The long awaited national healthcare program, Obamacare, is finally upon us. Many companies have already made plans to either a.) stay the course b.) reduce the number of full-time employees, or c.) simply calculate the costs associated with providing medical insurance and add that amount to wages as they discontinue offering this through their business.
Scenario A: Stay the Course
What I’m currently hearing from our larger member companies (anyone with 50+ full-time equivalent employees) is that will stay the course and offer a healthcare insurance plan that meets the federal mandates. However, one member informed me that by staying the course, they would witness a 43% increase on their premiums. On average, it looks like the larger employers are seeing a 10- 12% increase simply because their provider is anticipating increased costs.
My suggestion: If you do plan to stay the course, meet right now with your broker or healthcare provider. Many are offering a rate with only a slight increase as long as you commit early (before the normal renewal period).
Scenario B: Reduce Employees
Many companies are considering cutting existing employee hours to below the threshold of 30 hours per week to stay below the mandates of Obamacare. As a side-note, there are efforts within Congress to change the definition of full-time employees from 30 hours as defined by Obamacare and the Fair Labor Standards Act, to 40 hours per week.. I’ve heard where business owners are thinking about going with permanent part-time accounting, marketing, administrative, clerical, along with other hourly employees. They are weighing that choice against cutting headcount entirely in order to reduce costs associated with the expanded coverage requirements.
My suggestion: Carefully weigh the cost savings against what I believe would be higher turnover in your company. Now it may be that your employees would be ok with fewer hours and no insurance benefits, or it could prompt them to start looking for a full-time job with benefits.
Scenario C: Discontinue Health Benefits
Paying additional wages and having employees find their own insurance makes them feel as if they are being “kicked to the curb.” If and when this trend continues, I expect employees to feel a little bit better about finding health insurance on their own terms. The exchanges could be a great option for small companies looking to keep costs down and let employees decide for themselves how much insurance they need. In this scenario the younger, single employees can opt to carry only catastrophic/major medical plans, whereas the family person would opt for a more comprehensive plan.
My suggestion: If you intend to use this option, make sure you communicate early and often with your staff that this will be happening. You can find ways to offset the perceived loss of benefits with additional compensation and more individual choices for the employees’ healthcare plan. Explain why this is good for the employees and the business – be open and honest with your employees and they will appreciate that loyalty you have shown to them.
In the end this decision seems to come down to what you offer today and how that plan complies with the “metallic” tiered levels mandated in the law. While NSCA can’t tell you what to do, we can tell you what we are hearing from our members, your peers, and the solutions they are finding. But more importantly, we will keep you informed of the latest news of changes, regulations, tax implications and benefits as it relates to your healthcare options. There is a lot of uncertainty out there, and more information will be distributed as issues and concerns are addressed. More importantly, speak with your broker, your tax professionals and to each other to discover the best solutions.
For now, be prepared. While large employers have another year before fines are administered, they need to come up with a plan on how they will manage their benefits. Small businesses will need to evaluate the use of the SHOPs and what, if any credits are available to them.
If you find good solutions, please leave a comment, or contact me. If it works for you, it may very well work for another company in a similar situation. – CW