Bring up healthcare to a business owner and watch her eyes begin to mist over. That's usually because talking about the Affordable Care Act is like discussing Shakespeare. We know this stuff is important. But does it have to be so boring?
It is. Because it's expensive. And it's getting more so.
You probably now know that effective January 1, 2016 if your company has more than 50 full time "equivalent" people (it's a calculation you'll need to do that combines both full time and part time employees) then you are now required under the Affordable Care Act to provide affordable health insurance to your full time people--those working more than 30 hours per week (or 130 hours month). Otherwise you pay a fine of $2,000 per employee per year.
But even if you have less than 50 people you may still want to provide healthcare insurance for your employees because you want to offer this as a benefit to attract the best people you can.
And like I said, this is expensive. And it isn't getting any cheaper. This year, costs are up about 10% (in some states like Tennessee and Montana the costs are up more than 30%!). Enrollment, particularly with younger, healthier people, is way below the levels needed to make the system as affordable as hoped. Big insurers are dropping out. Programs designed to reimburse insurers for cost overruns are being curtailed. And an election looms this year that may, depending on who wins the White House, could repeal the law as we know it.
So, let's cut to the chase. You don't have to read Shakespeare if you don't want to. But you've got a business to run and you need to provide the best healthcare you can afford so that you keep your people happy and attract other good people. So what are your healthcare options this year? Here are three good ones:
You can self-insure.
You could just pay for most healthcare costs yourself and purchase a less expensive policy that would cover catastrophic issues to limit your exposure. The pros of this approach is that you can tailor your plan to your employees' needs and control your costs better because you're not paying someone else to take on the risk of your healthcare expenses. Most companies hire third party administrators and setup a trust to handle the costs. If you have a younger workforce with few health issues this may be an attractive approach. And, depending on your plan, you can be exempt from most of the Obamacare regulations (although this continues to be a political battle). But the costs could be higher too.
Among the many considerations to make a self-insurance program work you would likely have to invest in someone internally to administer it. This person would do the research, the paperwork and the communications to ensure that your employees are doing what they can (wellness programs, discount drugs, etc.) to keep your costs down. To really do this right you'll need to have good metrics about your employees' past health history too, which is harder than it sounds and why many small businesses don't opt for this approach. If you're interested, check out the Self Insurance Industry Association's site for more research.
You can get a "hybrid" plan.
If you don't have the stomach for the potential risks of self-insuring, a hybrid plan may be a good compromise. Some call this "level-funded." Here you're combining both the features of a group health insurance plan with a little bit of self-funding. Like a self-insurance plan, you're setting aside the cash for projected healthcare costs, only this time with your health insurance company who are assuming the role of the administrator. Premiums are paid in as usual. At the end of the policy year an accounting is done and if claims are less than what you've set aside you get the money back. If claims exceed the funded amount by a certain level a catastrophic coverage policy kicks in.
Like a self-funded plan, an employer can reap savings if your workforce is healthier. Yet costs are more consistent and predictable. The onerous taxes that are imposed on the health insurance industry are exempt from these premiums. You're also exempt from many of the Affordable Care Act's rules, like providing certain essential healthcare coverages so you can tailor your plan to your workforce's needs. And you're minimizing your exposure to large claims with catastrophic coverage. On the other hand, you're asking for more involvement from your health insurance company which means more fees to them. And most of these plans, in order to work, are requiring a more limited network of providers to participate within a geographical area where reimbursement rates are negotiated in advance. If you're a very small employer (usually less than five people) you may not even be able to use this option, depending on your state.
You can just go Bronze.
Finally, you can take the inspiration from our 2014 Winter Olympics team and just...go Bronze! That means buying a traditional group insurance plan but opting to pay for the minimum (Bronze) option. It still has all of the essential coverages and benefits required by the Affordable Care Act but its cost is lower than the alternative Silver or Gold plans because deductibles and out of pocket expenses are higher. In effect, you're asking your employees to pay more, just so long as it remains "affordable" (which is another calculation you'll need to make).
Coupling a Bronze plan with a Health Savings Account is crucial. HSAs have enormously grown in popularity over the past few years, mainly because they help offset your employees' costs with pre-tax contributions both you and they can make. HSAs are inexpensive to setup and administer and unused amounts can generally be rolled-over to future years.
There are other tricks to keeping costs low. Wellness programs. More aggressive pharmaceutical plans. Minimum Essential Coverage (or "skinny") plans. I know, it's a lot of effort. And it's as boring as Shakespeare. But Shakespeare's lucky: he doesn't have to pay these expenses like you do.
So face it: you'll never fully understand The Merchant of Venice. But if you work closely with your accountant, benefits advisor or other trusted council you'll better understand the best healthcare options for this year.