How will healthcare affect your small business?
And what are you—the employer—going to do about it?
By Ted Blotsky, Reprinted with permission from the Spokane Business Journal
In 2007, national health care spending grew by 6.9 percent—which at that time was twice the rate of inflation. This year, Washington state's health insurers estimate an average 22 percent rate increase—or more. In retrospect, it’s likely that most employers would consider a 6.9 percent increase a pretty good deal.
Given the passage of the 2000-page Patient Protection and Affordable Care Act, and the Supreme Court's subsequent ruling that validated the legislation's constitutionality, one may be tempted to think there's nothing more to be done. But it's not the end, folks; it's only the beginning.
Careful reading and analysis of the Court's ruling—as well as wrangling over many of the details—will likely take months, if not years. Teams of lawyers at the Department of Health and Human Services are still filling in the fine points to this massive legislation, and if there is a change of power in the White House, subsequent budget cuts could take the teeth out of the landmark legislation.
Health insurance is already one of the most heavily-regulated sectors in our state's economy, but the reform act has triggered even more expansion and regulation of state health plans. Even as analysis drags on, there is a time table built in to the law, and employers will soon have some tough decisions to make.
To insure or not to insure
We hear every day from business owners who are trying to make those decisions, but are confused. For example, beginning in 2014, employers who choose to not provide employee coverage, and employ more than 50 people, will be penalized to the tune of $166.67 per month for each full-time equivalent (FTE), minus the first 30 employees, who are excluded.
Here is a simplified example of an employer with 55 FTEs: Subtract 30 from the FTE count of 55, to get 25; multiply that number by $167 per month to get $4,175 monthly; and multiply that by 12 to get $50,100 annually.
There are pages of variables to determine the dollar impact, but they depend on possibly-confusing terms such as "full-time equivalent" and "temporary" versus "seasonal" employee as well as factors such as an individual employee's household income. There is more to this calculation. But you get the idea.
Furthermore, employers that decide to provide coverage may also be assessed a penalty if their employees decide to go for the option of subsidized coverage from their state’s Health Exchange, in which case, an employer could be assessed a penalty as high as $3,000 per employee!
Confused? That’s understandable. And it’s just a short list of issues employers need to consider that could cost their business thousands of dollars. Issues still being developed or debated but likely to affect the bottom line include the possible closure of “grandfathered” health plans, whether insurers will be forced to provide certain types of plans and questions regarding expansion of powers within the Insurance Commissioner Office.
No matter how these details shake out, until the new law takes over, you still have decisions you'll need to make about medical coverage for your employees. For the short term, you’ll need to know your options and compare apples to apples. During these confusing transitions, you’re going to need a knowledgeable health benefits partner that can work with you. If you don’t have a producer (broker), find one.
Someone is getting into your pocket
By far the greatest impact is likely to be felt in regard to the financing of the state Health Exchange provisions of the act. The various state exchanges will require a substantial infrastructure and deep pockets. We are seeing estimates that between now and 2017, the Washington state deficit will grow an average of more than $50 million each year because of the Exchange.
Where will the money come from? It’s likely that the dollars needed to finance Washington state's planned health care provisions as well as ACA directives, will partially come from insurers, through assessments. In addition, employers will pay the piper through increased premiums and new employee taxes. Ultimately, however, the health care bill will be paid out of your pocket and mine, in the form of increased taxes and burgeoning national debt.
As a business owner, it is critically important for the health of your business as well as the health of your employees and families to get informed and find out where your elected officials stand on healthcare-related issues.
Looking for more information? On Tuesday, Oct. 23, Associated Industries and our health care partners at ODS Health are providing sponsorship of an AWB Healthcare Forum: “Healthcare: What’s at Stake in Washington state?” – an informative, understandable discussion about health care reform and what it means to your company. Learn more at at www.awb.org.