As a Business that focuses on increasing sales, sometime we have to address issues that can have a negative impact on a business cash flow. When we free up cash we can use that money in other areas of the business: sales training, sales consulting and other leadership programs to help a company get to the next level.
One of the ways to do that is to take a look at the potential positive impact Affordable Care Act (ACA) can have on a business when some little know strategies are implemented.
I asked Tom Ziehler of David Rine Insurance to tell us about some strategies his form uses to help small business owner to better manage expenses associated with ACA.
It can be a difficult subject but I suspect after reading this you will want more information.
The scheduled expansion of how small employers are defined under federal Affordable Care Act in 2016 to include groups sized 51 to 100 will result in large increases to healthcare premiums for a significant number of employees of small businesses.
As groups with 2-100 renew or purchase new coverage, they must abide by the rules and regulations governing the small group market, including those related to benefit coverage, actuarial value, and premium rating restrictions. Groups sized with 51-100 employees will face additional benefit and cost-sharing requirements, which will reduce benefit flexibility and drastically increase premiums.
Plans covering groups with 100 or fewer employees will be pooled together (composite rating) for premium rating purposes. Groups that are self-funded or partially self-funded are not subject to these requirements, nor are they subject to the “market share fee” currently at 3.3% of premium.
In addition to the expansion of the small group definition, the ACA’s shared responsibility provisions-which already apply to groups of 100 and above -will begin applying to groups of 51-99 employees in 2016. Under these provisions, employers will face penalties if they have employees who obtain subsidized coverage that doesn’t meet minimum value and affordability requirements.
Composite rating or “community rating” is the practice of lumping all eligible employees together and assigning a single rating. The composite premium is calculated by dividing the total group premium by the number of enrollees to arrive at an average enrollee premium amount. All “fully-insured” employers with 2-100 employees will be subject to composite rating in 2016.
Under the ACA’s reforms, issuers may vary the premium rate charged to a non-grandfathered plan in the individual or small group market from the rate established for that particular plan based only on the following factors: age, family size, geography, and tobacco use.
All other rating factors are prohibited. This means that several factors commonly used by issuers to set higher premiums prior to 2014 (such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry) can no longer be used.
Large employers have been reaping the benefit of self-funding for years. These benefits include: full transparency of healthcare costs, broader choice of plans and PPO networks, lower administrative fees, improved loss experience, and enhanced cash flow.
Traditionally groups with 10-100 employees have been too small to self-insure. With the evolution of the ACA, there are now many innovations that allow groups of 10-100 to enjoy the benefits of self-insuring with no adverse risk. The new platforms have been adopted by thousands of employers
These new platforms from coast to coast with great success. The insurance carriers and administrators from coast to coast with great success. The insurance carriers and administrators of these self-insured platforms for the mid market (10-100 employees) have chosen to make them available only through a limited distribution of consultants and brokers across the country. These alternatives essentially avoid many of the bad provisions of the ACA.
Employers need to be looking at these options right now in order to give themselves enough time and to ensure a smooth transition. One new “temporary fix” that is starting to surface has employers “renewing early” on October 1, 2015 in order to buy themselves another year of time. This idea is a very temporary bandage to a long term problem and does not address the out-of control healthcare costs.
For more information please contact Tom Ziehler of David Tine Insurance. Tom can be reached at 330-375-1090 / firstname.lastname@example.org
If you need to free up some cash and you have 2-100 employees this could work for you.
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