Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

3 Signs You May Need A Second Opinion About Benefits

It’s often a good idea to get a second opinion before making a big decision. Because of the dramatic changes influenced by the Affordable Care Act (ACA) and other factors, the employee benefits strategy you have utilized until now may be unavailable, inadequate, or dramatically more expensive in 2015.  Here are three signs you might benefit from a second opinion:

You’ve just been hit with dramatic cost increases.

While some cost increases might be expected, if your employee benefits package for 2015 has given you “sticker shock,” it can’t hurt to shop around for a new strategy that will yield equal or better quality at a lower price. There are a number of innovative strategies that are worth a look.

You’re being forced to change companies and/or plans.

With the rules and regulations under the Affordable Care Act, many programs are no longer being offered. Others are offered but in a highly modified or watered-down format.  Before accepting a replacement plan, it may be valuable to look at other options.

It’s difficult to get answers to your questions.  

Does your current benefits provider answer all of your questions in a prompt manner? Do they have the knowledge about the current benefits environment to provide cutting edge advice? Are they sharp in their bookkeeping, in other words do you receive periodic statements, together with an organized summary document about your program, in case you ever get audited? Are they communicating with you about changes well before they happen and in a clear, concise manner?

If your answer to any or all of these questions is “yes,” you will most likely benefit from getting a second opinion about your program.

Benefits, Flexible Spending Accounts (FSA's), Health Care, Health Insurance, Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs)

Offering Health Insurance as a Small Employer

Small businesses and the people who own them are the backbone of their communities. In a larger, interwoven sense, when combined with similar-sized businesses across the United States they are the backbone of this country. While the intrinsic benefits of owning a small business are numerous, providing health insurance to employees is not necessarily one of them. For many employers, the expense has not been affordable, and in some industries with higher employee turnover, the obligation seems as appealing as a can of worms.

This may be changing as there are several benefits to offering health insurance. Here are some examples:

Pre-tax payment of premiums. The employer and the employ deduct the cost of premiums from their income resulting in a 30% savings on average versus paying individual premiums with after tax income.

Tax credits. The IRS offers a Small Business Healthcare Tax Credit to qualifying businesses who offer benefits to their employees. If you’re an employer with fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 (as adjusted for inflation beginning in 2014) a year, and pay at least half of employee health insurance premiums, you may qualify for the credit.

High Deductible, Lower Premium Plans. It is more and more common for employees to select plans that allow Health Savings Accounts (HSAs). By design they are lower in cost than traditional plans with copays, and so more affordable. And owners have the same opportunity as employees to save money for future health care needs on a pre-tax basis.

Offering benefits attracts high-quality employees. A competitive benefits package offered to potential new hires can be the deciding factor between an employee choosing your company over another. Attracting higher quality employees increases efficiency, attentiveness, and morale. Working conditions are better and ultimately the bottom line!





Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

Counting Full-Time Employees for Benefits – Pay or Play

If you employ 100 or more full time employees, the Affordable Care Act requires that they be counted beginning in 2015 to confirm if eligible for health benefits. The “30” hours per week standard that begins next year is delayed until 2016 for employers with 50 to 99 employees. Employers with fewer than 50 full-time employees are not required to count, at least not under current law.

There are generally two types of employees; “hourly” and “salaried.” Actual hours worked is easy for the hourly workers. Days worked or weeks worked is used for salaried workers. And, “30” hours per week is the same as “130” hours of service in a calendar month. Why not “120” hours per month? This has to do with the variation in the number of days per month.

Two choices exist for actual counting. One is called the “Monthly Measurement Method,” resulting in a month-to-month analysis and best for employers with consistency of time worked. The “Look Back Measurement Method” is an option designed for more flexibility in counting. Ongoing versus new, plus variable, seasonal and part time employees must be considered.

Terms like “Initial Measurement Period,” “Standard Measurement Period,” “Stability Period,” “Administrative Period” and “Look Back Period” are included for averaging purposes, and employers have some flexibility in choosing their length. It all comes down to how long an employee is eligible for benefits in the future, even if their work hours are reduced.

Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

Employer Dumping Leads To New IRS Rules

In lieu of offering health insurance benefits, certain employers have been paying employees to purchase their own individual insurance through the Marketplace exchanges. The rub is that employers have deducted these amounts as a cost of doing business the same way they deducted funds used to pay premiums.

The IRS has now moved to block this practice, colloquially dubbed “employer dumping.” Harsh tax penalties to the tune of $100 per day or $36,500 per year can now be assessed to employers. This new penalty in no way offsets other penalties that can be assessed under the Affordable Care Act.

“Employer payment plans,” as they’re sometimes called, do not satisfy the requirements of offering a health insurance plan, which must include preventive care. If employers choose to pay employees more to purchase their own health insurance, the amount must be treated as taxable income.

Affordable Care Act, Benefits, Health Care, Health Insurance, Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), Obamacare

Self-Funding in the Age of the Affordable Care Act

To avoid rates based upon age, Federal and State premium taxes of up to 5% on every premium dollar, and flexibility in plan design, employers down to 10 employees in select parts of America will consider self funding. Per person deductibles of $25,000 or more will be accepted by employers with the hope and expectation their employee group is healthier than the average. Plan designs that minimize claims activity are likely reality long term, but initially self funded employers continue coverage levels in place when fully insured.

Stop loss insurers expect employers to disclose information on potential high cost claimants, and employers will readily comply since they are financially responsible for claims losses up to the deductible. Contract types that include claims runout protection will be increasingly popular the smaller the employer. Self funding was often an obvious choice for employers spending $1 million or more in premium annually. Times have changed with the advent of Obamacare as the Law of Large numbers is less of a consideration in the past, and when there is hope under self funding that actual costs in the future will be lower than a fully insured 25% – 50% rate increase.

Affordable Care Act, Benefits, Health Care, Health Insurance

Benefits Plan Administration Tips

Benefits administration will continue to be less burdensome as more and more workers sign up for coverage electronically. The best advice is to align with a vibrant online system for enrollment and termination. The number of systems available is extensive.

Even better, outsource the administration work to a competent consulting and brokerage company to free time for other important human resource needs.


Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

Payroll Contributions & Age Band Rates

Many benefits professionals recognize that non-discrimination rules for benefits coverage merit an update. Government planners will have a heavy task ahead to develop rules that make sense due to ACA premium rates that increase with age. Basic thinking has always been that more highly compensated employees should be allowed financial benefits coverage no better than the lower paid.

And yet, if for the same insurance plan the premium rate for lower paid workers is three times less than the premium for the senior management team simply due to age, is this discriminatory?

And what about payroll contribution amounts for health insurance coverage? Logic again supports charging the same deduction per pay based upon status whether single and covering dependents.

In reality, a vice president covering herself, her spouse and three children could result in a $20,000 annual premium if they started having children late and both parents are now in their fifties. And the same size family of a warehouse supervisor where he and his spouse are in their thirties could result in a $15,000 annual premium. Is the vice president receiving a discriminatory advantage since their family premium is 35% higher? These are “wait and see” realities caused by the new health care law. Proof of discriminatory practices results in higher taxes and financial penalties so time will tell what the government believes is “fair.”

Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

Pay or Play? How Business Owners Can Navigate the Affordable Care Act

If you employ fewer than 50 full-time workers including part-time equivalents, there is no penalty for not offering health insurance as a benefit. Some project the “50” threshold will be reduced over time. If you’re a larger employer and do not offer health insurance, think of the $2,000 penalty as the cost of the government subsidies offered to your employees who purchase insurance on the Marketplace exchanges.

The $2,000 penalty will rise over time, and yet is far lower than the cost of subsidizing health insurance premiums, since the maximum contribution allowed is equal to 9.5% of an employee’s income. An employer whose average single premium cost is $5,000 per year will spend net about $3,000 once average payroll contributions and tax deductibility is factored in.

So the math proves it is cheaper to pay the penalty.

