Health Care Reform and Your Business. What You Can Do Right Now. By John Klimchak, CFP
Like many of our clients, you probably are concerned about how the passage of the
health care reform will affect your business and what you can do about it.It is important to begin with the fact that offering group health insurance is actually optional. The government has never required any employer to provide health insurance. The purpose for offering benefits to employees, especially medical insurance, is to attract and retain employees. Health insurance rates are increasing 20% to 65%, the question is, as a business owner, what do we need to know about the health care reform and what can we do to minimize rate increase effects?
Summary of Some Changes in the Law
Under the health care reform there will be significant changes that will take effect each year until 2014. For plan anniversaries after September 23, 2010 into 2011, Somechanges include: no pre-existing conditions exclusion for children up to age 19, adult children will be covered up to age 26, no lifetime limits on essential benefits, all group health plans and insurers are prohibited from rescinding coverage (except in limited
acts of fraud or intentional misleading representation of facts), grandfathered plans can barely be modified and new Flexible Spending Account limitation on over-the-counter medicines.
What You Can Do to Now to Save Money Immediately:
See if you Qualify for Added Tax Benefits for Small Businesses Companies with 25 or less employees with average wages of less than $50,000 per year may be eligible for up to a 35% tax credit if they contribute at least 50% of the premium. Check with your tax professional. The IRS has more detailed information about this at www.irs.gov.
Perform a Complete Market Analysis Prior to renewal you should always compare different carriers and plan designs. Premiums can vary dramatically by carrier. Explore network options, adjusting co-payments (especially the drug card co-payments), adjusting deductibles, co-insurance and out-of-pocket limits for premium differences. Perform a Physician Match Analysis if you are going to change networks. In-network services are contracted with the carriers at lower provider reimbursements then out-of-network services. Some plans will have lower out-of-network reimbursements or not cover out-of-network services at all unless it is an emergency visit.
Do Not Lose Grandfathered Status if you wish to Continue to Discriminate Certain conditions must be met (if your plan qualifies as a "grandfathered plan"). YOU CAN NOT change the carrier, cut or reduce benefits significantly, move employees to lesser plans, vary the contribution level by 5%, raise co-insurance, raise deductibles and out of pocket limits by medical inflation plus 15%, raise co-payments by more than $5 or medical inflation plus 15%, or restructure the company. You practically need to "renew-as-is" even if your new rates reflect a 50% increase.
If you choose to Give up Grandfathered Status and not discriminate you can offer two or more plans, but you should elect a base plan with a fixed employer contribution strategy with the other plans being set as buy up options with the employee paying the difference in premium between the base and buy up option.
Look into Co-Employment If you qualify, you can outsource the management of your benefit plan to a specialized employee management company such as a PEO (Professional Employers Organization). By joining a larger pool of employer groups the premiums may be lower than your current or renewal premiums. The PEO becomes the Co-Employer and provides the benefits, payroll and human resources administration.
Consider an HSA or HRA Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA) are paired with tax qualified high deductible health plans that provide lower monthly premiums. Under the HSA strategy the employer or employee or both can contribute into a Tax deductible Health savings account which can be used to fund the high health plan deductible. Under a Health Reimbursement Arrangement the employer can adopt a Section 105 plan that allows the employer to reimburse the employee for incurred claims. The main difference is that under the HSA strategy actual dollars may be given to the employee where under the HRA strategy the employer would only pay a portion of the incurred claims. This strategy is especially useful if your employees are relatively healthy and does not use the health plan much. Often times, when reimbursing a portion of the deductible to the employee, the maximum exposure of carrier premiums and claims may be lower than what you are currently paying under the traditional plan.
Every company is different. The above information is a general guideline. The health care reform consists of over 2400 pages. There are still many unanswered questions in the reform. The above is a general overview. Please consult a qualified Benefits Broker and Tax Professional before implementing any of the above strategies.
Health Care Reform and Your Business. What You Can Do Right Now. By John Klimchak, CFP
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