Under this scenario, many small businesses with more than 50 employees may debate canceling their insurance package, raising salaries to compensate for lost insurance and paying the above mentioned penalty. These small businesses argue that the penalty is much less than their current health care insurance premiums.
For example, in 2009 the typical small business paid $4,824 for individual health insurance coverage for an employee. The proposed 2014 penalty for not offering insurance may be $2,000. So there might be a financial incentive of $2,824 for a small business to have their team members seek insurance in a state insurance pool, rather than to offer coverage as an employee benefit.
This is a legitimate strategic decision for companies to consider. Economists are working to predict what small businesses may do in this scenario. But before a small business cancels insurance, there are other issues to consider. For example, health insurance premiums are currently tax deductible. So a small business’ insurance costs might be lower than it appears. In addition, if a company doesn’t offer insurance, it may no longer be a competitive employer in a local job market. And obviously, many small businesses are very close to their employees and will want to offer them insurance – regardless of costs. But the bottom line is that employers must be careful when you grow beyond 50 employees.
Are ‘grandfathered’ plans safe?
Another concern facing businesses is how to keep an insurance plan which the company and/or the employees like. Many companies want to keep their existing health insurance and don’t want to participate in the plans created in the health care legislation. These existing plans are called “grandfathered group plans.” These are group health plans which were in existence on March 23, 2010, the day the legislation was signed into law by President Obama.
The Patient Protection and Affordable Healthcare Act (PPACA), created a multitude of new requirements for group health plans ranging from the minimum level of benefits that must be provided to dictating which individuals must be offered coverage under a plan. Various provisions of the new law either do not apply at all or have extended compliance deadlines for what it refers to as "grandfathered plans."
If a health plan is “grandfathered” then the new law doesn’t impact it. President Obama regularly said that “if you like your health plan, you can keep it.” He is correct. However, if your grandfathered health plan has made any “significant changes” such as cost increases to deductibles or co-payment, your plan may have lost its grandfathered status. If this has happened, then the above new regulations, penalties and changes will start to apply.
NAMA’s third recommendation is that if your health plan is grandfathered, don’t make any changes. Don’t increase deductibles, increase copays or decrease your coverage.
Plans which were in effect on March 23, 2010 should be safe if only minor changes are adopted. The federal government is currently writing rules on what constitutes significant or minor changes. The Internal Revenue Service, Department of Labor and Department of Health and Human Services jointly issued interim final regulations in mid-November regarding a health plan's status as a grandfathered health plan.
It appears as if your health insurance plan will lose its grandfathered status if changes are made to the plan's coverage that significantly decrease the benefits, greatly increase costs to employees or paid by participants.
What are items which will eliminate your grandfathered status? The following are examples of some items which could cause a change: increasing an employee's portion of all costs from 20 percent to 25 percent, increasing fixed-amount copayments by $5, decreasing the employer contribution rate by more than 5 percent, or removing benefits. So if you can, try to keep your existing plan by maintaining current benefits.
It might be significantly better then newer proposed health care plans.
Consider a wellness plan
NAMA’s fourth recommendation is to implement a wellness program at your company, and help all your accounts implement a wellness program for their employees. For example, NAMA’s Fit Pick and Balanced for Life calorie disclosure and wellness programs should be used at your company and with all your accounts.