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A Tool to Help Employers Navigate the PPACA

Healthcare reform is turning employer-provided benefits on its head, and it will dramatically change the way small employers and their employees consume health insurance and other employer-provided benefits.  New financing options, new product offerings, new distribution and consumption options will be available over the next several months.  At the heart of succeeding in the next generation of employer-provided benefits is determining, from a cost and tax perspective, which new health insurance options are best for you and your team, as well as guiding employees to find the right protection at the lowest price while at the same time complying with the new law.

 

January 1, 2014—the day for full implementation of the major provisions of the Patient Protection and Affordable Care Act (PPACA or Healthcare Reform)—is right around the corner.  While large employers have recently been given a one year break from paying penalties for not providing health insurance, all businesses must comply with the new law.  Small businesses thus need to understand the mandates and all of the new options available to them.  The leading supplemental insurance provider, Aflac (yes, the duck people), interviewed more than 300 benefits brokers and 1,884 small businesses in mid-July of 2013; they learned that 85% of brokers say that their clients are not ready to neither successfully navigate nor comply with the new law.  55% of small businesses say they have done absolutely nothing to prepare for reform.  What’s worse is that 75% of their employees are relying on their employer to educate them on the changes and opportunities under the new law. Houston….  We have a problem!   

                                                                                                                

So what is a small business to do?

First, a couple of PPACA facts: Businesses with fewer than 50 full-time equivalents (FTE; and make sure you calculate the total correctly, including part time, seasonal employees, etc., and commonly-owned business and control groups) are not mandated to provide benefits.  Of course they never have been and, more importantly, will not be assessed a tax or penalty for not providing benefits.  However, all small businesses must comply with the basic components of the new law.  And, employers that do provide health insurance need to comply with the other mandates of the PPACA such as providing essential health benefits, preventative care, no pre-existing conditions, etc.

 

But the bigger question for small business is, “What is the best path for the future of providing benefits?” That is a seriously loaded question!  It all depends on your business philosophy and goals as it relates to compensation, employer-provided benefits and total rewards, and how important providing benefits is in your market and what the demands are of your workforce.

 

New resources available due to PPACA

A few more facts: 

For the first time in employee benefit history, employees, even high-earning employees, can receive premium subsidies and cost sharing assistance to help them afford their health insurance premiums and healthcare costs.  Advanced premium tax credit subsidies are available through the new marketplaces and are significant.  See the chart below which illustrates the subsidies and cost sharing benefits available to employees.

 

Income

Dependents

% of Poverty Line

Total Premium

% of Costs Covered

Max Out-of-Pocket Cost

Premium Subsidy

% of Prem Subsidized

 

 

$30,000.00

1

276%

$4,500.00

70%

$2,975.00

$1,871.00

41.6%

2

204%

$12,130.00

73%

$5,950.00

$10,212.00

84.2%

3

162%

$12,130.00

87%

$3,927.00

$10,778.00

88.9%

4

134%**

$12,130.00

94%

$3,927.00

$11,212.00

92.4%

5

114%**

$12,130.00

94%

$3,927.00

$11,530.00

95.1%

  $50,000.00

1

459%

$4,500.00

70%

$5,950.00

$0.00

0.0%

2

340%

$12,130.00

70%

$7,854.00

$7,380.00

60.8%

3

270%

$12,130.00

70%

$5,950.00

$7,835.00

64.6%

4

224%

$12,130.00

73%

$5,950.00

$8,583.00

70.8%

5

191%

$12,130.00

87%

$3,927.00

$9,187.00

75.7%

  $70,000.00

1

459%

$4,500.00

70%

$5,950.00

$0.00

0.0%

2

475%

$12,130.00

70%

$11,900.00

$0.00

0.0%

3

378%

$12,130.00

70%

$7,854.00

$5,480.00

45.2%

4

313%

$12,130.00

70%

$7,854.00

$6,650.00

54.8%

5

268%

$12,130.00

70%

$5,950.00

$6,157.00

50.8%

 

 

** May qualify for Medicaid depending on the state of the employee’s residence.

Note: Final premium rates are not yet available.  The rates used are based on preliminary information and likely to be updated and adjusted based on family composition.

 

What most employers do not realize is that if they provide group health insurance to their employees that is considered affordable, per the new law and meets a minimum value test (60%), then their employees are not eligible for the above subsidies. So, this begs the question, does it make sense to cancel your group health plan if you are one of the approximately 50% of small businesses that still provides medical coverage and instead decide to let your employees get their insurance and possible subsidies in the  Marketplaces?  Or, should you keep the status quo?

 

This depends on several factors. First, most businesses will want to do the “new Math” to determine, based on each group’s unique demographic make-up, what will work best financially for the business and the team.  By using a new calculator tool that captures a unique data set to accurately determine the significance of the available subsidy and cost sharing out-of-pocket reductions, a business can begin to determine the best financial path to consume health insurance now and into the future for each employee and their business as a whole. This fully integrated, comprehensive calculator will allow employers to perform what-if scenarios and identify alternative strategies to their employee total rewards program. The second key factor is your business’s approach towards compensation, benefits, and total rewards: what do your business goals call for, what does your market call for, and how can you continue to attract and retain the best employees with the best total rewards package? Isn’t that why we offer employer-provided benefits to begin with?  

 

Change brings opportunity

Small businesses have a unique new opportunity to take advantage of the new employee benefits/compensation paradigm and can be successful navigating in this new world of employer-provided benefits.  This can be accomplished by utilizing new technologies that will bring clarity, choice, decision support, and a collection of insurance options never before available to small businesses.  One of these new technologies is called a Private Exchange, allowing small employers to offer a Fortune 500 menu of benefits and fund them to a level that is within their budget, meeting their business goals.  What a concept!

 

The future of employer-provided benefits is here and it looks a lot different than where we have been. Small businesses will be able to provide employees with new tools to assist them in consuming the right insurance products, a dashboard that helps the individual manage his or her benefits and to understand his or her coverage. The new tools will also allow for access to healthcare advocates to find the low cost, high outcome providers, as well as wellness information.  Additionally, it will provide employees the ability to easily track deductibles and out-of-pocket maximums, health savings account (HSA) and flexible savings account (FSA) balance information, along with the ease in paying providers and accessing his or her electronic medical records, all in one spot.  

 

From a coverage stand point, the small employers’ coverage options have increased as well.  The new calculator tool will help determine which coverage options are best:    Medicaid, Medicare and Medicare Supplements, the new Marketplaces with and without subsidy money, Private Exchanges (Comprehensive Marketplaces) with a defined contribution approach to funding the plans, as well as the traditional health offerings will all be in the mix.

 

Partnering with experienced and trusted advisors with the appropriate tools is the key to accomplishing your business goals in the new employee benefits world.

 

New Focus HR has partnered with the nation’s premier PPACA solutions provider, Benefitnext. Benefitnext provides small business with a turnkey solution to help comply with and do the new calculations to financially succeed under the new health care reform law. An easy to use web based subscription service, BenefitNext helps you and your employees successfully navigate health care reform. Please visit www.benefitnext.com and enter your discount code_NFIN26_ to save $200 on your annual subscription and begin successfully navigating reform today.

 

For additional information on an employer’s responsibility for compliance with the PPACA, please contact New Focus HR at www.newfocushr.com.

 

Written by:  B. Michael Haffey, Partner

                       Benefitnext

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