By Dennis P Begley CLU ChFC LUTFC CBC

CBiz Benefits

We are approaching the final date for full implementation of the Health Care Reform. Ready or not, January 1, 2014, is THE date. When I say ready or not that means not only business people and individuals, but it also means the government.

In August, the Obama administration announced the penalties for large groups were going to be postponed to January 2015. The reporting systems (software) will not be ready by January 1, 2014. This has no effect on smaller companies with fewer than 50 employees as there are no penalties for not providing coverage. Note that the requirements for employers with more than 50 full time employee to provide medical coverage is not changed. What is changed is there will be no penalties in 2014 and employers will not have to report their benefits to the government. All other requirements still stand. We are all on the honor system for one more year, apparently.

As we move down this path, there are numerous changes that affect all businesses regardless of the number of employees. But there are some specific things that affect small businesses. I am going to outline some of the more small business things.

  1. A small business is defined as having fewer than 50 employees. If you have a lot of part time people that complicates the calculation since you have to count their hours to come up with how many full time equivalent employees you have. Cross the 50 number and you are a large company.
  2. The maximum number of hours an employer can set for employees to be eligible is 30 hours a week. So if you offer medical coverage, you must extend it to all employees averaging 30 hours.
  3. The maximum waiting period for new hires is 90 days before they are eligible for coverage.
  4. A business can no longer exclude coverage to classes of employees except for part time & seasonal and illegal aliens. If the employee works 30 hours, and you offer medical, you must offer it to that employee.
  5. Dental, vision, group life and disability are not affected by these rules. Only medical insurance is impacted. So a business can offer different levels of coverage to different classes of employees for these products.
  6. For some not so good news. Currently in Minnesota, small group medical is underwritten. Even though it is guarantee issue, a medical company will make an offer to a business based on the health of the employees and dependents asking for coverage. That offer could be from 75% up to 125% depending on the health of the group. This is going away. On January 1, 2014 there will only be ONE table, the 100%. Under the community rating rules, the only variable in the rates are age brackets. So what does that mean? Come the renewal of your group medical plan in 2014, 75% of the small employers are going to see a rate increase. If your company was rated say at the 75% table your renewal rates in 2014 could be 35%+ higher as your group goes to the new 100% table. On the other hand if your group had some health claims going on and it was at the 125% table, your rates are going to decrease to the new 100% table. No, you will not see a 25% decrease in your rates. The 100% table is going up, too. So if your group is healthy your rates are going up and if your people have been having lots of claims your rates are going down.
  7. In regards to 5 above, most of the local group medical companies are going to be sending out early renewals. They are going to give businesses the option of renewing their plans on December 1. This would change the renewal of your medical plan to 12-1. Why would you want to do that? The rate increases in 2013 are going to be less than any renewal that happens in 2014. So your company will get the opportunity to postpone the extra PPACA rate increase till then next renewal. Watch for this to come to you in September. Your agent should be in contact with you during that month to discuss the options. We do not know what the rates are going to be in January 2014. Even if the companies have the rates, they are not releasing them soon. If your current table rating is less than 105% you should grab this renewal change and postpone the PPACA community rates till next renewal.
  8. The local medical companies had to give the MNSure (the Minnesota Health Care Exchange) their rates by the end of May 2013. I understand they all did that. And I hear that the Exchange went back to each company and told them the rates were too high and to sharpen their pencils more. So we have no idea what the individual rates are going to be for the MNSure exchange. The MNSure Exchange is supposed to be operational by October 1, 2013.
  9. Open enrollment for the MNSure Exchange will be from October 1, 2013 to the end of March 2014.
  10. One of the options for small businesses is they can obtain their coverage through the SHOP option in the MNSure exchange. In fact, if you want your business to qualify for the tax credit for premiums paid, the rule says you have to get your group medical through it. Not all local medical companies are going to participate in the SHOP portion of the MNSure. At this time, one has announced for sure they are not participating. Remember, all businesses will be able to get medical coverage outside the MNSure Exchange.
  11. Every business MUST have a Health Care Reform strategy. But this strategy should not be your business strategy.

Voluntary benefits are going to more important to your employees than ever before. We will be moving to larger deductibles so everyone will want to learn about Hospital Bridge to pay the deductible on the medical plan.

What are the options a small business will have to consider under the PPACA rules?

  1. First you should look at your employees’ income to see who qualifies for the tax credit if they obtain coverage from the MNSure health care exchange. This is based on family income.
  2. If the employee incomes disqualify them for the tax credit then the reasons you offer group medical still apply. Everyone needs medical coverage and a business can do that on a tax favored basis. Keep the medical plan.
  3. If all of them qualify, the best alternative might be to drop group coverage and help your employees acquire coverage in the exchange. Why pay retail when they can get a discount?
  4. If some of your employees qualify for the credit and the rest don’t, that is a problem. If your employees are eligible for a group medical plan then they are not eligible for the tax credit. And you have to offer coverage to all employees that work 30 hours or more. See 5 below.
  5. A viable option is cancel your group medical and give your employees a benefits bonus that they can use to purchase a Hospital Bridge or Accident Plan or individual medical coverage. There is a way to do this on a pre-tax basis so the employee doesn’t pay taxes on the bonus. The catch is if the employer contributes to the medical insurance, this eliminates the employee from being eligible for the tax credit in the Health Care Exchange.

In September, AASP will be sponsoring a workshop for members and prospective members to put together their own health care strategy. I will be doing the sessions. We will cover the requirements and criteria to help you decide what strategy works best for your company. Providing medical insurance is a lot more complicated now. What strategy works best for your company and your employees depends on factors unique to your business. This will be a workshop. You will leave the session with a firm idea of what is going to work for your company.

We will be able to assist you regardless of what your strategy turns out to be. AASP will offer a “AASP Navigator” program to help member companies’ transition to the MNSure during the open enrollment period. We will have certified people, software and products to assist you and your employees.

This is a don’t miss meeting. You must have a health care strategy for your business.