There’s a lot in the pipeline for small businesses – SHOP exchange, collective buying power to purchase better health insurance and a chance to provide the same level of benefits as their large counterparts. However not many have weighed in on an aspect that might become a primary concern for small organizations in the near future – increasing healthcare costs. Amid the intricacies of the ACA, the increasing cost of providing better coverage has been in the crosshairs for a long time. Sadly, the same increase in costs for small employers is coming into play, and not all small firms are ready to play along.
The case study at hand for dissecting the response smaller firms might have to increasing costs is that of a financial firm, with approximately 30 employees. The firm is well within the definition of a small business and has been providing health insurance to its employees since 2005, its year of inception. The firm has been working with a Preferred Provider Organization, and has frequently changed providers to give the best to its employees. The firm has usually stayed at the higher end of the scale, and has paid $1,546, per month per family, and $581, per month per individual.
Now, the problem is they will be subject to an increase of 35 percent this year as the ACA is going to make health insurance costlier for them. The ACA annihilates the age-old concept of defining health insurance premiums according to the industry of the business, with low-risk businesses enjoying lower health insurance rates and high-risk businesses, such as construction, paying more. Under the ACA, sector-based discrimination will cease to exist and ultimately result in an increase of costs for most businesses. Since this particular small business belongs to financial services industry, it has enjoyed lower premiums than other businesses until now, and is facing a tremendous increase. Thus, over their cost of $18,500, per family per year, they will be required to pay $24,000, per family per year, upon renewal. Further, the ACA removes their privilege to partner with other small firms and ask for better insurance rates by providing them a stab at better health insurance through SHOP exchanges, which will go live this October.
As a result, to offset these rising costs, the management of the firm is looking into alternatives. They have surveyed their team for the benefits that they look for in a workplace, and have found that health insurance is not in the top five priorities of their employees. In fact, those employees who did weigh health insurance important figured that their organization paid 75-80 percent of the healthcare costs of their plan. Nearly all the employees felt that a fully funded health insurance plan was not in their top five needs from a workplace. Naturally, this worked as an eye opener for the top management. Firm management decided to explore the idea of covering a portion of the health plan or offering a fixed contribution to employees that could be used in different insurance plans.
The top leadership finally decided to select an alternative plan that only increases their current costs by 11 percent. The plan requires the small business to pay $500 toward the $1,000 family deductible that will cover patient stays, diagnostic tests and surgeries. Naturally, this move is going to provide a substantial cost advantage to the firm over an aspect that has called for refinement through popular employee opinion. The company feels that, post the launch of SHOP exchange and the mitigation of the volatility of this market after ACA implementation, they will have a better idea of the landscape and will be able to figure out a better strategy for providing health insurance to their employees without painstakingly increasing their costs.
As more small firms take this crucial decision in the coming months, all will have actionable data which can be used to provide better health insurance to employees in a cost effective manner. Till then, the landscape is open to trying and testing for finding the perfect formula, which suits typical requirements of small businesses and the cost mechanics of their industry.