Quite a few years ago, I was working with a few clients during their annual healthcare coverage negotiations. These companies paid between 75% and 100% of the premium for single coverage and between 50% and 75% for family coverage for their employees. They treated them well.
When the all insurance companies came in with between 30% to 50% increases, it was heartbreaking to see those same business owners stare into space with sticker shock trying to figure out how the company and the employees would be able to afford to have medical insurance. So, like every business that is questioning costs, my company did an analysis of the employees who signed up for medical coverage. What we found was that a great majority of the employees under 40 years old opted out of the coverage. The employees with young families and larger expenses said the cost of medical coverage was too high. Even though the companies paid a great majority of the premiums, the deductibles and other out of pocket expenses caused employees in this age bracket to do without coverage.
We also found that people who had medical issues signed up for the insurance coverage. They had no choice but to pay a higher price. Since the healthier employees with little or no claims opted out of the coverage, the resultant claims were higher than the premiums paid – year after year after year. Insurance companies lost money and had to raise the premiums - causing more people to opt out of coverage - resulting in high loss ratios - resulting in higher premiums – I think you get the drift.
The downward spiral was out of control.
It suddenly occurred to me that small businesses – those with between 50 and 150 employees and the lifeblood of the United States economy, would soon be in jeopardy of becoming priced out of the healthcare marketplace. This inability to provide medical insurance to their employees would place these business people at a disadvantage in recruiting and retaining employees.
Fast forward to present day, and we now have the Patient Protection and Affordable Care Act (ACA). It is imperative that small businesses understand the reporting requirements, method of determining the size of their workforce, and tax credits. Additionally, as the ACA is put in to place, the inevitable changes will occur during implementation. This can be a bit burdensome and difficult to keep up with for smaller businesses.
It is a concern for many industries. Including lawyers, accountants, benefits brokers, human resources professionals to stay on top of any changes or updates to the ACA.
As it stands now in 2015, only those companies with more than 100 full time equivalent employees have to comply by offering medical coverage to their employees. Currently, a full time employee is one who works 30 hours or more per week on a regular basis. However, of significant note, is the US House of Representatives just passed a bill increasing this to 40 hours per week. But keep in mind, we have to wait to see how the Senate votes and whether the President will sign the bill if is passed by the Senate. Employers with 50 or more employees will be required to offer coverage in 2016. However, that may change. We will just have to wait and see.
Employers under 50 employees will not have to offer coverage – ever – at least under current regulations. Aside from the obvious recruitment and retention advantages of offering medical coverage to employees, there may be great tax advantages for a small employer to offer medical benefits to their employees. On the other hand, it may be less expensive for employers to get coverage through the exchange. Employees may qualify for tax credits if they obtain medical coverage through the exchange. Business owners must conduct an analysis to determine their best option.
At this point, we know what we have to do to comply today. We don’t know what the future will bring. Stay tuned.
With over 30 years of human resource management experience, Bob’s background includes a wide range of hands-on HR practices including training and development, Equal Employment Opportunity, Affirmative Action Plan Development, development of performance management and compensation systems, recruitment, employee relations, union avoidance and labor contract negotiations. His working experience encompasses a wide range of industries.