WHAT SOME COMPANIES ARE DOING TO AVOID REFORMS AND PENALTIES

Strategy 1

As we all know starting January 1, 2014 almost every man, woman and child must have medical coverage or pay a fine.  Some religious groups, Indian Tribes  and others are exempt.  Here in the state of Maryland the exchange will begin enrolling people October 1, 2013.  In addition when employers renew their medical coverage, they are then subject to the reforms as well.  What this means is that each person within the group will stand on their own and pay premiums based on them self.  In other words a person who is individual and 38 may have a different premium than someone who is 58.  In addition, the family rate will be separated out to include the individual, the spouse, number of children, etc.  There will not be a melded four rate structure any longer.  In addition, there will also be additional premiums due on those employees who smoke, up to a 50% increase over the standard rate.  For this, employer group can expect (according to some carriers) an additional 5-15% increase on top of their already ridiculously high renewals.  What are the carriers suggesting?  Early renewals.........most of the carriers are coming out and saying renew early if it makes financial sense.   If you have a renewal that may be in January, 2014 through say July, 2014, you may want to renew December 1, 2013.  What this will do is simply delay the impacts.  However, if you have a HRA, HSA or some other high deductible plan, these deductibles re-set so it may not make sense to you.  

Strategy 2

Larger organizations with lower paid employees are going to get killed either by having to offer Affordable, Minimal Essential Coverage or paying fines......period.  What some companies are doing is offering Minimal Essential Coverage although unaffordable and creating  a potential penalty to the employer. What employers are doing is making available Limited Medical Benefit Plans at a lower cost than the subsidized coverage made available to them on the exchange.  A limited Medical Benefit Plan, depending on the persons age may cost approximately $40-$50 per month.  Lets say a 30 year old person making $10 per hour would pay $80 per month on the exchange for a subsidized medical plan.  The idea is that if an employee has a Limited Medical Benefit Plan that is working for them and the costs are considerably less than the exchange plan (although not nearly as comprehensive), they will stay with the lower cost plan.  If they do, the employer has avoided a $3,000 penalty since the only way they are penalized is when an employee actually gets a subsidized health plan on the exchange.  

As a note, Limited Medical Benefit Plans typically offer preventive care, some prescription benefit's and other services.  They typically do not or have limited coverage for hospitalization.  These plans can be dangerous to the employee if they aren't explained very well and would caution any employee electing this coverage in place of a true medical plan. 

Strategy 3

Self-Fund....or partially self-fund.  Since health insurance, for the most part, will be guaranteed issue (except self-funded plans), and rates will favor older people rather than younger people, the population will be made of an older, more expensive pool.  If you have a relatively healthy group, you may be able to avoid the additional costs that the exchange will saddle employers/employees with and your healthy population will stand on its own merit.  Partially self-funded plans go down to as small as 5 employees and have premiums that are guaranteed.  In addition you will have a standard four tier rating structure. 

PPACA: Should I Care About a Wellness Program for My Company?

The answer to this is maybe.  Many carriers offer some version of a wellness program.  Some may even customize to your population.  They can be very helpful pin-pointing certain illness' that can truly affect your claims. Perhaps a walking program or a smoking cessation campaign would be helpful to your employees.  Much of the time it's about showing your employees that you care.  You care about their physical health, mental health, morale etc.  By doing this you may create a more effective and productive employee who wants to come to work and do a great job.  And at the same time may be reducing your claims exposure which ultimately lowers medical premiums. 

Except if you are in the fully-insured small group market in Maryland.  Since there is no pre-existing condition limitation it doesn't matter how healthy or sick you are and your rates are primarily based on a community pool.  However, if you have a relatively healthy group, you may want to consider partially-self insuring.  These plans protect you from claims like a traditional health insurance plan does, except if you are healthy and use less claims, you may get a refund.  In addition, the initial premiums are typically less costly.  If you have a bad claims year, you are not on the hook for any additional premium and if the renewal is high, you can move back to the fully-insured market.  Besides being friendly to you employee's, wellness programs can help your bottom-line especially if you are partially or fully self-insured. 

In addition, through Health Reform there may be grants for employers who currently haven't established a wellness program.  Also, the success to any wellness program is that the senior management be fully-on board and that there is high participation within the employees.  Wellness programs can be crafted to encourage employees to participate by way of rewards or penalty.

If you haven't had a conversation with your consultant about wellness or partially self-insured plans, you should.  If the are unfamiliar, please give me a call at 410-239-5009.  I'd be happy to discuss.

Ben

PPACA (Health Reform) and How To Cut Medical Insurance Costs

Under Health Reform (PPACA) and currently in the Maryland Small Group Market (Under 50 Employees), medical plans are guaranteed issue.  This means that when a small group employer puts a medical plan in place there are no questions asked.  Plans are chosen, employees enrolled and thats it.  There are two main criteria used  to establish a rate:  Average age of the employees electing coverage and Location of the Company.  All things being equal, one employer located in the same county as another employer with the same average age will pay the exact same rate for the same medical plan through the same carrier.  The rates that the insurance carrier uses are filed with the State of Maryland and based on pooling.  What this means is that regardless of how much or how little you or your employees use the medical coverage you will pay the exact same rates as other companys with the same demographics because all claims are pooled together.  Now, if your company is sick, then this is a good thing because you are going to benefit from all the healthy people in the pool.  However, if your group is healthy, you are helping to pay for all those sick, unhealthy people.  This is where self-funding or partial self-funding comes in.  For small group plans, partial self-funding is a combination of traditional medical coverage, a claims fund, and stop-loss coverage.  Under a traditional plan you pay your premium whether you use the plan or not.  Under self-funded plans, if you don't use the plan, some of those premium dollars may come back to you.  For example, lets say a 40 employee group pays $200,000 in medical premium per year.  Under a partially self-funded plan $100,000 may go to a claim fund.  To protect your fund there are limits on claims.  One is a specific Stop-Loss Insurance, maybe $10,000 (for specific one-time claims) and Aggregate Stop-Loss Insurance (this amount is the total amount of claims that will be paid out before this coverage kicks in).  If all those dollars aren't used in the plan year, they are paid back to the employer.  If claims exceed this amount, under partially self-funded plans, employers costs are only limited to their premiums paid in.  These plans will become ever more attractive to healthy employer groups as Exchanges are set-up and younger healthy employees may be opting-out to go find cheaper coverage leaving the employer group with older, more costly, employees that will only drive up the costs of their coverage.