Health Insurance Reform: Good or Bad for Your Bottom Line?


Will “Obamacare” batter or bolster your bottom line?

The federal Affordable Care Act comes at a time of rising health insurance costs for small business owners. Annual premiums for employer-provided family coverage grew to just under $16,000 in 2012, a rate some 4 percent higher than 2011, according to a report from the Kaiser Family Foundation .

Will the new federal law help put a cap on rates? If you have 50 or fewer employees you have a good chance of turning the new federal law to your advantage.

“Generally speaking the law is more favorable to smaller businesses,” says Shawn Nowicki, director of health policy at Northeast Business Group on Health, a coalition of 175 employers, unions and health care providers.

Nowicki points to a number of advantages geared toward the smaller operators. These include competitive state wide insurance exchanges, premium reform, and tax credits.

Key Positives

Here’s a rundown of how you may benefit from some of the law’s provisions:
Competitive exchanges. Competition is good. That’s the theory behind the new state wide health insurance exchanges, designed to allow small businesses to shop for plans from competing carriers. These exchanges will be available for employers with 50 or fewer people in 2014.

“To understand how the exchanges will work, imagine navigating to a travel website that aggregates airfares,” says Karl Ahlrichs, benefits consultant for Indianapolis-based insurance broker Gregory & Appel. “You type in your parameters and the site sorts your options and you pick what you want. That’s what employees will be doing with the exchange sites.”

Under the best of conditions, the new exchanges will also help trim the human resources overhead, by providing a host of robust administrative services.

“Businesses that send employees to the health insurance exchanges will be getting out of the health insurance management business,” notes Ahlrichs.

Premium reform. Small businesses have long been the targets of prohibitive premium hikes when one employee is hit with a costly illness. The new law levels the playing field.

“Starting in 2014 insurance carriers will not be able to set premiums based on health status, sex or claim history,” says Julie Stich, director of research at the International Foundation of Employee Benefit Plans, a research organization based in Brookfield, Wis.

“That will help small group plans where one catastrophic claim can cause health costs to go up.”

Penalty exemption. If you have 50 or fewer full time employees you will be exempted from penalties for not providing health insurance.

If you have more than 50 employees and your employees purchase insurance from the new state exchanges, you will pay a fine of $2,000 per employee who does so, excluding the first 30 employees from the assessment.

Tax credit. The law provides for a tax credit for businesses with 25 or fewer employees if the company pays at least half of the employee premiums.

Downward pricing pressure. The law may also encourage more transparency in the area of fees for medical services, says Ahlrichs.

In consumer-driven health plans, people will be given a set amount of money with which they can shop for services. They will be able to go to a Web site, enter a service such as an “appendectomy” and get a list of physicians that perform that procedure, a quality rating and a cost.

“Comparison shopping should put downward pressure on prices,” notes Ahlrichs.

Transparency. Do you know how much your broker is being paid for arranging your insurance? Today such commissions are buried in your premiums.

This may change under the new law as pressure mounts to reduce administrative costs. Brokers may start charging fees for their services, which may well dampen overall costs while promoting accountability and performance.

Employee Mobility

There is another hidden benefit the new law may provide smaller businesses: access to higher quality personnel.

“Today at larger employers there are many high quality, mid-career professionals who are frustrated because they cannot be very entrepreneurial,” says Ahlrichs.

“They would love to join a smaller organization where they can try things out, or they might want to band together and start something.”

In the current system, says Ahlrichs, if such people quit their current positions they are uninsurable.

“They may have a daughter or wife who is a diabetic or cancer survivor. Or they themselves may have some chronic condition. As a result, they are handcuffed to their desks because of healthcare.”

When the exchanges come online, the handcuffs come off. “There will be a significant shift in high performing talent out of the larger organizations and into smaller ones,” says Ahlrichs.

“This could be a huge benefit to small entrepreneurial organizations which position themselves as places where talented people can exercise some freedom.”

Decision Time

Many business owners are upset about the minimum level of benefits required by the new law. In some cases, those levels are higher than what is currently being offered in the workplace. That means greater expense in the form of higher premiums.

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