Smart Benefits: Obamacare Brings Big Changes to Small Employers
Monday, January 27, 2014
Amy Gallagher, GoLocalProv Business/Health Expert
Small companies with 51-100 employees are required to offer health coverage like larger employers, but will soon be treated like small employers (<50 employees).
By 2016, employers with 51-100 employees will need to adhere to small group laws under healthcare reform. And that means they should expect to give up the ability to negotiate with insurance carriers, lose plan designs, and face higher premiums.
Age-Rating Will Drive Up Premiums
Currently, these employers can negotiate rates with insurance carriers just like larger employers. But after 2016, they will have to accept the rates given to them. And, since small group is now age-rated, that will mean higher premiums for many employees.
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Small Groups Will Pay for Low Exchange Enrollment
The first open enrollment since small group reform revealed that the number of young adults enrolling in health exchanges is well below what was projected (10% versus 40%). And that means groups with 51-100 employees will be used to expand the actuarial base and absorb the losses.
And there's talk of merging small group with the individual market, another indicator of higher rates to come.
Fewer Plan Designs on the Horizon
Being switched into small group status means employers with 51-100 employees will be forced into plan designs that limit deductibles to $2,000 for individual plans and $4,000 family ones. Employers offering higher deductibles should plan for higher premiums as a result of moving to richer plan designs.
Self-Funding Could be the Answer
Employers concerned about these changes should consider the new self-funded products available to them. Insurers are quickly rolling out self-funded products that include various stop-loss options designed specifically for smaller businesses.
And, by opting for self-insurance, employers may also be able to save on administrative costs and eliminate premium taxes, as well as some of the taxes stemming from the Affordable Care Act.
Amy Gallagher has over 21 years of healthcare industry experience guiding employers and employees. As Vice President at Cornerstone Group, she advises large employers on all aspects of healthcare reform, benefit solutions, cost-containment strategies and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, and is often quoted by national publications on the subject matter. Locally, Amy is a member of SHRM-RI, the Rhode Island Business Group on Health, and the Rhode Island Business Healthcare Advisory Council.
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