Like many employers, Phil Davis, president of Handyman Matters of Wichita, wanted to provide health insurance for his employees.
“It’s just something I knew I wanted to do,” Davis said. “With my background in the corporate world and big manufacturing, I understood what it’s like to have good insurance. I felt I really wanted to provide my employees something to help them be healthy.”
But when Davis studied the costs last spring, he found his nine employees could purchase insurance on their own and for their families more cheaply than he could provide it as an employer.
Now, Davis’ business provides $600 in contributions to verified health expenses for employees each year, as well as payroll reductions that let employees save on their income taxes if they use Atlas MD, a concierge medical provider.
Employers have long had to adjust their employee insurance plans to deal with rising costs. Now they also have to navigate a changing sea of health care regulations that are being implemented as part of the Affordable Care Act.
“To a large degree, a lot of business owners still don’t understand the changes, and I don’t think they clearly understand what it means for them in terms of things like the individual mandate,” said Tim Witsman, Wichita Independent Business Association president.
And with good reason: Not all of the regulatory rules that dictate how the law will be implemented have been released.
“People have a little bit of information but don’t have enough to really start making decisions,” said Janet Hamous, interim executive director for the Wichita Business Coalition on Health Care.
One aspect of health insurance finds agreement, however. Costs for premiums will likely continue to rise.
“Health care reform aside, premiums will continue to go up,” said Karen Vines, vice president for benefits at IMA of Kansas, a retail insurance broker. “The same factors that have continued to influence health care insurance finance are still there: medical costs, technological advances and a population that continues to age.”
Additionally, certain aspects of the federal law are expected to drive up costs, especially in 2014, Vines said, due to things like changes in the risk pools of beneficiaries and fees meant to level the playing field in different markets.
Vines suggests that employers start now to prepare for changes next year, trying to educate themselves about the financial implications for their company and looking at options for coverage.
They also will need to look at the full-time employment status of their work force, because of rules that are specific to business size.
“The roadmap is intense, and frankly, they need to be on the roadmap right now. If they’re not creating strategies right now, they’re going to be in a different situation come the end of this year,” Vines said.
Linda Sheppard, director of the accident and health division of the Kansas Insurance Department, also thinks there will be increases in premiums for 2014.
“We anticipate some increases in premium rates because insurance companies are going to have to try to set up rates to anticipate the new requirements the federal law puts in place and how that impacts their businesses,” Sheppard said.
‘Pay or Play’
Under current law, business owners are not required to offer employees health care benefits.
The Affordable Care Act – dubbed “Pay or Play” – requires businesses with more than 50 full-time-equivalent employees to offer health insurance or pay fines.
The federal government defines a full-time employee as working at least 30 hours per week, Sheppard said, so employers can total all hours worked by employees and divide by 30 to see how many FTE workers they have.
In 2014, businesses with more than 50 employees that don’t offer coverage will be fined $2,000 per employee, excluding the first 30 employees, according to the Kaiser Family Foundation.
After 2014, the ‘Pay or Play’ penalties will increase, said Stephen Criser, a certified public accountant and senior partner with Criser, Gough & Parrish, LLC.“It is scary to be an employer now,” Criser said. “We’re all concerned about penalties for doing something wrong.”
Employers with fewer than 50 full-time-equivalent employees, Criser said, will face the same kind of decision they did before federal law changed. It’s a decision with basically three factors:
“Cost, what moral position they have about taking care of employees and understanding the options and complexity of it all,” Criser said.
If an employer wants to offer something other than traditional health insurance, there are options such as Health Savings Account contributions, Criser said.
Criser’s firm has about 15 employees and he thinks HSAs will become more popular as health care costs continue to rise.
Even though HSAs have a high deductible, Criser said they can lower the amount of financial risk.
Those who aren’t able to get coverage through work can use health exchanges to purchase insurance. The federal health exchange is to be designed to provide consumers with choices for coverage, but they are not operational, and no one knows exactly what they would offer or how much coverage would cost.
According to the Kansas Health Institute, those who have insurance through employers with fewer than 50 employees are among the most likely to use the exchange.
There are about 245,000 Kansans who have insurance through small employers and about 101,000 of them would be eligible for federal tax credits if they use the exchange, KHI estimates.
“(We’re) trying to anticipate how many people are going to go on the exchange and whether or not small employers are going to continue to offer coverage or whether they will drop it and encourage employees to go onto the exchange,” Sheppard said.
Sheppard thinks that larger employers will likely continue offering health insurance as a benefit to recruit and retain employees, but no one is certain what decisions smaller businesses will make.
“That’s the big unknown: What are employers going to decide to do?” Sheppard said.