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Healthcare Changes Will Suffocate Businesses and Jeopardize Attraction of Top Talent

New Healthcare Reform went into effect September 23, 2010 or your health insurance plan’s first anniversary date. On March 1,2011, The Patient Protection and Affordable Care Acts and the Health Care and Education Reconciliation Act will then go into effect.   And, the bottom line is that many small businesses with 50 or more employees will be greatly impacted.  And, if they choose not to offer benefits because the new plans and revisions will increase premium rates with the providers they will be penalized with a $2,000 per employee penalty every year. If you have 50 employees or more that can be a $100,000 cost and you still will not be able to offer competitive health insurance coverage to your employee’s.

If you decide to bite the bullet and comply with the new changes, you will need to hire a full time HR/Benefits staff to monitor compliance since employers are ONLY allowed to charge up to a max of 9.5% of Adjusted Household Income. For example if you have an employee who is currently covered under “Family” medical coverage who earns $112,000 per year and the monthly premium all employee’s within your company contributes $908 per month, you will be compliant, however; the rest of your workforce under $112,000 will require their monthly contribution lowered to match the new formula of 9.5% of Adjusted Household Income.

It is illegal to ask employees what other members of their HOUSEHOLD earn, it is a violation of our privacy. But if an employer is to be compliant with the new reform and to correctly calculate the monthly premium charge they must now ask. What if their spouse is a business owner like mine? Most business owners will tell you exactly what was declared to the IRS last year, ZERO.

Is it fair to charge more monthly insurance premiums to the people who earn more than those who do not or require them to disclose their personal family income? These changes forth coming are clearly not well thought out on behalf of the employer and the logistical nightmare they face with keeping up with the new laws or the employees who need health insurance coverage but now their employer may not be able to provide as it is more expensive and hard to administer.

As a small business owner and licensed health insurance broker, “The focus of the new law is to increase the number of people with health coverage, not to control costs for small businesses. In fact, small businesses won’t benefit in the least and may have to lay off people to cover increased health insurance costs or cancel health insurance benefits for existing employee’s.  Clearly, the real winners are NOT the employees.”

Here’s a basic overview of the financial impact for small businesses:

1)     Approximate 3-5% increase in cost due to plan design changes

2)     Indirect costs (i.e. pharmaceutical taxes, medical device taxes)

Here’s a basic overview of how employees will benefit in Phase 1 (2011-2013):

• Removes lifetime limits on PPO plans
• Removes annual limits on essential benefits
• Removes pre-existing conditions for dependent children under age 19 (PPO plans)
• Removes cost sharing for specific preventive services
• Increases eligibility age to 26 for dependent children
• FSA contributions capped at $2,500 (currently $3,000)
• FSA no longer includes OTC drugs

Phase II (2014) Employee Benefits:

• Annual limits removed
• Pre-existing conditions for all members (PPO plans) removed
• Wellness incentives increased
• Employer mandate and voucher requirements

How does an employer attract top talent and retain them if they can not afford to offer medical coverage to their “knowledge workers”? Boomers and Traditionalists are very interested in this part of the “rewards and compensation” package when considering a job offer. They do not want to have to work part-time at Wal-Mart as a greeter just to afford health insurance….

What steps can employers take to stay competitive in the marketplace with these new changes?

• Evaluate your employee demographics; determine if the “rewards and compensation” matches the personal needs of your employee base. For instance the younger generation, Millennials are not as concerned with health insurance because they do not need it yet but your “knowledge workers” which are the Boomers and Traditionalists need medical coverage.
• Contact local gyms and nutritionists to see if will offer discounts to your employees so they have an affordable and trusted venue to keep learn about a healthier lifestyle.
• Provide counseling coverage under your health insurance plan so employees have a place to seek advice when life events cause them concern.
• Provide opportunities for employees to work a flexible schedule or telecommute if it is feasible for your business. This provides them the opportunity to be home more and provide care for their children or aging parents and it is good for the environment.

Photo Credit Medicexchange.