It is touchy business trying to write an article about the implementation of Health Care Reform (HCR) when so much will be revealed between when this article is submitted and when it is printed. That said, the subject of HCR is inescapable and the uncertainty that has surrounded what we can expect come January 1 is universally frustrating. In my experience, those businesses with over 50 employees have pretty well determined to continue providing medical coverage to their employees in lieu of facing the penalty that’s now been delayed until 2015.
Companies with fewer than 50 employees, however, seem to be wrestling with whether to remain as their employees’ source of coverage or not. The purpose of this article is to relay some of the reasons we think that many smaller companies will elect to keep offering benefits.
1. Competitiveness – Put simply, some smaller firms could lose out on current and future talented employees if they cease to provide benefits. Of course, smaller employers could attempt to offer more in gross compensation to try and offset this perceived advantage from a larger firm, but if they can afford higher compensation, why not continue to ensure that their employees have access to quality medical care?
2. Tax Advantages – Typically, employers can deduct the expense of providing benefits and employees can pay for their coverage on a pre-tax basis. The tax savings through the Federal Exchange, however, will be dependent on income levels and may mean that group-based coverage is actually less expensive.
3. Quality of Coverage – When employers provide the coverage, they have the ability to ensure that the quality of the plans’ benefits do not place their employees in bad financial conditions should they have adverse medical events. If they cease offering coverage, employees may elect a less robust benefit structure – or worse – not elect coverage at all.
4. Pricing – The great unknown of HCR is what exactly these plans will cost people through the Federal Exchange. The variables are many, but the mandated benefits and removal of the pre-existing conditions clause are certain to drive the costs well above where the individual marketplace has been in the past. What remains to be seen is whether there will be substantive pricing differences between what is offered in the individual marketplace and what is offered to small employers.
5. Access – Another unknown is how arduous the enrollment process will be through the Federal Exchange. With a small group plan, typically employees are assisted with enrollment either by their company’s Human Resources director or a local insurance agent. With the Exchange, individuals will either do it themselves or seek the assistance of one of the “Navigators,” who may or may not have any prior experience advising people about their health care options. Again, until we see what the process looks like, it is tough to imagine that it will be a more efficient delivery method than the traditional employer-based system.
I realize that by the time this article is published the Exchange may have opened to rave reviews and been proclaimed the greatest step forward in health care since penicillin. I truly am hopeful that it yields a higher percentage of Americans carrying health care coverage. In the interim, however, I and other agents like me remain engaged with our clients, large and small, eager to assist them with adapting to the changing health care landscape.