probably have more options now,” says Baker. But there’s a downside as well. “I think payments are going up for small employers,” she adds. Costs could increase significantly, despite tax credits.
Another warning sign: Employers with more than 50 full-time equivalent employees on the payroll will in fact be required to provide health care coverage. In response, many are doing some juggling. The cutoff is 30 hours—so some workers’ hours are being cut to fit them into the no-coverage-required square.
Mertel suggests turning to your lawyer or accountant to help sort out your options. Meanwhile, he notes, ACA does come with benefits. People can get health care coverage even with pre-existing conditions. Grown children can get coverage under a parent’s policy to age 26. “So there’s a lot of good that can be said about the law,” he adds, “but it comes with a cost. And it comes with complexity.”
TCT&A’s Kevin Yonce, still looking for guidance, will also talk to his business insurance provider, who may have some insight on health care coverage. Beyond that, he says, he will keeping trying to do “the necessary homework. And be patient.”