As this year’s benefits enrollment period draws to a close, small business owners are probably feeling that there are more questions than answers out there—and they would be right. There is a lot that even professional benefits advisers don’t know about what will happen in the years ahead.
Take, for example, the question of self-funding of health benefits for employees. Self-funding means that the company takes on the funding of health benefits itself (hence the word “self”), rather than paying an insurance company the premiums. This means the company takes on all the risk for healthcare costs for its employees—and also takes out a stop-loss insurance policy to help cover them in case the gamble goes bad.
Once upon a time, it was as “given” in the industry that only large companies could afford to do this. These days, however, there are industry professionals who are asking whether that “given” should be revisited, and perhaps discarded. They see plan costs continuing to rise and the plans themselves becoming less flexible as a result of elements and mandates in the Affordable Care Act (ACA).
For example, at the moment a small business with a healthy workforce can get benefits coverage with lower premiums than a small business with a less-than-healthy workforce. However, the “modified community rating” in federal law will soon prohibit the use of health risk as a factor in calculating premiums for employer groups of fewer than 100 people. This will result in what seems like a penalty for small businesses with a healthy workforce.
Changes are not just happening on the employer side of the ledger. As the ACA mandates what percentage of premium payments may be used by insurance companies to cover overhead costs, insurance companies are streamlining their business practices to make the most of those dollars, and plan flexibility is one casualty of these changes.
As small business owners face the uncertainties of health benefits in 2014 and beyond, it’s very helpful to have consultants to turn to–professionals who track all these questions and changes on a daily basis. To learn more about how we can help you navigate these unknown benefits waters, contact us today.