6 Things That Will Lower Employee Healthcare Costs in 2016
October ends with the scariest day of the year—Halloween. But for small business owners, unless they are prepared, the really frightening day may be November 1, the first day of open enrollment for health insurance plans for 2016.
Here are six things business owners should do in October to be ready for 2016:
1. Watch the news. Follow the news carefully in the next few weeks. Both the House and Senate passed legislation (called the PACE Act) to give states the flexibility to decide if businesses with 51-100 employees will be required to move into the small group health plan market as currently mandated by the Affordable Care Act (ACA, also referred to as “Obamacare”). President Obama has signed this change into law, but then each state gets to decide.
If you have more than 51 employees, and less than 100, and your state lets you opt out of the healthcare requirement, it could be a substantial savings in insurance costs. It means you won’t have to offer a plan that includes the “essential benefits” mandates that have been added to make small group and individual health plans comply with the ACA.
But, if your state doesn’t allow the opt-out, then you still have to offer the more expensive plans that meet ACA requirements. A study by Oliver Wyman Actuarial Consulting estimates 64 percent of employers with 51 to 100 workers would see an increase in costs averaging 18 percent as a result of being forced into the small group market.
2. Ask for multiple bids. If you have a group health plan, make sure you get bids from at least two health insurance carriers. Prices can vary significantly, as much as 30 percent from one carrier to the next with similar benefits; health reform is creating turmoil in insurance plan pricing.
For example, if your business has 20 employees of varying ages between 21 and 64, and you offer a plan with a $1,500 deductible and a broad provider network, the difference in costs between Carrier A vs. Carrier B could be as much as $30,000 in total during the year. That’s a lot of money for most business owners. If deductibles were raised, and a less expansive provider network was chosen, there might be an additional $10-15,000 in savings.
3. Look into SHOP plans. Check to see if there is a SHOP plan operating in your state. These plans are part of the ACA marketplace. You can buy these plans through HealthCare.gov or your state exchange.
In general, you must have 50 or fewer full-time equivalent (FTE) employees. You must also offer coverage to all of your full-time employees--generally this means those working 30 or more hours per week on average. You don’t have to offer healthcare coverage to your part-time employees—generally those who work 29 hours per week or fewer.
In most states, at least 70 percent of full-time employees must enroll in your SHOP plan. And employers who enroll in SHOP coverage between November 15 and December 15 each year can offer SHOP coverage without meeting this percentage requirement.
4. Weigh the difference between private plans for employees and your group plan. Ask each of your employees to give you an estimate of their household income. Then, do a quick calculation on how much of a subsidy each would receive if they bought an individual plan directly. You can use the tools at HealthCare.com to get a pretty good estimate of the amount of subsidies, and the cost of individual health plans.
If many of your employees would be better off buying a plan themselves and getting a subsidy, consider eliminating your group plan. You might need to make a small upward adjustment to the salary for each of your employees, but it may be a good trade-off.
5. Determine the value of your group plan to your business. Weigh the “net” value and cost of continuing your small group plan; the value is not all economics. Offering a health plan may make your company more attractive to new workers.
You may believe it is a core part of your business culture, but balance that with what is the best long-term benefit for your business and your employees. There is no “right” answer.
6. Be sure you're in compliance with new reporting rules. Make sure you are complying with the new reporting rules that went into effect on July 1. Remember you are no longer able to “reimburse” your employees health insurance costs directly if they have an individual health plan; the penalty for doing so is $100 a day, per employee. Ouch!
If your employees have individual plans, and because you no longer can directly reimburse the costs, you could do what we did at HealthCare.com—give them monthly bonuses that are roughly equal to the cost of insurance and taxes. (And then lobby your elected officials to get rid of this silly rule.)
Remember: healthcare insurance has changed. Individuals cannot be denied coverage, there are new rules to follow, and there is much volatility in pricing. No two businesses are alike. Shop around. There are lots of resources to help you make a good economic decision, and the best choice for your employees--and your business.
