In the last quarter of the year, the new rates for next year’s health insurance plans start rolling out. I work with a lot of small companies, many of whom were shocked a year ago by how much their health insurance premiums increased.
As bad as 2014 seemed, it isn’t sounding like 2015 is going to be an improvement.
I received a call the other day from a colleague who has a small business, around 25 employees. His business is actually in providing benefits to larger businesses, so my friend is someone who is intimately aware of how health insurance works. However, he received a quote for 2015 that would increase his premiums by over 100%. That’s untenable for any business, and much more so for a small business.
What solutions are available to a small business who’s faced with this issue?
Look for a solution that allows you to control your contribution. Several insurance companies now allow you, as the employer, to offer several plans to your employees. As long as you offer to contribute a percentage of any ACA-compliant plan’s premium, you are considered to be in compliance with the rules. Then employees can elect a higher-level plan and pay more themselves.
Let me illustrate with an example. I have another client with 20 employees, offering all 4 metallic levels to his staff. The employer offers to pay 50% of a single employee’s Bronze plan. The employee can elect a Platinum plan, and may have dependents, but the balance of that premium will be up to the employee to pay, not the employer. The good news is, the employer is providing a valuable benefit to the employee, and is able to have a tax deduction as well.
Stop offering a health plan, “gross up” your employees’ salaries, and have them buy their own insurance. This option is actually counter to what the vision of the Affordable Care Act was supposed to be – for Americans to continue offering health insurance to their employees. However, it’s a reality for small businesses that they have to make some hard choices about offering such a rich benefit. Dropping out of the small business health insurance marketplace and allowing your employees to make their own decisions about what kind of health insurance to get makes a lot of sense to some small businesses.
See if your business qualifies for a tax credit. If a small business has 25 or less full-time employees they can apply for tax breaks of up to 50% (35% for non-profits) of their contribution of their employees’ premiums. To qualify, businesses must pay for at least 50 percent of their employees premiums and their workers average annual wages can’t be more than $50,000. Clearly this isn’t an option for many small businesses, especially those in a professional setting, but it may be an option for your business nonetheless.
One thing to remember: the Affordable Care Act is still fluid. The legislation exists, but several deadlines have already been pushed back, and compliance is hard to monitor. There will be more pain for small businesses before it all gets sorted out, but with some of the strategies mentioned above, you can make plans on how you’d like to navigate these turbulent waters.