The Game has Changed – Have you?
Or, how to stop complaining about ObamaCare and start using it to increase profit
When people talk about the The Affordable Care Act (aka ObamaCare) they could be thinking of a lot of different aspects. Like it or hate it, there is only one area that can revolutionize the way “Benefits” are provided. So while there are important financial, political, constitutional, regulatory and taxation issues that exist, let’s focus on those changes that will make a positive impact on your bottom line. Specifically, changes that have taken place in the individual health insurance market that will provide a major competitive advantage to those business owners willing to do something different.
A competitive advantage because you can spend less and your employees can get more.
There are two categories of health insurance today:
1) Group Health means an employer sponsored health insurance plan – typically one carrier, one plan, one network. The employer picks the plan, pays the bills and decides how much to deduct from employees who wish to participate.
2) Individual Health means the health insurance that covers individuals, their children and spouses/partners and purchased via the Public Exchange/Marketplace, direct for carriers, from local agents or from private exchanges.
If you are one of the few business owners who feel that the group health insurance market has worked well for you and your people you can stop reading here. The other 99.9% should proceed.
Positive Changes for those who purchase their own health insurance
In 2013 about 180 million people purchased health insurance through their employer and 12 million who purchased their own coverage. Prior to 2014 those purchasing their own coverage were able to save 30-70% over those who purchased via their employer. Why? Because you must have been healthy at the time you applied for coverage. ObamaCare changes all of that. Yes the cost goes up compared to pre-2014 individual plans, but according a PwC’s Health Research Institute (February 2014) report the premiums found on the “Exchanges” were 4-20% below comparable group health plans. And now everyone gets covered. This is why experts expect a major change away from group health over the next decade.
How many businesses are offering group health insurance because they felt this was the only way to provide quality coverage at an affordable price to their employees? Many. How many of these businesses would be better off dropping their group health plan. Most.
So where do you get this coverage? Most people think that they must purchase coverage from one of the 51 unsecure, dysfunctional ObamaCare websites – generically referred to as “Exchanges”. This is not so. Purchases can certainly be made from a public exchange like healthcare.gov or newyorkstateofhealth.com but the same rates can be found directly from the carriers (Blue Cross, United Healthcare, etc), from local agents, “web” brokers like eHealth.com and private exchanges such as the Simplifi Benefits Exchange ™.
Add in expanded Medicaid and significant financial assistance for people not offered affordable group health and you have the foundation for changing the game at your business.
1) Everyone gets covered – no pre-existing conditions excluded
2) Rates based on age/area/smoking status only (except NY which has 1 rate for all)
3) Same Benefit levels in group and individual markets
4) Expanded Medicaid means free coverage for those earning $15k or less per year
5) Financial Assistance (Premium Tax Credits/Subsidy) means $25 or less per week for good (Silver) plans for those earning under $20k and less than $50/week if earning under $30k per year.
Our firm, Simplifi Benefits, LLC was formed in 2012 to help employers of any size leverage the changes in ObamaCare to increase predictability in labor/health care costs. Employers with less than 50 employees working 30+hrs per week have no Employer Shared Responsibility (aka tax or $2,000 fine) to navigate. If you have over 50 there are very simple solutions that allow you to take advantage of these changes without spending the additional $2,000/employee. Either way, here are a few ideas that you can put to use in your business today.
Changing the Game to increase profits and increasing take home pay
Do you or don’t you? 60% of small businesses don’t… Offer health insurance.
Study after study shows that if you do not offer benefits (health insurance, etc) you will not be a top tier employer. Simply put, that means your cost of labor is higher than your competition – have to pay higher wages, attract fewer applicants, hire lower quality candidates, higher turnover and etc. But who said “Benefits” were limited to the health insurance plan that the employer picks?
If you offer a health plan you have seen your costs and hassles double every 7 or 8 years. And that is not sustainable. Add in that most employees have unrealistic expectations; do not want to pay for health insurance and expect that this free health insurance will pay 100% for everything. How can they be anything but disappointed while you spend all that money. You don’t need to do a lot of fancy employee engagement/benefit surveys to come up with this truism:
1) Almost everyone hates health insurance
2) Everyone loves more money in their pocket at the end of the month
If you can afford to pay 100% for a plan that reimburses employees 100% that is great.
For the rest of you, it makes sense to at least consider giving employees the freedom and responsibility of choosing their own health insurance. They use the income they receive from you to make purchase decisions on everything else – house/apartment, cars, auto insurance, etc. Your employees can do this they just need some help.
Here are three critical elements that will allow you to turn the individual insurance market changes required under ObamaCare into a competitive advantage:
1) Defined Contribution Funding
- Sounds fancy but it is just you deciding how much you want to provide employees – think of this as a health care expense allowance
- Employees decide if they want to add any of their own money into the mix
- Make this tax preferred (business deduction + tax free income + pre-tax employee contributions) by establishing IRS approved Portable Healthcare Accounts
2) Personalized Benefits
- Don’t make people feel like they are being “dumped on the Exchange”
- Utilize a Private Health Insurance and Benefits Exchange that provides education and personalized consultations so people who want health insurance can make purchase decisions stress free
- Make sure services include enrollment into Medicaid, CHIP and Premium Tax Credits to help employees on low end of income ladder
- Round out the package by providing access to voluntary benefits such as life, accident, critical illness, dental and vision that can be purchased directly by the employee and paid via pre or post tax payroll deduction
3) Provide 24/7/365 Support for navigating the health care system once they have insurance
- Telemedicine – US Doctors on call to provide diagnosis, advice and prescribe medicines
- Personal Health Advocate to help navigate “The System” – find providers, schedule appointments, search for lowest cost treatments and negotiate bills
In theory you could put this together yourself but that is most likely a less effective and more costly approach. Plus it still keeps you attached at the hip to health insurance. The above approach will provide you with considerably less headaches and increased profits because you retain the two most important aspects of group health insurance: business tax preferences and payroll tax preferences, while offloading the responsibility and burdens. This is a no brainer for any company that does not offer benefits now. For those of you who offer benefits, changing your approach allows you to stop being responsible for something everyone HATES and start being appreciated for something everyone LOVES. Bet you didn’t think ObamaCare would give you that?