Since employers can charge up to $90 per bi-weekly pay for employees who earn $25,000, which is more than double the current payroll contribution average is $40 per pay (Kaiser/HRET study), those who currently offer health insurance as a benefit are likely to increase payroll deductions first before dropping coverage, plus adding higher deductible plan options with lower premiums.

Employers who have not had to offer health insurance as a benefit will pay the penalty as an increased cost of business. It will be a slow “bleed” before employers who offer health insurance drop the benefit as there are new arrows in the quiver available to lower costs while still offering coverage.

Affordable Care Act, Benefits, Health Care, Health Insurance, Obamacare

Small Business and Obamacare

What are the best practices for small employers to follow with the Affordable Care Act?

  1. Make certain everyone knows the real cost of premiums, both monthly and annual.
  2. Offer at least two plan options so employees decide whether to spend more on premium or take more risk and spend less out of their pay for insurance.
  3. Only allow spouses to be enrolled if they do not have access to insurance where they work. The days of supplementing spousal coverage are over.
  4. Allow employees to cover their children without question and consider how much of a subsidy is merited based upon your culture
  5. Investigate SHOP (Small Business Health Options Program) as it can allow up to a 50% tax credit on the premiums an employer pays. Warning, though: the credits drop if you employ more than 10 employees and pay them on average more than $25,000 in wages.
  6. Remember when considering dropping health insurance that employer paid premiums are tax deductible and employee payroll contributions are paid pre-tax. This is worth a 30% cost reduction on average. If employee compensation is less than $30,000 on average, then government subsidies are as efficient financially as tax deductibility.

Offering health insurance is important to employers who embrace the value of benefits beyond cash compensation. This value varies from business to business.

Benefits, Flexible Spending Accounts (FSA's), Health Care, Health Insurance, Health Savings Accounts (HSAs)

7 Key Health Insurance Tips to Get the New Year Started Off Right

It’s the beginning of the New Year and the news and information about health care has never been more confusing for more people. Health care expert Jonathan P. Warner provides 7 important and timely health care insurance tips to give you a strong start to your new year.

  1. If you have a Health Savings Account and did not fully fund it in 2013, you have until April 15, 2014 to maximize tax deductible deferrals of $3,250 individual and $6,450 with dependents, plus $1,000 catch up if you are age 55 and older. Maximum deferrals for HSAs in 2014 are $3,300 individual and $6,550 with dependents.
  1. Think of HSAs as health care retirement accounts. Forecasts show that seniors living into their mid-80s will spend more than $150,000 on premiums and out of pocket costs above what is covered by Medicare.
  1. About a third of employer-sponsored health insurance plans are grandfathered and do not include coverage of preventive care services.
  1. Consider your historical health insurance usage when choosing a new plan. If your usage is limited, then accept reasonable risk and enroll in a plan with deductibles and coinsurance.
  1. If your plan allows for HSAs, deposit a portion of the premium savings into your own HSA to build a reserve for future time when you have higher health care costs. Drip money into your HSA now so the burden of a gusher cost to satisfy out of pocket costs is saved when you need it for future health care expenses.
  1. You have until March 31, 2014 to enroll in a Marketplace health insurance at without penalty. If you enroll by March, your coverage is effective May 1, 2014. If you enroll in January, coverage is effective March 1st. If enrolling in February, your coverage will be effective April 1st.
    Although a moving target at its outset, the current understanding for signing up is as follows: If enrollment occurs between January 16 and February 15, coverage is effective March 1st. If between February 16 and March 15, coverage is effective April 1st. If enrollment is completed between March 16 and March 31, coverage is effective May 1st.Regardless of coverage effective date, the next renewal date will be January 1, 2015. The Open Enrollment period to change and update coverage selections will run from November 15, 2014 through January 15, 2015

7.  If you are eligible for Medicare, signing up for Social Security automatically enrolls you in Medicare Part A (Hospitalization). Consider delaying this enrollment if              you plan on working until age 70, as once enrolled you can no longer deposit tax deductible funds into an HSA.

Wishing everyone a healthy and happy New Year!