The Affordable Care Act requires companies with 50 or more employees to provide group insurance. But for business owners with fewer than 50 employees who see group insurance as a competitive advantage or just the right thing to do, Mike Stahl says the Affordable Care Act provides “a really interesting and valuable option.”
The senior vice president at HealthMarkets, an independent marketplace that helps small businesses and others evaluate their insurance options, Stahl says the average small business employs seven people. Half of those provided group insurance. But since the ACA went into effect, his company has been saving employers “thousands upon thousands of dollars per employee” by helping them migrate employees from company sponsored group health plans to individual coverage from the new health insurance exchanges.
Yahoo! Small Business spoke with Stahl about what business owners with fewer than 50 employees need to know right now about the Affordable Care Act and their workforce. In a separate post, we speak to him about what self-employed solopreneurs and freelancers need to know.
YSB: What has changed for businesses with fewer than 50 employees who provide group insurance because they see it as a benefit to attract and retain talent?
Stahl: When you want to offer insurance as part of your benefits program, you have to decide on a group or alternative structure. Historically, group insurance was the better option because there was group underwriting. If you had an employee who was a heroic survivor of breast cancer BRCA, your group insurance could insure her, whereas individual insurance would have denied her coverage.
With group insurance, there was also a tax advantage for the employee and the employer. But small business owners who had been doing right by their employees were seeing a rate increase every year above inflation. They felt like they were on this treadmill with ever-increasing costs. It’s a business problem. They ask, “What are my options?”
Now, any employee with a modified adjusted gross income below $95,000 is eligible for federal subsidies. Employers can still offer benefits, but they can be structured using individual plans rather than group plans. You can migrate employees away from group insurance to individual plans, and now the breast cancer survivor can get coverage on the market.
YSB: Why still call it a benefit if the employer isn’t paying for it?
Stahl: The average net cost for an individual plan with subsidies is $82 per month. That is way less than what the cost for an employee was under the group plan. By migrating employees from the group to the individual plans on the exchange, you’re allowing employees to access subsidies.
Employers who do this right are not “dumping” their employees to the exchange. They’re having a broker like us come in, sign them up, and get them the subsidies they deserve.
If you want to help your employees, and you want them to save money, then you can share with them some of what you’re saving. You can increase taxable pay, or start depositing money for employees into health savings accounts, or add benefits like dental or vision or supplemental insurance plans.
With subsidized insurance from the ACA marketplace, employees spend less than they once contributed to their employer-sponsored plan, and they are better covered because the employer is helping with dental or vision or an HSA.
We help employers set up a communication program so that employees understand what’s going on. We tell them what the employer is doing in terms of contributing. Our agents are structuring individual insurance to feel like it is a benefit.
YSB: How many employers are making this kind of switch?
Stahl: We’re seeing massive migrations. It’s the biggest thing happening in the industry. In its second quarter earnings call, the managed healthcare company Wellpoint mentioned seeing hundreds of thousands of insureds move away from group plans to individual coverage. Then the next quarter the company said it had made a mistake: The migrations were happening way faster than they had predicted. Group insurance is not working for small businesses anymore.
YSB: Why wouldn’t larger employers migrate their employees from group insurance too?
Stahl: Large employers are different. Companies that have more than 50 employees are required by law to provide health insurance coverage, so it’s a very different equation. But they are not required to provide it for part-time employees, so that’s why Walmart and others are migrating those workers to a different methodology.
YSB: Are there any small employers for whom this would not make sense?
Stahl: We don’t advise employers who pay incomes that average above $100,000 to do this, because people making those salaries do not get subsidies and those employers get loyalty from them for offering insurance.
YSB: For employers who currently offer group insurance, what is the deadline for migrating employees to the individual exchange?
Stahl: Job creators with group insurance are not restricted to the open enrollment period. If you want to change and migrate away from group insurance, you can do that any time of year. This is because that change in coverage would be a “qualifying event”–like moving, or having a baby—for enrollment. An employer could start the process November 15, but they could also do it in May.